10-Q 1 brze-20240430.htm 10-Q brze-20240430
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________
FORM 10-Q
______________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to     
Commission File Number: 001-41065
______________________________________________________________
Braze, Inc.
(Exact name of Registrant as specified in its charter)
______________________________________________________________
Delaware45-2505271
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
63 Madison Building
28 East 28th Street, Floor 12
New YorkNew York 10016
(Address of principal executive offices, including zip code) 
(609) 964-0585
(Registrant’s telephone number, including area code)
______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareBRZEThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
At May 31, 2024, there were 77,451,377 shares of the registrant’s Class A and 24,175,408 shares of the registrant’s Class B common stock, each with a par value of $0.0001 per share, outstanding.


Braze, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended April 30, 2024
TABLE OF CONTENTS
Page No.
2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

the anticipated effects of unstable market and economic conditions that may have serious adverse consequences on our business, financial condition and share price;
our expectations regarding our revenue and the timing of revenue recognition under our customer contracts, expenses and other operating results;
our ability to acquire new customers and successfully retain existing customers;
our ability to increase usage of our platform and upsell and cross-sell additional products;
our ability to achieve or sustain our profitability;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
the costs and success of our marketing efforts, and our ability to promote our brand;
our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;
our growth strategies for our platform and our ability to effectively manage our growth, including any international expansion;
the estimated addressable market opportunity for our platform;
our ability to protect and enforce our intellectual property rights and any costs associated therewith;
the anticipated impact of domestic and global socioeconomic events on our business;
our ability to compete effectively with existing competitors and new market entrants;
the size and growth rates of the markets in which we compete; and
the anticipated benefits or effects of any completed or future acquisitions or international expansion.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and are inherently uncertain. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Braze,” “the Company,” “we,” “our,” and “us,” refer to Braze, Inc. and its subsidiaries.

Trademarks

“Braze,” “Be Absolutely Engaging,” and other trade names and trademarks of ours appearing in this Quarterly Report on Form 10-Q are our property. This Quarterly Report on Form 10-Q contains trade names and trademarks of other companies,
3

which are the property of their respective owners. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Where You Can Find More Information

We announce material information to the public through a variety of means, including filings with the U.S. Securities and Exchange Commission, or the SEC, press releases, public webcasts and conference calls, blogposts on our website (braze.com), and the investor relations section of our website (www.investors.braze.com). We therefore encourage investors and others interested in Braze to review the information that we make available on our website, in addition to following our filings with the SEC, press releases, webcasts and conference calls. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Quarterly Report on Form 10-Q, and you should not consider information on our website to be part of this Quarterly Report on Form 10-Q.
4

