Braze(BRZE) - 2024 Q4 - Annual Report

PART I Business Braze operates a comprehensive customer engagement platform, serving 2,044 customers and 6.2 billion monthly active users as of January 2024, focusing on growth through customer acquisition, expansion, and AI innovation - Braze is a customer engagement platform that enables brands to manage direct, meaningful relationships with their customers through a vertically integrated system for data ingestion, orchestration, classification, and personalization[34][208][211] - The company's growth strategy centers on acquiring new customers, expanding within the existing base, geographical expansion, and strengthening technology leadership, particularly in AI[242][243][244] - Braze faces intense competition from established software companies, including legacy marketing clouds like Adobe and Salesforce, and point solutions such as Airship, Iterable, Klaviyo, and MoEngage[308] Key Operational Metrics (as of January 2024) | Metric | Value | | :--- | :--- | | Customers | 2,044 | | Monthly Active Users (MAUs) | 6.2 billion (up from 4.8 billion in Jan 2023) | Risk Factors The company faces significant risks in sustaining growth and profitability, including intense competition, reliance on third-party infrastructure, data privacy regulations, and financial challenges from historical net losses and its dual-class stock structure - The company has a history of operating losses, with a net loss of $130.4 million for the fiscal year ended January 31, 2024, and an accumulated deficit of $483.1 million, making achieving and sustaining profitability a key risk[88][364] - Business operations are highly dependent on third-party cloud infrastructure, particularly Amazon Web Services (AWS), where any disruption, termination, or cost increase could significantly harm the business[15][433] - The company faces intense competition from well-established companies like Adobe and Salesforce, which have greater resources and brand recognition, potentially leading to pricing pressure and loss of market share[341][368] - The business is subject to stringent and evolving data privacy laws like GDPR and CCPA, where non-compliance could result in significant fines, litigation, and reputational damage[18][437][438] - The dual-class stock structure concentrates approximately 78.8% of voting power with holders of Class B common stock, limiting the influence of Class A stockholders on corporate matters[130][180] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[516] Cybersecurity Braze maintains an enterprise-wide cybersecurity program overseen by the CTO and audit committee, designed to protect against threats through various tools and audits, with no material incidents reported to date - The company has an enterprise-wide cybersecurity program that includes security tools, a bug bounty program, incident response plans, and employee training[92] - Cybersecurity risk management oversight is delegated to the audit committee of the board, which receives regular reports from the Chief Technology Officer[62] - As of the report date, the company has not identified any cybersecurity incidents that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition[518] Properties The company leases its New York City headquarters, with a new 92,300 square feet lease through January 2034, and maintains additional leased office spaces globally - The company's headquarters is in New York City, with a new lease for approximately 92,300 square feet commencing in October 2023 and terminating in January 2034[94] - Braze leases additional office space in key global cities including Austin, Berlin, Chicago, Jakarta, London, Paris, San Francisco, Singapore, Sydney, and Tokyo[94] Legal Proceedings As of the report date, Braze is not a party to any litigation expected to have a material adverse effect on its business or financial condition - The company is not currently a party to any litigation expected to have a material adverse effect on its business[63] Mine Safety Disclosures This item is not applicable to the company - Not applicable[519] PART II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Braze's Class A common stock trades on Nasdaq under "BRZE"; the company has never paid dividends and intends to retain earnings for business expansion - The company's Class A common stock is traded on The Nasdaq Global Select Market under the symbol "BRZE"[41] - Braze has never paid dividends and does not intend to in the foreseeable future, retaining earnings for business expansion[42] Reserved This item is reserved and contains no information - Item 6 is reserved[66] Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2024, Braze reported $471.8 million revenue, up 33%, with a net loss of $130.4 million, improved gross margin, positive operating cash flow of $6.9 million, and strong retention rates Key Financial Performance (Fiscal Year Ended Jan 31) | Metric | 2024 | 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $471.8M | $355.4M | +33% | | Net Loss | ($130.4M) | ($140.7M) | -7.3% | | Gross Profit | $324.3M | $239.6M | +35.3% | | Gross Margin | 68.7% | 67.4% | +1.3 p.p. | | Cash from Operations | $6.9M | ($22.3M) | N/A | - Revenue growth of $116.4 million was primarily driven by a $112.7 million increase in subscription revenue, with approximately 66.8% from existing customers and 33.2% from new customers[116] - The dollar-based net retention rate for the trailing 12 months ended January 31, 2024, was 117% for all customers and 120% for customers with ARR of $500,000 or more[72] - The number of customers with Annual Recurring Revenue (ARR) of $500,000 or more grew to 202 as of January 31, 2024, up from 156 in the prior year[72] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate risk on its $480.0 million portfolio and foreign currency exchange rate risk from international operating expenses, with no hedging activities to date - The company is exposed to interest rate risk on its $480.0 million portfolio of cash, cash equivalents, and marketable securities, where a hypothetical 10% change in interest rates is not expected to have a material impact[720][766] - Foreign currency exchange rate risk exists as operating expenses are denominated in local currencies of foreign subsidiaries, and while most sales are in U.S. dollars, fluctuations in exchange rates can affect consolidated results[739] - Inflation has not had a material effect on the business, but the company notes that if costs become subject to inflationary pressures, it may not be able to fully offset them through price increases[719] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal years 2022-2024, including notes on accounting policies, the North Star acquisition, and disclosures on revenue, deferred revenue, and net operating loss carryforwards - The report from the independent auditor, Ernst & Young LLP, provides an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[743][775] - On June 1, 2023, the company acquired North Star Y, Pty Ltd, its exclusive reseller in Australia and New Zealand, for a total consideration of $27.0 million, resulting in the recognition of $28.4 million in goodwill[621][671][1005] - As of January 31, 2024, the company had federal and state net operating loss (NOL) carryforwards of approximately $355.4 million and $248.4 million, respectively, which may be available to offset future taxable income, subject to certain limitations[51] - Total stock-based compensation expense recognized for the fiscal year ended January 31, 2024 was $99.3 million, up from $73.3 million in the prior year[634] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[1029] Controls and Procedures Management concluded disclosure controls were effective as of January 31, 2024, having remediated a prior material weakness in revenue recognition controls, with the Braze Australia acquisition excluded from internal control evaluation - Management concluded that disclosure controls and procedures were effective as of January 31, 2024[652] - A material weakness in internal control over financial reporting related to revenue recognition, identified in the prior fiscal year, has been successfully remediated as of January 31, 2024[679][1033] - The audit of internal controls excluded the acquisition of Braze Australia (formerly North Star), which represented approximately 1% of total assets and 6% of total revenues[653] Other Information Several executive officers, including the CTO, President and CCO, and CFO, entered into Rule 10b5-1 trading plans for future stock sales during the fourth fiscal quarter - The Chief Technology Officer, President and Chief Commercial Officer, and Chief Financial Officer each entered into Rule 10b5-1(c) trading plans for the sale of Class A common stock[681] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[1015] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the forthcoming 2024 Proxy Statement[683] Executive Compensation Information detailing executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the forthcoming 2024 Proxy Statement[1017] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership by major shareholders and management is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the forthcoming 2024 Proxy Statement[1018] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the forthcoming 2024 Proxy Statement[684] Principal Accounting Fees and Services Information detailing fees paid to the principal accountant is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the forthcoming 2024 Proxy Statement[1019] PART IV Exhibits, Financial Statement Schedules This section lists Form 10-K exhibits, noting consolidated financial statements are in Item 8 and financial statement schedules are omitted due to inapplicability or prior inclusion - The consolidated financial statements are located in Item 8 of the report[1040] - Financial statement schedules have been omitted because the information is not applicable or is included elsewhere in the report[1021] Form 10-K Summary This optional section for a Form 10-K summary has not been utilized by the company - No summary is provided in this optional section[1024]