Summary of Braze (BRZE) 2025 Conference Call Company Overview - **Company**: Braze, founded in 2011, went public in 2021, operates in the customer engagement space [2][3] - **Business Model**: Focuses on orchestrating and personalizing messaging for consumers using first-party data, primarily serving B2C but also B2B use cases [3][4] Core Insights and Arguments - **Growth Drivers**: Significant growth driven by the need for brands to build stronger first-party data sets and direct connections with consumers, especially in a competitive digital landscape [3][4][5] - **AI Integration**: Braze positions itself as an AI-native company, leveraging AI advancements to enhance customer engagement and decision-making processes [7][10] - **Market Dynamics**: Brands are increasingly responding to market aggregators (e.g., Google, Amazon) by developing direct customer relationships to maintain profitability and customer loyalty [12][14][16] - **Customer Engagement**: Emphasizes the importance of maintaining first-party data sets and intelligent systems to foster meaningful customer interactions [16][18] Financial Performance - **Earnings Highlights**: Organic revenue growth accelerated, with OfferFit contributing approximately 2% to year-over-year revenue growth [20][21] - **Downsell Mitigation**: Improved implementation and onboarding processes have reduced downsell risks, leading to better performance in customer renewals [22][24] - **Sales Momentum**: Strong upsell and new business momentum, with plans to increase sales capacity in the second half of the year [23][32] Strategic Initiatives - **Acquisition of OfferFit**: Integration of OfferFit is progressing smoothly, enhancing Braze's decisioning capabilities [29][30] - **Sales Team Dynamics**: New CRO Ed's leadership is expected to sharpen focus on go-to-market strategies and improve sales productivity [31][32] - **Investment in AI**: Project Catalyst aims to enhance embedded AI capabilities, focusing on rapid deployment and optimization of decisioning products [44][45] Market Trends and Future Outlook - **Technical Sophistication**: The rise of AI has led to increased technical involvement in buyer processes, benefiting Braze's differentiation in the market [39][40] - **Composable Intelligence**: Future strategies will focus on integrating AI-driven decisioning with existing marketing strategies, allowing for dynamic and flexible customer engagement [50][51] Additional Important Points - **Customer Education**: Increased investment in educating customers on utilizing Braze's technical capabilities, driven by the demand for more technical proficiency in marketing roles [41][42] - **Long-Term Contracts**: The average contract length exceeds two years, indicating a stable revenue base but also challenges in managing customer expectations over time [27][24] This summary encapsulates the key points discussed during the Braze conference call, highlighting the company's strategic direction, financial performance, and market positioning.

Core Insights - Braze, Inc. is recognized for its innovative customer engagement technology and has a strong market presence, consistently surpassing earnings expectations [1] Financial Performance - For the quarter ending in July 2025, Braze reported an earnings per share (EPS) of $0.15, significantly exceeding the analysts' forecast of $0.03, resulting in a 400% earnings surprise [2][4] - The company's revenue for the same quarter was approximately $180.1 million, showing a substantial increase from $145.5 million in the previous year, although it was slightly below the anticipated $180.3 million [2][4] Growth Indicators - Braze has consistently exceeded consensus revenue estimates over the last four quarters, reinforcing its growth trajectory [3] - The price-to-sales ratio stands at 4.71, indicating that investors are willing to pay $4.71 for every dollar of sales, reflecting confidence in the company's revenue capabilities [3] - The company maintains a conservative capital structure with a low debt-to-equity ratio of 0.18, indicating minimal reliance on debt financing [3] Liquidity and Valuation - Braze's current ratio is 1.92, demonstrating a strong capability to cover short-term liabilities with its short-term assets [3] - The enterprise value to operating cash flow ratio is notably high at 67.04, suggesting a high valuation in comparison to its cash flow from operations [3]

Core Insights - Braze, Inc. reported revenue of $180.11 million for the quarter ended July 2025, marking a year-over-year increase of 23.8% and exceeding the Zacks Consensus Estimate of $171.6 million by 4.96% [1] - The company achieved an EPS of $0.15, significantly higher than the $0.09 reported a year ago, and surpassed the consensus EPS estimate of $0.03 by 400% [1] Financial Performance Metrics - Dollar Based Net Retention (TTM) stood at 108%, closely aligning with the average estimate of 108.1% from two analysts [4] - Total Customers reached 2,422, slightly above the average estimate of 2,394 from two analysts [4] - Revenue from Professional Services and Other was reported at $8.3 million, exceeding the average estimate of $6.73 million from five analysts, representing a year-over-year increase of 50.9% [4] - Subscription Revenue amounted to $171.8 million, surpassing the average estimate of $164.76 million from five analysts, with a year-over-year growth of 22.7% [4] Stock Performance - Over the past month, Braze's shares have returned -1.1%, contrasting with the Zacks S&P 500 composite's increase of 3.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - Braze, Inc. reported quarterly earnings of $0.15 per share, exceeding the Zacks Consensus Estimate of $0.03 per share, and up from $0.09 per share a year ago, representing an earnings surprise of +400.00% [1] - The company has surpassed consensus EPS estimates for the last four quarters [2] - Braze's revenues for the quarter ended July 2025 were $180.11 million, surpassing the Zacks Consensus Estimate by 4.96%, and up from $145.5 million year-over-year [2] Group 2: Stock Performance and Outlook - Braze shares have declined approximately 35.6% since the beginning of the year, while the S&P 500 has gained 9.6% [3] - The future performance of Braze's stock will depend on management's commentary during the earnings call and the earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.02 on revenues of $180.44 million, and for the current fiscal year, it is $0.17 on revenues of $704.36 million [7] Group 3: Industry Context - The Internet - Software industry, to which Braze belongs, is currently ranked in the top 29% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Braze's stock performance [5][6]

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Braze, Inc.'s unaudited condensed consolidated financial statements and notes are presented for the periods ended July 31, 2025, and January 31, 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details Braze, Inc.'s financial position, including assets, liabilities, and equity, as of July 31, 2025, and January 31, 2025 Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | July 31, 2025 | January 31, 2025 | | :-------------------- | :------------ | :--------------- | | **CURRENT ASSETS:** | | | | Cash and cash equivalents | $80,979 | $83,062 | | Marketable securities | $282,626 | $430,457 | | Total current assets | $484,505 | $644,026 | | Goodwill | $267,778 | $28,448 | | Intangible assets, net | $67,643 | $3,130 | | **TOTAL ASSETS** | **$1,022,537**| **$870,998** | | **LIABILITIES (in thousands)** | July 31, 2025 | January 31, 2025 | | **CURRENT LIABILITIES:** | | | | Deferred revenue | $262,113 | $239,976 | | Total current liabilities | $353,661 | $324,477 | | **TOTAL LIABILITIES** | **$423,487** | **$396,249** | | **STOCKHOLDERS' EQUITY** | July 31, 2025 | January 31, 2025 | | Accumulated deficit | $(650,521) | $(586,836) | | **TOTAL STOCKHOLDERS' EQUITY** | **$598,881** | **$474,861** | - Total assets increased by **$151.5 million (17.4%)** from January 31, 2025, to July 31, 2025, primarily driven by a significant increase in goodwill and intangible assets due to the OfferFit acquisition[20](index=20&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Current assets decreased by **$159.5 million (24.8%)** due to a reduction in marketable securities and accounts receivable, while total liabilities increased