Part 1 – Financial Information
Item 1.    Financial Statements
BRAZE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
April 30,
2024
January 31,
2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$74,801 $68,228 
Restricted cash, current3,373 3,373 
Accounts receivable, net of allowance of $2,396 and $2,772 at April 30, 2024 and January 31, 2024, respectively
81,632 92,256 
Marketable securities408,957 407,898 
Prepaid expenses and other current assets30,180 29,366 
Total current assets598,943 601,121 
Restricted cash, noncurrent530 530 
Property and equipment, net39,328 29,358 
Operating lease right-of-use assets76,597 81,163 
Deferred contract costs66,012 63,661 
Goodwill28,448 28,448 
Intangible assets, net3,472 3,690 
Other assets2,796 2,970 
TOTAL ASSETS$816,126 $810,941 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable$4,689 $6,321 
Accrued expenses and other current liabilities56,267 63,264 
Deferred revenue229,330 204,269 
Operating lease liabilities, current15,360 15,585 
Total current liabilities305,646 289,439 
Operating lease liabilities, noncurrent72,173 75,027 
Other long-term liabilities2,074 2,050 
TOTAL LIABILITIES379,893 366,516 
COMMITMENTS AND CONTINGENCIES (Note 13)
Redeemable non-controlling interest (Note 4)126 192 
STOCKHOLDERS’ EQUITY
Class A common stock, $0.0001 par value; 2,000,000,000 and 2,000,000,000 shares authorized as of April 30, 2024 and January 31, 2024, respectively; 76,844,270 and 73,037,015 shares issued and outstanding as of April 30, 2024 and January 31, 2024, respectively
8 7 
Class B common stock, $0.0001 par value; 110,000,000 and 110,000,000 shares authorized as of April 30, 2024 and January 31, 2024, respectively; 24,175,408 and 27,173,408 shares issued and outstanding as of April 30, 2024 and January 31, 2024, respectively
2 3 
Additional paid-in capital958,224 928,494 
Accumulated other comprehensive loss(3,393)(1,178)
Accumulated deficit(518,734)(483,093)
TOTAL STOCKHOLDERS’ EQUITY436,107 444,233 
TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY$816,126 $810,941 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
April 30,
20242023
Revenue$135,459 $101,780 
Cost of revenue44,548 32,687 
Gross profit90,911 69,093 
Operating expenses:
Sales and marketing69,827 57,262 
Research and development34,373 29,745 
General and administrative26,791 23,983 
Total operating expenses130,991 110,990 
Loss from operations(40,080)(41,897)
Other income, net
5,171 3,459 
Loss before provision for income taxes(34,909)(38,438)
Provision for income taxes
798 388 
Net loss(35,707)(38,826)
Net loss attributable to redeemable non-controlling interest(66)(372)
Net loss attributable to Braze, Inc.$(35,641)$(38,454)
Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted$(0.35)$(0.40)
Weighted-average shares used to compute net loss per share attributable to Braze, Inc. common stockholders, basic and diluted100,788 96,353 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
Three Months Ended
April 30,
20242023
Net loss$(35,707)$(38,826)
Other comprehensive income (loss):
Change in foreign currency translation adjustments(137)66 
Unrealized gains (losses) on marketable securities(2,078)1,447 
Other comprehensive income (loss), net(2,215)1,513 
Comprehensive loss, net(37,922)(37,313)
Less: comprehensive loss, net, attributable to redeemable non-controlling interest(66)(372)
Comprehensive loss attributable to Braze, Inc.$(37,856)$(36,941)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Redeemable Non-controlling InterestClass A and Class B Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total Stockholders' Equity
SharesAmount
Balance at January 31, 2024
$192 100,210 $10 $928,494 $(483,093)$(1,178)$444,233 
Issuance of common stock for options exercised— 233 — 1,035 — — 1,035 
Vesting of restricted stock units— 577 — — — — — 
Stock-based compensation— — — 28,695 — — 28,695 
Other comprehensive loss— — — — — (2,215)(2,215)
Net loss attributable to redeemable non-controlling interests(66)— — — — — — 
Net loss attributable to Braze Inc.— — — — (35,641)— (35,641)
Balance at April 30, 2024
$126 101,020 $10 $958,224 $(518,734)$(3,393)$436,107 



Redeemable Non-controlling InterestClass A and Class B Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total Stockholders' Equity
SharesAmount
Balance at January 31, 2023
$1,455 95,975 $10 $806,044 $(353,927)$(6,824)$445,303 
Issuance of common stock for options exercised— 676 — 2,211 — — 2,211 
Vesting of restricted stock units— 213 — — — — — 
Stock-based compensation— — — 24,576 — — 24,576 
Other comprehensive income— — — — — 1,513 1,513 
Net loss attributable to redeemable non-controlling interests(372)— — — — — — 
Net loss attributable to Braze, Inc.— — — — (38,454)— (38,454)
Balance at April 30, 2023
$1,083 96,864 $10 $832,831 $(392,381)$(5,311)$435,149 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
April 30,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (including amounts attributable to redeemable non-controlling interests)$(35,707)$(38,826)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation28,620 24,179 
Amortization of deferred contract costs8,313 6,660 
Depreciation and amortization2,126 1,526 
Provision for credit losses668 594 
(Accretion) amortization of (discount) premium on marketable securities
(487)471 
Non-cash foreign exchange (gain) loss
(295)310 
Fair value adjustments to contingent consideration
(137) 
Other280 20 
Changes in operating assets and liabilities:
Accounts receivable9,876 11,046 
Prepaid expenses and other current assets(984)745 
Deferred contract costs(10,730)(9,479)
ROU assets and liabilities1,522 705 
Other assets277 (380)
Accounts payable(1,800)405 
Accrued expenses and other current liabilities(7,351)9,364 
Deferred revenue25,285 15,228 
Other long-term liabilities(81)(19)
Net cash provided by operating activities
19,395 22,549 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment(6,915)(40)
Capitalized internal-use software costs(1,039)(852)
Purchases of marketable securities(59,650)(46,297)
Maturities of marketable securities57,000 71,486 
Net cash (used in)/provided by investing activities(10,604)24,297 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options1,035 2,211 
Payments of deferred purchase consideration(2,916) 
Net cash (used in)/provided by financing activities
(1,881)2,211 
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash(337)(180)
Net change in cash, cash equivalents, and restricted cash6,573 48,877 
Cash, cash equivalents, and restricted cash, beginning of period72,131 72,623 
Cash, cash equivalents, and restricted cash, end of period$78,704 $121,500 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9

BRAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SUPPLEMENTAL CASH FLOWS DISCLOSURE
(in thousands)
Three Months Ended
April 30,
20242023
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for income taxes, net of refunds
$1,576 $(465)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock-based compensation capitalized to internal-use software$597 $480 
Unrealized net loss on marketable investment securities
$(2,078)$(1,447)
Net change to property and equipment (included in accounts payable / accrued liabilities)$3,727 $66 
Asset retirement obligation$7 $6 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

BRAZE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Company Overview
Description of Business

Braze, Inc., together with its subsidiaries (collectively, the “Company,” “we,” “us,” “our,” or “Braze”), is a cloud-based customer engagement platform that delivers customer-centric experiences across push notifications, email, in-product messaging, SMS and MMS messages, and more. Customers use the Braze platform to facilitate real-time experiences between brands and customers in a more authentic and human way.

We began operations in 2011 and are incorporated in the state of Delaware. Our headquarters are located in New York, New York. As of April 30, 2024, we also lease additional office space in Austin, Berlin, Bucharest, Chicago, Jakarta, London, Paris, San Francisco, Seoul, Singapore, Sydney, and Tokyo.
2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and variable interest entities (“VIE”) for which we are the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications and immaterial changes have been made to prior-period financial statements to conform to the current-period presentation.
Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reported period. We evaluate estimates based on historical and anticipated results, trends, and various other assumptions. Significant items subject to such estimates and assumptions include, but are not limited to, the standalone selling price for separate performance obligations in our revenue arrangements, expected period of benefit for deferred contract costs, the valuation of common stock and stock-based compensation, the allocation of overhead costs between cost of revenue and operating expenses, the estimated useful lives of intangible and depreciable assets, the fair value of acquired assets and assumed liabilities from business combinations, valuation of long-lived assets and their recoverability, including goodwill, the incremental borrowing rate, the valuation of deferred tax assets and liabilities and other tax estimates including our ability to utilize net operating losses.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments as facts and circumstances dictate. As future events and their effects, including the uncertainty surrounding rapidly changing market and economic conditions from global or domestic macroeconomic and socioeconomic conditions such as, among others, instability in the banking and financial services sector, international and domestic supply chain risks, inflationary pressure, interest rate increases, declines in consumer confidence, international conflicts and domestic and foreign political unrest, that impact us and our customers, cannot be determined with precision, actual results could differ from those estimates and many of our estimates and assumptions have required increased judgement and carry a higher degree of variability and volatility.
Significant Accounting Policies
Our significant accounting policies are detailed in “Note 2. Summary of Significant Accounting Policies" of the audited annual consolidated financial statements for the fiscal year ended January 31, 2024 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on April 1, 2024 (the “Annual Report”). There have been no material changes to our significant accounting policies.
Concentration of Credit Risk

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Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, and accounts receivable. Restricted cash consists of letters of credit related to our leased properties. For cash, cash equivalents, restricted cash, and marketable securities, we are exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the consolidated balance sheets in excess of the Federal Deposit Insurance Corporation (“FDIC”) limits. Cash, cash equivalents, restricted cash, and marketable securities balances are maintained at financial institutions that management believes are of high-credit, quality financial institutions, where deposits, at times, exceed the FDIC limits.

