Braze(BRZE) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 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][119][120] - 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] Condensed Consolidated Statements of Operations 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][179][186] - 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][180][181][182][183][184] Condensed Consolidated Statements of Comprehensive Loss 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] Condensed Consolidated Statements of Redeemable Non-controlling Interest and Stockholders' Equity 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][119] - Stock-based compensation contributed $68.2 million to additional paid-in capital for the six months ended July 31, 2025[35] Condensed Consolidated Statements of Cash Flows 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][199][200] - 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][202] - 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][204] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting Braze, Inc.'s condensed consolidated financial statements 1. Company Overview 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] - 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] 2. Summary of Significant Accounting Policies 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] - 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] - 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][58] 3. Revenue from Contracts with Customers 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][186] - 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][186] 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 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][72][73] - 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] 5. Fair Value Measurements 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] 6. Marketable Securities 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][78] 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 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] - 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] - 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] 8. Prepaid Expenses and Other Current Assets 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] 9. Accrued Expenses and Other Current Liabilities 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] 10. Employee Benefit Plans 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] 11. Stockholders' Equity 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] - 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] 12. Employee Stock Plans 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] - 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][99] 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] 13. Commitments and Contingencies 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] - Legal proceedings are part of the ordinary course of business, and the company believes it has recorded adequate provisions for any potential losses[106] 14. Leases 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] - 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] 15. Income Taxes 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] - The decrease in the effective tax rate was primarily due to the release of the valuation allowance from the acquisition of OfferFit[110] - 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] 16. Net Loss per Share 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] - 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] 17. Related Party Transactions 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] 18. Derivative Financial Instruments 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] - The fair value of derivative financial instruments was $5 thousand as of July 31, 2025, classified within prepaid expenses and other current liabilities[118] 19. Business Combination 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] - 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][121][125] - Acquisition-related costs totaled $11.4 million for the six months ended July 31, 2025, expensed as general and administrative[128] 20. Intangible Assets, Net 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] - 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] 21. Goodwill 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][133] 22. Segments 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] - The CODM reviews financial information on a consolidated basis for resource allocation and performance assessment, with net loss as the primary performance measure[136] 23. Subsequent Events 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Braze's financial condition and results of operations, highlighting revenue growth, factors affecting performance, and liquidity 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] - 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] 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 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][148] - 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][149] - 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][155] - 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] - Continued investment in research and development, particularly in artificial intelligence capabilities and channel offerings, is crucial for sustaining innovation and technology leadership[157] - 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] Components of Results of Operations 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][161][163] - Cost of revenue includes third-party cloud infrastructure, application service providers, personnel, and overhead costs, expected to increase with business growth[165][166] - Operating expenses comprise sales and marketing, research and development, and general and administrative costs, with personnel costs being the most significant component[168] - Other income, net, primarily consists of net exchange gains/losses on foreign currency transactions and investment income[175] - 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] Results of Operations 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 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 | $(1,520) | (27.6)% | - Revenue growth of 23.8% was driven by a 22.7% increase in subscription revenue, with 58.8% from new customers and 41.2% from existing customer expansion[179] - Gross margin decreased by 2.5 percentage points to 67.7%, primarily due to increased hosting, third-party messaging fees, personnel costs, and amortization from the OfferFit acquisition[180][181] - Operating expenses increased across all categories, with general and administrative seeing the largest percentage increase (29.9%) due to acquisition-related expenses and investments in finance and administrative functions[182][183][184] Comparison of the Six Months Ended July 31, 2025 and July 31, 2024 This section compares Braze's financial performance for the six months ended July 31, 2025, against the prior year, detailing revenue and expense trends Comparison of the Six Months Ended July 31, 2025 and July 31, 2024 (in thousands) | (in thousands) | July 31, 2025 | July 31, 2024 | Change ($) | % 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] - 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] - 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] Liquidity and Capital Resources 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] - 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][199] 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] 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] - 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][209] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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][218] - A hypothetical 10% change in interest rates would not have a material impact on the consolidated financial statements as of July 31, 2025[219] - 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][221] Item 4. Controls and Procedures 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] - 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] - 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][228][231] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - Future legal proceedings, even if resolved favorably, could incur significant costs and divert management attention[233] Item 1A. Risk Factors 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 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] - Operational risks involve reliance on third-party cloud infrastructure, compliance with stringent privacy and data protection laws, and the potential for security breaches[238] - Financial reporting risks include identified material weaknesses in internal controls, and governance risks relate to the dual-class stock structure concentrating voting control[238] Risks Related to Our Growth and Capital Requirements 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] - 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][242] - 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][246] Risks Related to Our Business and Our Brand 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][255] - 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][257] - 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][266][270] - International expansion creates operational challenges, including political and economic conditions, regulatory differences, and currency fluctuations, which could negatively affect results[297] - Acquisitions, such as OfferFit, pose integration challenges, divert management attention, and may not yield expected synergies, potentially diluting stockholder value[302] Risks Related to Our Dependence on Third Parties 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][306] - 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][306][307] - 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][305] Risks Related to Privacy, Data Security and Data Protection Laws 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][315][316][317] - Non-compliance or perceived failures to comply with these regulations could lead to government enforcement actions, substantial fines, litigation, and reputational harm[317][322] - 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][327] Risks Related to Other Laws and Litigation 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][329] - 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][334] - 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][337][340] - 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] - 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][365][366] Risks Related to Intellectual Property 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][352][354] - 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][359] - 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][350] Risks Related to Socioeconomic Factors 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] - 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] Risks Related to Public Company Reporting and Public Disclosure Practices 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][372] - 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][374] Risks Related to Ownership of Our Class A Common Stock 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] - The dual-class stock structure concentrates voting control with executive officers, directors, and significant holders, limiting the influence of Class A common stockholders[376][377] - 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][392] - 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][391] General Risk Factors 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][391] - Issuance of additional capital stock for financings, acquisitions, or equity incentive plans will dilute existing stockholders' ownership interests[392] - If securities or industry analysts cease coverage or publish negative reports, the share price and trading volume could decline[393][395] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - This issuance was made pursuant to Section 4(a)(2) of the Securities Act, as it did not involve a public offering[396] Item 3. Defaults Upon Senior Securities This item is marked as not applicable, indicating no defaults upon senior securities during the reporting period Item 4. Mine Safety Disclosures This item is marked as not applicable, indicating no mine safety disclosures are required for the reporting period Item 5. Other Information 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] - 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] Item 6. Exhibits 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]