by **$27.2 million (6.9%)**[20](index=20&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents Braze, Inc.'s financial performance, including revenue, expenses, and net loss, for the three and six months ended July 31, 2025 and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | (in thousands, except per share amounts) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $180,111 | $145,499 | $342,170 | $280,958 | | Cost of revenue | $58,221 | $43,420 | $109,078 | $87,968 | | Gross profit | $121,890 | $102,079 | $233,092 | $192,990 | | Total operating expenses | $160,643 | $130,029 | $312,067 | $261,020 | | Loss from operations | $(38,753) | $(27,950) | $(78,975) | $(68,030) | | Net loss | $(27,763) | $(23,149) | $(63,404) | $(58,856) | | Net loss per share, basic and diluted | $(0.26) | $(0.23) | $(0.60) | $(0.58) | - Revenue increased by **23.8% YoY** for the three months ended July 31, 2025, and by **21.8% YoY** for the six months ended July 31, 2025, primarily driven by subscription revenue growth and new customer acquisition[23](index=23&type=chunk)[179](index=179&type=chunk)[186](index=186&type=chunk) - Net loss increased to **$(27.8) million** for the three months ended July 31, 2025, from **$(23.1) million** in the prior year, and to **$(63.4) million** for the six months, from **$(58.9) million**, mainly due to increased operating expenses and cost of revenue[23](index=23&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details Braze, Inc.'s comprehensive loss, including net loss and other comprehensive income or loss, for the periods ended July 31, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(27,763) | $(23,149) | $(63,404) | $(58,856) | | Other comprehensive income (loss), net | $(2,072) | $3,140 | $822 | $925 | | Comprehensive loss, net | $(29,835) | $(20,009) | $(62,582) | $(57,931) | - Other comprehensive income (loss) shifted from a gain of **$3.1 million** in Q3 2024 to a loss of **$(2.1) million** in Q3 2025, primarily due to unrealized losses on marketable securities and derivatives[27](index=27&type=chunk) [Condensed Consolidated Statements of Redeemable Non-controlling Interest and Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Non-controlling%20Interest%20and%20Stockholders'%20Equity) This section outlines changes in Braze, Inc.'s redeemable non-controlling interest and stockholders' equity for the periods ended July 31, 2025, and January 31, 2025 Condensed Consolidated Statements of Redeemable Non-controlling Interest and Stockholders' Equity (in thousands) | (in thousands) | Balance at January 31, 2025 | Balance at July 31, 2025 | | :------------- | :-------------------------- | :----------------------- | | Redeemable Non-controlling Interest | $(112) | $169 | | Class A and Class B Common Stock Amount | $10 | $11 | | Additional Paid-in Capital | $1,062,613 | $1,249,495 | | Accumulated Deficit | $(586,836) | $(650,521) | | Accumulated Other Comprehensive Loss | $(926) | $(104) | | Total Stockholders' Equity | $474,861 | $598,881 | - Total stockholders' equity increased by **$124.0 million** from January 31, 2025, to July 31, 2025, largely due to **$73.4 million** from common stock issuance for acquisition and **$35.3 million** from replacement share-based awards related to the OfferFit acquisition[35](index=35&type=chunk)[119](index=119&type=chunk) - Stock-based compensation contributed **$68.2 million** to additional paid-in capital for the six months ended July 31, 2025[35](index=35&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents Braze, Inc.'s cash flow activities from operations, investing, and financing for the six months ended July 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,096 | $31,007 | | Net cash used in investing activities | $(37,713) | $(27,431) | | Net cash provided by financing activities | $8,083 | $4,041 | | Net change in cash, cash equivalents, and restricted cash | $2,108 | $7,518 | | Cash, cash equivalents, and restricted cash, end of period | $85,700 | $79,649 | - Net cash provided by operating activities remained stable at approximately **$31.1 million** for the six months ended July 31, 2025 and 2024[38](index=38&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Net cash used in investing activities increased to **$(37.7) million** for the six months ended July 31, 2025, primarily due to **$181.2 million** cash paid for the OfferFit acquisition, partially offset by maturities and returns of principal on marketable securities[38](index=38&type=chunk)[202](index=202&type=chunk) - Net cash provided by financing activities doubled to **$8.1 million** for the six months ended July 31, 2025, driven by proceeds from stock options and employee stock purchase plan[38](index=38&type=chunk)[204](index=204&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting Braze, Inc.'s condensed consolidated financial statements [1. Company Overview](index=13&type=section&id=1.%20Company%20Overview) This section provides an overview of Braze, Inc.'s business, its cloud-based customer engagement platform, and global operations - Braze, Inc. is a cloud-based customer engagement platform providing real-time, customer-centric experiences across various messaging channels[43](index=43&type=chunk) - Headquartered in New York City, the company operates globally with additional office spaces in over 10 cities across North America, South America, Europe, Asia-Pacific, and the Middle East as of July 31, 2025[44](index=44&type=chunk) [2. Summary of Significant Accounting Policies](index=13&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and significant estimates used in preparing Braze, Inc.'s financial statements - The financial statements are prepared in accordance with U.S. GAAP, consolidating wholly-owned subsidiaries and variable interest entities[45](index=45&type=chunk) - Significant estimates include standalone selling price for revenue, deferred contract costs, stock-based compensation, fair value of acquired assets, and valuation of deferred tax assets[47](index=47&type=chunk) - The company adopted ASU 2017-12 (Derivatives and Hedging) as of April 30, 2025, coinciding with its first period of derivative activities, and uses derivative instruments to manage foreign currency market risks[50](index=50&type=chunk)[58](index=58&type=chunk) [3. Revenue from Contracts with Customers](index=16&type=section&id=3.%20Revenue%20from%20Contracts%20with%20Customers) This section details Braze, Inc.'s revenue recognition policies, disaggregated revenue, and remaining performance obligations Revenue Type (in thousands) | Revenue Type (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription | $171,771 | $139,960 | $326,674 | $270,108 | | Professional services and other | $8,340 | $5,539 | $15,496 | $10,850 | | Total | $180,111 | $145,499 | $342,170 | $280,958 | Revenue by Geography (in thousands) | Revenue by Geography (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $98,713 | $80,233 | $186,614 | $155,872 | | International | $81,398 | $65,266 | $155,556 | $125,086 | | Total | $180,111 | $145,499 | $342,170 | $280,958 | - Subscription revenue increased by **22.7%** for the three months and **20.9%** for the six months ended July 31, 2025, compared to the prior year, primarily from existing customer growth and new customer acquisition[179](index=179&type=chunk)[186](index=186&type=chunk) - International revenue increased by **$16.1 million** for the three months and **$30.5 million** for the six months ended July 31, 2025, reflecting expanded market penetration in Europe and Asia-Pacific[179](index=179&type=chunk)[186](index=186&type=chunk) Remaining Performance Obligations (in millions) | Remaining Performance Obligations (in millions) | Total | Less than 1 Year | 1-5 Years | | :-------------------------------------------- | :---- | :--------------- | :-------- | | July 31, 2024 | $689.6| $438.3 | $251.3 | | January 31, 2025 | $793.1| $505.2 | $287.9 | | July 31, 2025 | $862.2| $558.2 | $304.0 | [4. Variable Interest Entity and Redeemable Non-Controlling Interest](index=17&type=section&id=4.