Significant customers are those which represent 10% or more of our total revenue for the period, or accounts receivable at the balance sheets dates. For the three months ended April 30, 2024 and 2023, no customer accounted for 10% or more of our total revenue.

For accounts receivable, we are exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the consolidated balance sheets. As of April 30, 2024 and January 31, 2024, no customers accounted for 10% or more of our total accounts receivable balance.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, (“ASU 2021-08”), which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The Company adopted ASU 2021-08 prospectively during the second quarter of the fiscal year ended January 31, 2024, and determined that ASU 2021-08 does not have a material impact on the Company’s consolidated financial statements nor its related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, (“ASU 2023-07”), which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), an amount for other segment items with a description of the composition, and disclosure of the title and position of the CODM. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the update should be applied retrospectively to each period presented in the financial statements. The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, (“ASU 2023-09”), which requires public business entities on an annual basis to disclose specific categories in a tabular rate reconciliation and provide additional information for reconciling items that meet a five percent quantitative threshold. Additionally, the ASU requires all entities to disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions where income taxes paid are equal to or greater than five percent of total income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and the updated should be applied on a prospective basis, with a retrospective application permitted in the financial statements. The Company is currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on our consolidated financial statements or disclosures.
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3. Revenue from Contracts with Customers

Disaggregated Revenue Streams

The following disaggregation depicts the nature, amount, timing and uncertainty of cash flows related to the primary types of revenue from contracts with customers.

The following table presents total revenue by type (in thousands):

Three Months Ended
April 30,
20242023
Subscription$130,148 $97,146 
Professional services and other5,311 4,634 
Total$135,459 $101,780 

The following table presents total revenue by geography (in thousands):

Three Months Ended
April 30,
20242023
United States$75,639 $58,503 
International59,820 43,277 
Total$135,459 $101,780 

Revenue by geography is determined based on the location of our users. Other than the United States, no other individual country accounted for 10% or more of total revenue for any of the periods presented.

Unbilled Accounts Receivable

Unbilled accounts receivable included in trade accounts receivable, net, which generally arise from our contractual right to bill our customers in advance of services on the contract effective date, were $3.7 million and $1.5 million as of April 30, 2024 and January 31, 2024, respectively.

Contract Balances

Contract Assets

Contract assets as of April 30, 2024 and January 31, 2024 were $0.1 million and $0.9 million, respectively. The change in contract assets for all periods presented primarily reflects revenue recognized in excess of billings partially offset by contract assets earned during the period.

Deferred Revenue

The change in deferred revenue for all periods presented primarily reflects cash payments received during the period for which the performance obligation was not satisfied prior to the end of the period, partially offset by revenues recognized during the period. Revenue recognized during the three months ended April 30, 2024, from amounts included in deferred revenue at January 31, 2024, was $98.4 million. Revenue recognized during the three months ended April 30, 2023 from amounts included in deferred revenue at January 31, 2023, was $77.1 million.
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Credit Losses

The following table presents a reconciliation of the allowance for credit losses on accounts receivable (in thousands):

Allowance for Credit Losses
Balance at January 31, 2024
$2,772 
Reserve:
Credit losses668 
Deferred revenue565 
Write-offs(1,644)
Recoveries35 
Balance at April 30, 2024
$2,396 

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, the timing of service delivery and contract terms. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes and other market factors.

The following table presents remaining performance obligations as of the dates indicated below (in millions):

TotalLess than 1 Year1-5 Years
April 30, 2023$477.5 $325.4 $152.1 
July 31, 2023523.5 353.3 170.2 
October 31, 2023560.1 369.9 190.2 
January 31, 2024639.2 409.1 230.1 
April 30, 2024657.3 419.8 237.5 
4. Variable Interest Entity and Redeemable Non-Controlling Interest

On September 14, 2020, we, along with Japan Cloud Computing Co., Ltd., and M30 LLC, (the “Investors”), entered into an agreement, whereby each Investor agreed to purchase shares of common stock of Braze Kabushiki Kaisha (“Braze KK” and “Braze KK Shares”) for a total purchase price of $10.0 million in two tranches of $5.0 million per tranche in September 2020 and September 2021, to engage in the investment, organization, management and operation of Braze KK focused on the distribution of our products in Japan. The purpose of this arrangement was to further expand our business in the Japanese market.