%20Variable%20Interest%20Entity%20and%20Redeemable%20Non-Controlling%20Interest) This section explains Braze, Inc.'s consolidation of a Variable Interest Entity and the accounting for redeemable non-controlling interest - Braze, Inc. consolidates Braze Kabushiki Kaisha (Braze KK) as a Variable Interest Entity (VIE) to expand its business in the Japanese market, with investors holding common stock callable by Braze or puttable by investors[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The redeemable non-controlling interest balance increased from **$(112) thousand** at January 31, 2025, to **$169 thousand** at July 31, 2025, reflecting net income attributable to non-controlling interest[74](index=74&type=chunk) [5. Fair Value Measurements](index=18&type=section&id=5.%20Fair%20Value%20Measurements) This section describes Braze, Inc.'s fair value measurements for financial assets and liabilities, categorized by valuation inputs Financial Assets (in thousands) | Financial Assets (in thousands) | July 31, 2025 Total | January 31, 2025 Total | | :------------------------------ | :------------------ | :--------------------- | | Cash equivalents | $20,242 | $25,485 | | Marketable securities | $282,626 | $430,457 | | Derivative Instruments | $5 | $0 | | Total financial assets | $302,873 | $455,942 | - Money market funds and U.S. government securities are classified as Level 1, while corporate debt securities and derivative instruments are Level 2, reflecting valuation based on quoted market prices or pricing models[75](index=75&type=chunk) [6. Marketable Securities](index=19&type=section&id=6.%20Marketable%20Securities) This section provides details on Braze, Inc.'s marketable securities portfolio, including fair values and investment income Marketable Securities (in thousands) | Marketable Securities (in thousands) | July 31, 2025 Fair Value | January 31, 2025 Fair Value | | :----------------------------------- | :----------------------- | :-------------------------- | | U.S. government securities | $216,057 | $317,649 | | Corporate debt securities | $66,569 | $112,808 | | Total | $282,626 | $430,457 | - Total marketable securities decreased by **$147.8 million** from January 31, 2025, to July 31, 2025, with a weighted-average remaining maturity of approximately one year[77](index=77&type=chunk)[78](index=78&type=chunk) Investment Income (in thousands) | Investment Income (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $3,748 | $4,455 | $8,529 | $8,615 | | Accretion/amortization, net | $255 | $556 | $654 | $1,043 | | Investment income | $4,003 | $5,011 | $9,183 | $9,658 | [7. Property and Equipment, Net](index=20&type=section&id=7.%20Property%20and%20Equipment,%20Net) This section details Braze, Inc.'s property and equipment, net, including capitalized internal-use software and depreciation expense Property and Equipment, Net (in thousands) | Property and Equipment, Net (in thousands) | July 31, 2025 | January 31, 2025 | | :--------------------------------------- | :------------ | :--------------- | | Capitalized internal-use software | $22,060 | $19,144 | | Total property and equipment, net | $40,089 | $38,550 | - Total property and equipment, net, increased by **$1.5 million** from January 31, 2025, to July 31, 2025[83](index=83&type=chunk) - Depreciation and amortization expense for property and equipment was **$5.3 million** for the six months ended July 31, 2025, up from **$4.6 million** in the prior year[84](index=84&type=chunk) - Capitalized internal-use software costs were **$2.9 million** for the six months ended July 31, 2025, with amortization recognized in cost of revenue at **$2.0 million**[86](index=86&type=chunk) [8. Prepaid Expenses and Other Current Assets](index=21&type=section&id=8.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This section outlines Braze, Inc.'s prepaid expenses and other current assets, including prepaid software subscriptions and advertising Prepaid Expenses and Other Current Assets (in thousands) | Prepaid Expenses and Other Current Assets (in thousands) | July 31, 2025 | January 31, 2025 | | :----------------------------------------------------- | :------------ | :--------------- | | Prepaid software subscriptions | $12,007 | $17,289 | | Prepaid advertising | $4,455 | $2,520 | | Investment interest receivable | $3,039 | $4,572 | | Total prepaid expenses and other current assets | $31,385 | $35,273 | - Total prepaid expenses and other current assets decreased by **$3.9 million** from January 31, 2025, to July 31, 2025, primarily due to a decrease in prepaid software subscriptions and investment interest receivable[87](index=87&type=chunk) [9. Accrued Expenses and Other Current Liabilities](index=21&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This section details Braze, Inc.'s accrued expenses and other current liabilities, such as compensation, software, and professional service fees Accrued Expenses and Other Current Liabilities (in thousands) | Accrued Expenses and Other Current Liabilities (in thousands) | July 31, 2025 | January 31, 2025 | | :---------------------------------------------------------- | :------------ | :--------------- | | Accrued compensation costs | $27,568 | $28,989 | | Accrued software subscriptions | $14,593 | $10,680 | | Accrued commissions | $6,340 | $8,876 | | Accrued professional service fees | $5,171 | $1,996 | | Accrued tax liability | $8,540 | $8,848 | | Total accrued expenses and other current liabilities | $70,424 | $64,189 | - Total accrued expenses and other current liabilities increased by **$6.2 million** from January 31, 2025, to July 31, 2025, driven by increases in accrued software subscriptions and professional service fees[88](index=88&type=chunk) [10. Employee Benefit Plans](index=21&type=section&id=10.%20Employee%20Benefit%20Plans) This section provides information on Braze, Inc.'s employee benefit plans, including 401(k) matching contributions - Matching contributions to the 401(k) plan increased significantly to **$6.0 million** for the six months ended July 31, 2025, compared to **$3.7 million** in the prior year[90](index=90&type=chunk) [11. Stockholders' Equity](index=22&type=section&id=11.%20Stockholders'%20Equity) This section describes Braze, Inc.'s capital structure, including its dual-class common stock and changes in stockholders' equity - The company has a dual-class common stock structure (Class A with one vote, Class B with ten votes), with Class B shares converting to Class A under certain conditions[91](index=91&type=chunk) - Charitable donations of Class A common stock resulted in **$1.9 million** expense for the six months ended July 31, 2025, under the Pledge 1% commitment[93](index=93&type=chunk) [12. Employee Stock Plans](index=22&type=section&id=12.%20Employee%20Stock%20Plans) This section details Braze, Inc.'s employee stock plans, including equity incentive plans, RSU awards, and stock-based compensation expense - The 2021 Equity Incentive Plan reserved an additional **5,197,568 shares** of Class A common stock on February 1, 2025[96](index=96&type=chunk) - Unvested RSU and PSU awards increased to **10,202,951 shares** as of July 31, 2025, with replacement awards issued in connection with the OfferFit acquisition totaling **1,888,172 shares**[97](index=97&type=chunk)[99](index=99&type=chunk) Stock-based Compensation Expense (in thousands) | Stock-based Compensation Expense (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $1,348 | $1,078 | $2,425 | $2,042 | | Sales and marketing | $12,138 | $9,892 | $22,149 | $19,337 | | Research and development | $14,091 | $11,448 | $25,427 | $22,280 | | General and administrative | $11,972 | $7,404 | $19,947 | $14,441 | | Total stock-based compensation, net of capitalized | $39,549 | $29,822 | $69,948 | $58,100 | | Capitalized stock-based compensation | $478 | $645 | $1,051 | $1,242 | | Total stock-based compensation expense | $40,027 | $30,467 | $70,999 | $59,342 | - Total stock-based compensation expense increased to **$71.0 million** for the six months ended July 31, 2025, from **$59.3 million** in the prior year[100](index=100&type=chunk) [13. Commitments and Contingencies](index=24&type=section&id=13.%20Commitments%20and%20Contingencies) This section outlines Braze, Inc.'s commitments and potential liabilities, including indirect taxation and legal proceedings - The company is subject to indirect taxation (VAT, GST, sales and use tax) in various jurisdictions, with recognized liabilities of **$3.8 million** as of July 31, 2025[105](index=105&type=chunk) - Legal proceedings are part of the ordinary course of business, and the company believes it has recorded adequate provisions for any potential losses[106](index=106&type=chunk) [14. Leases](index=25&type=section&id=14.%20Leases) This section provides details on Braze, Inc.'s lease arrangements, including lease costs and future undiscounted lease payments Lease Cost (in thousands) | Lease Cost (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $4,668 | $4,295 | $9,189 | $9,836 | | Variable lease cost | $1,095 | $60 | $1,962 | $870 | | Short-term lease cost | $274 | $129 | $571 | $231 | | Total net lease cost | $6,037 | $4,484 | $11,722 | $10,937 | - Total net lease cost increased to **$11.7 million** for the six months ended July 31, 2025, from **$10.9 million** in the prior year, primarily due to higher variable lease costs[108](index=108&type=chunk) - Total future undiscounted lease payments are **$108.7 million**, with a weighted-average remaining lease term of **6.8 years** and a weighted-average discount rate of **7.4%** as of July 31, 2025[108](index=108&type=chunk) [15. Income Taxes](index=25&type=section&id=15.%20Income%20Taxes) This section explains Braze, Inc.'s income tax provision or benefit, effective tax rate, and the impact of recent tax legislation - The company recorded an income tax benefit of **$(7.0) million** for the three months ended July 31, 2025, compared to a provision of **$0.7 million** in the prior year, with the effective tax rate changing from **(3.1)%** to **20.2%**[109](index=109&type=chunk) - The decrease in the effective tax rate was primarily due to the release of the valuation allowance from the acquisition of OfferFit[110](index=110&type=chunk) - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which includes tax provisions that may impact future tax positions, though the immediate impact was not material[112](index=112&type=chunk) [16. Net Loss per Share](index=26&type=section&id=16.%20Net%20Loss%20per%20Share) This section presents Braze, Inc.'s net loss per share calculations, including basic and diluted figures and potentially dilutive securities Net Loss per Share (in thousands, except per share amounts) | Net Loss per Share (in thousands, except per share amounts) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to Braze, Inc. | $(27,899) | $(22,999) | $(63,685) | $(58,640) | | Weighted-average shares used to compute net loss per share | 106,807 | 101,449 | 105,858 | 101,239 | | Net loss per share, basic and diluted | $(0.26) | $(0.23) | $(0.60) | $(0.58) | - Basic and diluted net loss per share increased to **$(0.26)** for the three months and **$(0.60)** for the six months ended July 31, 2025, compared to **$(0.23)** and **$(0.58)** in the prior year periods, respectively[114](index=114&type=chunk) - Potentially dilutive securities, including replacement shares from acquisition, options, RSUs, PSUs, and ESPP shares, totaling **14.4 million** for the six months ended July 31, 2025, were excluded from diluted EPS as their inclusion would be anti-dilutive[114](index=114&type=chunk) [17. Related Party Transactions](index=26&type=section&id=17.%20Related%20Party%20Transactions) This section discloses Braze, Inc.'s transactions with related parties, including services purchased from a vendor with a board member - The company purchased **$0.5 million** in services from Datadog, Inc. for the three months ended July 31, 2025, a vendor whose CFO joined Braze's board of directors in May 2021[115](index=115&type=chunk) [18. Derivative Financial Instruments](index=27&type=section&id=18.%20Derivative%20Financial%20Instruments) This section describes Braze, Inc.'s use of foreign currency forward contracts to hedge market risks and their fair value - Braze uses foreign currency forward contracts as cash flow hedges to manage exposure to foreign currency fluctuations, with notional amounts equivalent to **$20.5 million** as of July 31, 2025[117](index=117&type=chunk) - The fair value of derivative financial instruments was **$5 thousand** as of July 31, 2025, classified within prepaid expenses and other current liabilities[118](index=118&type=chunk) [19. Business Combination](index=27&type=section&id=19.%20Business%20Combination) This section details Braze, Inc.'s acquisition of OfferFit, Inc., including the purchase price allocation and recognized goodwill and intangibles - On June 2, 2025, Braze acquired OfferFit, Inc. for a preliminary purchase price of **$304.0 million**, consisting of **$195.3 million** in cash and **$108.7 million** in Class A common stock[119](index=119&type=chunk) - The acquisition resulted in the recognition of **$66.6 million** in intangible assets (developed technology, customer relationships, trademarks) and **$239.3 million** in goodwill, primarily for expected synergies with AI initiatives[120](index=120&type=chunk)[121](index=121&type=chunk)[125](index=125&type=chunk) - Acquisition-related costs totaled **$11.4 million** for the six months ended July 31, 2025, expensed as general and administrative[128](index=128&type=chunk) [20. Intangible Assets, Net](index=28&type=section&id=20.%20Intangible%20Assets,%20Net) This section provides a breakdown of Braze, Inc.'s intangible assets, net, including those acquired through the OfferFit acquisition Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | July 31, 2025 Net Carrying Amount | January 31, 2025 Net Carrying Amount | | :------------------------------------ | :-------------------------------- | :----------------------------------- | | Customer relationships | $11,193 | $2,599 | | Trademark | $825 | $0 | | Technology | $55,125 | $0 | | Technology licenses | $500 | $500 | | Total intangible assets, net | $67,643 | $3,130 | - Net intangible assets significantly increased to **$67.6 million** as of July 31, 2025, from **$3.1 million** at January 31, 2025, primarily due to the OfferFit acquisition[131](index=131&type=chunk) - Amortization expense for intangible assets was **$2.1 million** for the six months ended July 31, 2025, up from **$0.3 million** in the prior year[131](index=131&type=chunk) [21. Goodwill](index=29&type=section&id=21.%20Goodwill) This section details the changes in Braze, Inc.'s goodwill balance, primarily due to the OfferFit acquisition and expected synergies Goodwill (in thousands) | Goodwill (in thousands) | Amount | | :---------------------- | :----- | | Balance at January 31, 2025 | $28,448 | | Acquisition related adjustments | $239,330 | | Balance at July 31, 2025 | $267,778 | - Goodwill increased by **$239.3 million** to **$267.8 million** as of July 31, 2025, primarily due to the OfferFit acquisition, driven by expected synergies with AI initiatives[125](index=125&type=chunk)[133](index=133&type=chunk) [22. Segments](index=29&type=section&id=22.%20Segments) This section explains Braze, Inc.'s single operating segment structure and how the Chief Operating Decision Maker assesses performance - Braze operates as a single operating segment: the cloud-based customer engagement platform, with the CEO serving as the Chief Operating Decision Maker (CODM)[135](index=135&type=chunk) - The CODM reviews financial information on a consolidated basis for resource allocation and performance assessment, with net loss as the primary performance measure[136](index=136&type=chunk) [23. Subsequent Events](index=30&type=section&id=23.%20Subsequent%20Events) This section discloses significant events occurring after the reporting period, including stock donations and RSU grants - In August 2025, the company donated **24,116 shares** of Class A common stock, recognizing approximately **$0.7 million** in operating expense[138](index=138&type=chunk) - Also in August 2025, **743,273 RSUs** with a grant date fair value of **$19.1 million** were granted to employees, vesting over approximately four years[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Braze's financial condition and results of operations, highlighting revenue growth, factors affecting performance, and liquidity [Overview](index=31&type=section&id=Overview) This section provides an overview of Braze's cloud-based customer engagement platform, its revenue model, and key financial highlights - Braze is a leading cloud-based customer engagement platform, enabling brands to process customer data in real-time and orchestrate multi-channel marketing campaigns[141](index=141&type=chunk) - The company primarily generates revenue from subscription sales based on messaging volumes, monthly active users, platform access, and add-on products, supplemented by professional services[143](index=143&type=chunk) Financial Highlights (in millions) | Financial Highlights (in millions) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $180.1 | $145.5 | $342.2 | $281.0 | | Net Loss | $(27.8) | $(23.1) | $(63.4) | $(58.9) | | Net cash provided by operating activities | N/A | N/A | $31.1 | $31.0 | | Non-GAAP Free Cash Flow | N/A | N/A | $26.4 | $18.7 | [Factors Affecting Our Performance](index=31&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses key factors influencing Braze's financial performance, including customer acquisition, retention, international expansion, and macroeconomic conditions - Braze focuses on acquiring new customers across diverse industries and expanding within its existing customer base by increasing monthly active users, adding channels, and selling additional products[146](index=146&type=chunk)[148](index=148&type=chunk) - The company had **2,422 customers** as of July 31, 2025, up from **2,163** as of July 31, 2024, and approximately **7.4 billion monthly active users** as of July 31, 2025[146](index=146&type=chunk)[149](index=149&type=chunk) - Dollar-based net retention rate for the trailing 12 months ended July 31, 2025, was **108%** for all customers and **111%** for customers with ARR of $500,000 or more, a decline from the prior year due to customer turnover and renewals at lower subscription levels amid macroeconomic uncertainty[153](index=153&type=chunk)[155](index=155&type=chunk) - International revenue accounted for approximately **45%** of total revenue for the six months ended July 31, 2025 and 2024, with plans for further expansion in Europe, Asia-Pacific, and Latin America[156](index=156&type=chunk) - Continued investment in research and development, particularly in artificial intelligence capabilities and channel offerings, is crucial for sustaining innovation and technology leadership[157](index=157&type=chunk) - Macroeconomic conditions, including inflation, interest rate increases, and global conflicts, pose risks to customer spending and the company's financial performance, potentially impacting sales cycles and renewal rates[158](index=158&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the primary components of Braze's revenue, cost of revenue, operating expenses, and other income/taxes - Revenue is primarily from subscription services (platform access, support, add-ons, excess usage) recognized ratably over contract terms, and professional services (training, configuration, optimization) recognized over shorter periods[160](index=160&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) - Cost of revenue includes third-party cloud infrastructure, application service providers, personnel, and overhead costs, expected to increase with business growth[165](index=165&type=chunk)[166](index=166&type=chunk) - Operating expenses comprise sales and marketing, research and development, and general and administrative costs, with personnel costs being the most significant component[168](index=168&type=chunk) - Other income, net, primarily consists of net exchange gains/losses on foreign currency transactions and investment income[175](index=175&type=chunk) - Income tax provision/benefit is influenced by state and foreign income taxes and the release of valuation allowances, such as from the OfferFit acquisition[176](index=176&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of Braze's financial results for the three and six months ended July 31, 2025 and 2024 [Comparison of the Three Months Ended July 31, 2025 and July 31, 2024](index=36&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20July%2031,%202025%20and%20July%2031,%202024) This section compares Braze's financial performance for the three months ended July 31, 2025, against the prior year, highlighting revenue and expense changes Comparison of the Three Months Ended July 31, 2025 and July 31, 2024 (in thousands) | (in thousands) | July 31, 2025 | July 31, 2024 | Change ($) | % Change | | :------------- | :------------ | :------------ | :--------- | :------- | | Revenue | $180,111 | $145,499 | $34,612 | 23.8% | | Cost of revenue | $58,221 | $43,420 | $14,801 | 34.1% | | Gross profit | $121,890 | $102,079 | $19,811 | 19.4% | | Gross margin | 67.7% | 70.2% | -2.5% | | | Sales and marketing | $82,599 | $68,569 | $14,030 | 20.5% | | Research and development | $41,250 | $33,141 | $8,109 | 24.5% | | General and administrative | $36,794 | $28,319 | $8,475 | 29.9% | | Other income, net | $3,983 | $5,503 | $(1,520) | (27.6)% | - Revenue growth of **23.8%** was driven by a **22.7%** increase in subscription revenue, with **58.8%** from new customers and **41.2%** from existing customer expansion[179](index=179&type=chunk) - Gross margin decreased by **2.5 percentage points** to **67.7%**, primarily due to increased hosting, third-party messaging fees, personnel costs, and amortization from the OfferFit acquisition[180](index=180&type=chunk)[181](index=181&type=chunk) - Operating expenses increased across all categories, with general and administrative seeing the largest percentage increase (**29.9%**) due to acquisition-related expenses and investments in finance and administrative functions[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) [Comparison of the Six Months Ended July 31, 2025 and July 31, 2024](index=38&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20July%2031,%202025%20and%20July%2031,%202024) This section compares Braze's financial performance for the six months ended July 31, 2025, against the prior year, detailing revenue and expense trends Comparison of the Six Months Ended July 31, 2025 and July 31, 2024 (in thousands) | (in thousands) | July 31, 2025 | July 31, 2024 | Change ($) | % Change | | :------------- | :------------ | :------------ | :--------- | :------- | | Revenue | $342,170 | $280,958 | $61,212 | 21.8% | | Cost of revenue | $109,078 | $87,968 | $21,110 | 24.0% | | Gross profit | $233,092 | $192,990 | $40,102 | 20.8% | | Gross margin | 68.1% | 68.7% | -0.6% | | | Sales and marketing | $156,726 | $138,396 | $18,330 | 13.2% | | Research and development | $78,047 | $67,514 | $10,533 | 15.6% | | General and administrative | $77,294 | $55,110 | $22,184 | 40.3% | | Other income, net | $9,635 | $10,674 | $(1,039) | (9.7)% | - Revenue increased by **21.8% YoY**, with subscription revenue up **20.9%**, driven by new customer acquisition (**54.0%**) and existing customer growth (**46.0%**)[186](index=186&type=chunk) - Gross margin decreased by **0.6 percentage points** to **68.1%**, impacted by acquisition-related expenses and a one-time charge from an April 2024 service disruption[189](index=189&type=chunk) - General and administrative expenses increased by **40.3%**, primarily due to **$11.2 million** in acquisition-related professional services and legal costs, and **$9.3 million** in personnel and overhead costs[192](index=192&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes Braze's liquidity, capital resources, cash flow activities, and ability to meet future financial obligations - As of July 31, 2025, principal liquidity sources were **$368.3 million** in cash, cash equivalents, and marketable securities[195](index=195&type=chunk) - The company had an accumulated deficit of **$650.5 million** as of July 31, 2025, and generated **$31.1 million** in cash from operating activities for the six months ended July 31, 2025[196](index=196&type=chunk)[199](index=199&type=chunk) Cash Flows (in thousands) | Cash Flows (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,096 | $31,007 | | Net cash used in investing activities | $(37,713) | $(27,431) | | Net cash provided by financing activities | $8,083 | $4,041 | - Net cash used in investing activities increased to **$(37.7) million**, primarily due to **$181.2 million** for the OfferFit acquisition, partially offset by marketable securities maturities and principal returns[202](index=202&type=chunk) Non-GAAP Free Cash Flow (in thousands) | Non-GAAP Free Cash Flow (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,096 | $31,007 | | Less: Purchases of property and equipment | $(2,826) | $(10,224) | | Less: Capitalized internal-use software costs | $(1,865) | $(2,108) | | Non-GAAP free cash flow | $26,405 | $18,675 | - Non-GAAP free cash flow increased to **$26.4 million** for the six months ended July 31, 2025, from **$18.7 million** in the prior year, driven by higher collections[207](index=207&type=chunk) - The company expects current liquidity to meet working capital and capital expenditure requirements for at least the next 12 months, with significant funding requirements for employee compensation, purchase commitments (**$169.5 million**), and operating lease obligations (**$109.1 million**)[208](index=208&type=chunk)[209](index=209&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Braze's exposure to market risks, primarily from fluctuations in interest rates and foreign currency exchange rates - Braze's primary market risk exposure is from fluctuations in interest rates, affecting its **$368.3 million** in cash, cash equivalents, and marketable securities as of July 31, 2025[215](index=215&type=chunk)[218](index=218&type=chunk) - A hypothetical **10%** change in interest rates would not have a material impact on the consolidated financial statements as of July 31, 2025[219](index=219&type=chunk) - The company is exposed to foreign currency exchange rate risk due to operating expenses in various foreign currencies and sales in Japanese Yen, which it mitigates using foreign currency forward contracts[220](index=220&type=chunk)[221](index=221&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that Braze's disclosure controls and procedures were not effective as of July 31, 2025, due to a material weakness in internal control related to ineffective information technology general controls (ITGCs) - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of July 31, 2025[224](index=224&type=chunk) - A material weakness was identified in internal control related to ineffective information technology general controls (ITGCs) in user access and program change management over financial reporting systems[226](index=226&type=chunk) - Remediation efforts include enhancing controls over user access and program change management, strengthening IT compliance functions, and engaging external advisors, with completion expected by the end of fiscal year ending January 31, 2026[227](index=227&type=chunk)[228](index=228&type=chunk)[231](index=231&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) Braze is not currently a party to any litigation that is expected to have a material adverse effect on its business, operating results, cash flows, or financial condition - As of the report date, Braze is not a party to any litigation that is believed to have a material adverse effect on its business[233](index=233&type=chunk) - Future legal proceedings, even if resolved favorably, could incur significant costs and divert management attention[233](index=233&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks and uncertainties that could materially and adversely affect Braze's business, financial condition, and results of operations [Risk Factors Summary](index=45&type=section&id=Risk%20Factors%20Summary) This section provides a concise overview of the key risks facing Braze, including market, operational, financial, and governance factors - Key risks include unstable market conditions, challenges in achieving and sustaining profitability, intense competition, and the need to attract and retain customers[235](index=235&type=chunk) - Operational risks involve reliance on third-party cloud infrastructure, compliance with stringent privacy and data protection laws, and the potential for security breaches[238](index=238&type=chunk) - Financial reporting risks include identified material weaknesses in internal controls, and governance risks relate to the dual-class stock structure concentrating voting control[238](index=238&type=chunk) [Risks Related to Our Growth and Capital Requirements](index=46&type=section&id=Risks%20Related%20to%20Our%20Growth%20and%20Capital%20Requirements) This section outlines risks associated with Braze's growth, capital needs, market conditions, and the challenge of achieving sustained profitability - Unstable market and economic conditions, including inflation and interest rate increases, may adversely affect customer spending, extend sales cycles, and impact the company's dollar-based net retention rate[237](index=237&type=chunk) - Rapid revenue growth may not be indicative of future growth, and the company may require additional capital, which might not be available on acceptable terms, leading to potential dilution or increased debt[240](index=240&type=chunk)[242](index=242&type=chunk) - The company has a history of operating losses and may not achieve or sustain profitability due to substantial investments in technology, sales, marketing, and international expansion[245](index=245&type=chunk)[246](index=246&type=chunk) [Risks Related to Our Business and Our Brand](index=49&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Brand) This section details risks concerning Braze's business operations, brand reputation, competition, customer retention, and acquisition integration challenges - Braze faces intense competition from established and emerging marketing solution providers, which could lead to pricing pressure, loss of market share, and reduced revenue[252](index=252&type=chunk)[255](index=255&type=chunk) - Failure to attract new customers and retain existing ones, or to adapt to rapidly changing technology and evolving industry standards, could impair the company's competitiveness and revenue growth[256](index=256&type=chunk)[257](index=257&type=chunk) - Dependence on a single platform means that any failure to achieve continued market acceptance or proper performance, including defects or disruptions, could harm reputation and market share[265](index=265&type=chunk)[266](index=266&type=chunk)[270](index=270&type=chunk) - International expansion creates operational challenges, including political and economic conditions, regulatory differences, and currency fluctuations, which could negatively affect results[297](index=297&type=chunk) - Acquisitions, such as OfferFit, pose integration challenges, divert management attention, and may not yield expected synergies, potentially diluting stockholder value[302](index=302&type=chunk) [Risks Related to Our Dependence on Third Parties](index=58&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section highlights risks arising from Braze's reliance on third-party service providers for messaging delivery and cloud infrastructure - Braze relies on third-party providers for delivering consumer engagement messages (e.g., emails, SMS, mobile notifications) and cloud-based infrastructure (e.g., AWS, Rackspace)[303](index=303&type=chunk)[306](index=306&type=chunk) - Any disruption in these third-party services, changes in their policies, or limitations on capacity could lead to customer dissatisfaction, reputational harm, and significant liabilities[303](index=303&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) - Dependence on mobile operating systems (Android, iOS) means changes in their policies or functionality could adversely affect Braze's ability to interact with consumers and retain customers[304](index=304&type=chunk)[305](index=305&type=chunk) [Risks Related to Privacy, Data Security and Data Protection Laws](index=60&type=section&id=Risks%20Related%20to%20Privacy,%20Data%20Security%20and%20Data%20Protection%20Laws) This section addresses risks related to compliance with global privacy and data protection laws, and the potential impact of security breaches - Braze is subject to stringent and evolving privacy, data security, and data protection laws globally, including HIPAA, CCPA, EU GDPR, and UK GDPR, which impose strict requirements on personal data processing[313](index=313&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) - Non-compliance or perceived failures to comply with these regulations could lead to government enforcement actions, substantial fines, litigation, and reputational harm[317](index=317&type=chunk)[322](index=322&type=chunk) - Security breaches or unauthorized access to customer or company data, whether from cyberattacks, employee error, or third-party vulnerabilities, could harm reputation, reduce demand, and incur significant liabilities[324](index=324&type=chunk)[327](index=327&type=chunk) [Risks Related to Other Laws and Litigation](index=63&type=section&id=Risks%20Related%20to%20Other%20Laws%20and%20Litigation) This section covers risks from evolving internet laws, anti-corruption regulations, export controls, tax limitations, and the use of AI in its platform - Changes in internet-related laws and regulations, or the internet infrastructure itself, could diminish demand for Braze's platform[328](index=328&type=chunk)[329](index=329&type=chunk) - Non-compliance with anti-corruption, anti-bribery, and anti-money laundering laws (e.g., FCPA, U.K. Bribery Act) could lead to criminal or civil liability, fines, and reputational damage[333](index=333&type=chunk)[334](index=334&type=chunk) - Governmental export and import controls, including those related to encryption technology and sanctions, could impair Braze's ability to compete internationally and subject it to liability for violations[336](index=336&type=chunk)[337](index=337&type=chunk)[340](index=340&type=chunk) - The company's ability to use its net operating losses (NOLs) to offset future taxable income may be limited by ownership changes or regulatory changes, potentially increasing future tax liabilities[342](index=342&type=chunk) - The use of AI and machine learning in its platform may expose Braze to claims, regulatory scrutiny, and reputational harm if algorithms are flawed, biased, or produce inaccurate outputs[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk) [Risks Related to Intellectual Property](index=67&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section discusses risks concerning Braze's intellectual property protection, potential infringement claims, and the use of open-source software - Failure to protect proprietary technology and intellectual property rights (patents, trademarks, trade secrets) could harm the business, as patents may not issue or be enforceable, and trade secrets could be misappropriated[351](index=351&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk) - Braze may be subject to costly intellectual property infringement claims by third parties, potentially requiring significant damages, licensing fees, or development of alternative technologies[358](index=358&type=chunk)[359](index=359&type=chunk) - The use of open-source software in products carries risks of unanticipated license conditions, potential requirements to release proprietary source code, or litigation over ownership rights[347](index=347&type=chunk)[350](index=350&type=chunk) [Risks Related to Socioeconomic Factors](index=69&type=section&id=Risks%20Related%20to%20Socioeconomic%20Factors) This section outlines risks from socioeconomic factors, including changes in industry demand and disruptions from catastrophic events or pandemics - Future revenue and results could be harmed if increased demand from certain industries, observed during the COVID-19 pandemic, does not continue long-term[368](index=368&type=chunk) - Natural catastrophic events, human-made problems (e.g., cyberattacks, power disruptions), and global pandemics could disrupt business operations, network infrastructure, and information technology systems[369](index=369&type=chunk) [Risks Related to Public Company Reporting and Public Disclosure Practices](index=70&type=section&id=Risks%20Related%20to%20Public%20Company%20Reporting%20and%20Public%20Disclosure%20Practices) This section addresses risks related to financial reporting, internal control weaknesses, and ESG disclosure practices for a public company - A material weakness in ITGCs could impair the ability to produce timely and accurate financial statements, leading to loss of investor confidence and potential regulatory sanctions[370](index=370&type=chunk)[372](index=372&type=chunk) - Risks related to ESG practices and disclosures, including differing stakeholder priorities and potential negative press, could adversely impact share price and access to capital[373](index=373&type=chunk)[374](index=374&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=71&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) This section details risks associated with owning Braze's Class A common stock, including dividend policy, voting control, and market volatility - The company does not intend to pay dividends, meaning investor returns depend solely on Class A common stock price appreciation[375](index=375&type=chunk) - The dual-class stock structure concentrates voting control with executive officers, directors, and significant holders, limiting the influence of Class A common stockholders[376](index=376&type=chunk)[377](index=377&type=chunk) - Future sales of Class A common stock in the public market, including shares issued for acquisitions or equity incentive plans, could depress the market price and dilute existing stockholders[386](index=386&type=chunk)[392](index=392&type=chunk) - The market price of Class A common stock may be highly volatile due to various factors, including financial performance, analyst expectations, and general economic conditions[390](index=390&type=chunk)[391](index=391&type=chunk) [General Risk Factors](index=73&type=section&id=General%20Risk%20Factors) This section covers general risks affecting Braze's Class A common stock, including price volatility, dilution from future stock issuances, and analyst coverage - The price of Class A common stock may be volatile due to fluctuations in financial condition, analyst expectations, market conditions, and other factors, potentially leading to loss of investment[390](index=390&type=chunk)[391](index=391&type=chunk) - Issuance of additional capital stock for financings, acquisitions, or equity incentive plans will dilute existing stockholders' ownership interests[392](index=392&type=chunk) - If securities or industry analysts cease coverage or publish negative reports, the share price and trading volume could decline[393](index=393&type=chunk)[395](index=395&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered sales of equity securities during the fiscal quarter ended July 31, 2025, specifically a donation of Class A common stock to a charitable fund - On May 1, 2025, Braze issued **24,116 shares** of Class A common stock to a charitable donor-advised fund for no consideration, in connection with its Pledge 1% commitment[396](index=396&type=chunk) - This issuance was made pursuant to Section 4(a)(2) of the Securities Act, as it did not involve a public offering[396](index=396&type=chunk) [Item 3. Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as not applicable, indicating no defaults upon senior securities during the reporting period [Item 4. Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as not applicable, indicating no mine safety disclosures are required for the reporting period [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) This section discloses the termination of Rule 10b5-1(c) trading plans by the Chief Financial Officer and Chief Technology Officer in July and August 2025, respectively - On July 2, 2025, CFO Isabelle Winkles terminated her Rule 10b5-1(c) trading plan, which was adopted on April 3, 2025, and provided for the sale of up to **53,315 shares** of Class A common stock and shares from **62,418 RSUs**[400](index=400&type=chunk) - On August 15, 2025, CTO Jon Hyman terminated his Rule 10b5-1(c) trading plan, adopted on April 3, 2025, which provided for the sale of up to **390,000 shares** of Class A common stock and shares from **49,179 RSUs**, subject to price conditions[401](index=401&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and XBRL-related files - The exhibit index includes the Amended and Restated Certificate of Incorporation and Bylaws, certifications from the CEO and CFO, and Inline XBRL documents[404](index=404&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenue of $180 million for Q2 2026, representing a 24% year-over-year increase and an 11% increase from the prior quarter [6][18] - Non-GAAP operating income was $6 million, with a non-GAAP net income of $17 million, and free cash flow of $4 million [6][24] - The company achieved three consecutive quarters of positive non-GAAP operating income and free cash flow, and five consecutive quarters of positive non-GAAP net income [7] Business Line Data and Key Metrics Changes - Subscription revenue accounted for 95% of total revenue, with the remaining 5% from professional services and onboarding fees [18] - The total customer count increased by 12% year-over-year to 2,422, with large customers (spending at least $500,000 annually) growing by 27% year-over-year to 282 [18][19] - Dollar-based net retention was 108% overall and 111% for large customers, indicating strong expansion across industries and regions [20] Market Data and Key Metrics Changes - Revenue outside the U.S. contributed 45% of total revenue, down approximately 60 basis points sequentially but in line with the prior year [20] - The total remaining performance obligation was $862 million, up 25% year-over-year, with current RPO at $558 million, up 27% year-over-year [21] Company Strategy and Development Direction - The company aims to drive higher profitability while reinvesting in business growth and maintaining its competitive advantage in customer engagement [7][17] - The integration of OfferFit is expected to enhance the company's AI capabilities and customer engagement strategies, with a focus on autonomous personalization [12][13] - The company is committed to improving customer engagement through AI-driven innovations and enhancing the user experience [10][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, citing strong pipeline generation and competitive strength despite global trade and economic concerns [7][32] - The company noted that the demand environment remains stable, with improved execution and high competitive win rates contributing to positive performance [32][33] - Management highlighted the importance of AI in transforming customer engagement and enhancing marketer productivity [66] Other Important Information - The company expects Q3 2026 revenue to be in the range of $183.5 million to $184.5 million, representing a year-over-year growth rate of approximately 21% [26] - For the full fiscal year 2026, total revenue is expected to be in the range of $717 million to $720 million, with OfferFit contributing approximately two percentage points to year-over-year growth [28][29] Q&A Session Summary Question: What has changed in the demand environment and the appetite for Braze? - Management noted that there hasn't been a meaningful change in the macro or demand environment, but execution has improved globally, leading to high competitive win rates and efficient late-stage pipeline operations [32] Question: What are the expectations for OfferFit's integration and its impact on ACV? - Management reported strong early wins from OfferFit across all regions and expressed confidence in high attach rates for the offering, which is priced around $300,000 annually [41][45] Question: How is the usage of AI products trending? - Management indicated rapid adoption of AI features across various verticals, enhancing customer engagement and closing the gap between capability and accessibility for customers [52][53] Question: How has sales execution improved? - Management highlighted synchronization of operational changes and investments leading to improved sales efficiency and better prioritization of late-stage pipeline opportunities [56][57] Question: What changes have been observed in the demand environment across geographies? - Management noted strong performance globally, with contributions from all regions, particularly from the ANZ region due to investments like the new data center [80]

Financial Data and Key Metrics Changes - The company reported revenue of $180 million for Q2 2026, representing a 24% year-over-year increase and an 11% increase from the prior quarter [6][18] - Committed annual recurring revenue surpassed $700 million, indicating strong demand for the Braze Customer Engagement Platform [6] - Non-GAAP operating income was $6 million, with non-GAAP net income of $17 million, and free cash flow of $4 million for the quarter [6][24] - Dollar-based net retention was 108%, with large customers showing a retention rate of 111% [19] Business Line Data and Key Metrics Changes - Subscription revenue accounted for 95% of total revenue, with the remaining 5% from professional services and onboarding fees [18] - The number of large customers (spending at least $500,000 annually) increased by 27% year-over-year to 282 [19] - The company added 80 new customers sequentially and 259 year-over-year, bringing the total customer count to 2,422 [7][18] Market Data and Key Metrics Changes - Revenue outside the U.S. contributed 45% of total revenue, down approximately 60 basis points sequentially but consistent with the prior year [19] - The company experienced strong bookings across various verticals and geographies, with significant wins against legacy marketing clouds [9][10] Company Strategy and Development Direction - The company aims to enhance profitability while reinvesting in business growth and maintaining its competitive edge in customer engagement [7][12] - The integration of OfferFit is expected to accelerate the AI roadmap and enhance customer engagement strategies [13][14] - The focus on AI-driven solutions is seen as a key differentiator, with plans to leverage generative AI and reinforcement learning to improve customer experiences [10][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, citing strong pipeline generation and competitive strength despite global economic concerns [7][34] - The integration of OfferFit is progressing well, contributing positively to the company's outlook [34][43] - Management noted that the demand environment remains stable, with improvements in downsell activity contributing to better performance [32][74] Other Important Information - The company ended the quarter with approximately $368 million in cash and marketable securities, including the impact of the OfferFit acquisition [25] - Non-GAAP gross profit was $125 million, with a gross margin of 69.3%, slightly down from the previous year due to increased messaging volumes [21][22] Q&A Session Summary Question: What has changed in the demand environment? - Management noted that there hasn't been a significant change in the macro environment, but execution has improved globally, leading to better performance [32][34] Question: How is OfferFit performing post-acquisition? - The integration is going well, with strong early wins across all regions and high levels of trust from enterprise customers [41][43] Question: Can you discuss the usage trends for AI products? - Adoption of AI features is increasing, with strong usage across various verticals, enhancing customer engagement capabilities [51][52] Question: How is sales execution improving? - Improved sales execution is attributed to better pipeline management and strong competitive positioning, allowing for more judicious resource allocation [56][58] Question: What are the expectations for customer engagement in the AI landscape? - The company believes that AI will enhance the capabilities of customer engagement teams, allowing them to focus on strategic initiatives rather than routine tasks [66][67]

Financial Performance - Braze's quarterly revenue run rate is $720 million[3] - Q2 2026 revenue reached $1801 million, a 238% year-over-year increase and an 111% sequential growth[10, 14] - The GAAP gross margin was 677%, while the non-GAAP gross margin was 693%[10, 16] - The dollar-based net retention rate was 108%[4, 10, 18] - GAAP operating loss was $388 million, compared to a $280 million loss in the prior year quarter, while non-GAAP operating income was $60 million, compared to $42 million in the prior year quarter[10] - Net cash provided by operating activities was $70 million, compared to $310 million in the prior year quarter[10] - Free cash flow was $35 million, compared to $72 million in the prior year quarter[10, 23] Customer Growth - The customer base increased to 2,422 as of July 31, 2025, from 2,163 in the prior year quarter, representing a 12% year-over-year growth[4, 10, 20] Guidance - Q3 2026 revenue is projected to be between $1835 million and $1845 million, and full-year 2026 revenue is expected to be between $7170 million and $7200 million[29]

BRAZE REPORTS FISCAL SECOND QUARTER 2026 RESULTS NEW YORK -- (BUSINESSWIRE) -- September 4, 2025 -- Braze (Nasdaq: BRZE) the leading customer engagement platform that empowers brands to Be Absolutely Engaging , today announced results for its fiscal quarter ended July 31, 2025. TM "We reported a strong second quarter, delivering 24% year-over-year revenue growth while driving continued efficiency in our business, expanding our non-GAAP operating income and net income profitability, and generating strong fre ...

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