In March 2022, we consented to the periodic issuance of stock options to purchase Braze KK Shares by certain employees of Braze KK. These options cannot be exercised by the holders thereof prior to the exercise of the call or put options described in more detail below. The Company considers the stock options to be a substantive class of equity, classified as a liability within other long-term liabilities on the consolidated balance sheets. As of April 30, 2024, the liability balance was $0.5 million. The issuance of stock options does not impact our majority stake in Braze KK, as none of the vesting criteria of the options were met as of the balance sheet date. The issuance of stock options did not result in a reconsideration event and therefore Braze KK still met the criteria of a Variable Interest Entity as Braze KK did not have sufficient equity at risk to finance their activities. As a result, we continue to operate Braze KK as a subsidiary, exposing us to business and foreign exchange risk. We consolidate Braze KK and present the results within the consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows.

The common stock held by the Investors is callable by us or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of Braze KK and the Company and may be settled, at our discretion, with our stock or cash. The non-controlling interest in Braze KK is classified in mezzanine equity as redeemable non-controlling interest as a result of the put right available to the Investors in the future, an event that is not solely in our control. The non-controlling interest is not accreted to redemption value because it is currently not probable that the non-controlling interest will become redeemable.
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The following table summarizes the activity in the redeemable non-controlling interests for the periods indicated below (in thousands):

Balance as of January 31, 2024
$192
Net loss attributable to redeemable non-controlling interest(66)
Balance as of April 30, 2024
$126
5. Fair Value Measurements

The following table sets forth our financial instruments that were measured at fair value on a recurring basis at the periods indicated below, by level within the fair value hierarchy (in thousands):
April 30, 2024
Level 1Level 2Level 3Total
Financial Assets:
Cash equivalents
Money market funds$20,145 $ $ $20,145 
U.S. government securities8,996   8,996 
Total cash equivalents29,141   29,141 
Marketable securities
U.S. government securities$317,707 $ $ $317,707 
Foreign securities 6,309  6,309 
Corporate debt securities 84,941  84,941 
Total marketable securities317,707 91,250  408,957 
Liabilities
Contingent consideration$ $ $86 $86 
Total liabilities  86 86 
Total financial assets$346,848 $91,250 $86 $438,184 
January 31, 2024
Level 1Level 2Level 3Total
Financial Assets:
Cash equivalents
Money market funds$20,758 $ $ $20,758 
U.S. government securities6,996   6,996 
Total cash equivalents27,754   27,754 
Marketable securities
U.S. government securities$318,957 $ $ $318,957 
Foreign securities 6,367  6,367 
Corporate debt securities 82,574  82,574 
Total marketable securities318,957 88,941  407,898 
Liabilities
Contingent consideration$ $ $223 $223 
Total liabilities  223 223 
Total financial assets$346,711 $88,941 $223 $435,875 
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Our money market funds and financial instruments that are classified as Level 1 within the fair value hierarchy, because they are valued using quoted prices in active markets as of April 30, 2024 and January 31, 2024. Financial instruments classified as Level 2 within our fair value hierarchy are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. Prices of these securities are obtained through independent, third-party pricing services and include market quotations that may include both observable and unobservable inputs. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.

The fair value of our contingent consideration is estimated using Level 3 unobservable inputs. The estimates of fair value are based upon assumptions believed to be reasonable but which are uncertain, and involve significant judgments by management. We will reassess the fair value of the contingent consideration quarterly until the contingency is resolved. The liability is recorded within other long-term liabilities on the consolidated balance sheets. Changes in the fair value are recorded in operating income in the consolidated statements of operations.

There were no transfers of financial instruments among Level 1, Level 2 and Level 3 during the periods presented.

The following table summarizes the fair value changes in the contingent consideration liability in connection with the acquisition of North Star Y, Pty Ltd (in thousands):

Three Months Ended
April 30,
20242023
Beginning fair value $223 $ 
Adjustments in the period
(137) 
Ending fair value$86 $ 
6. Marketable Securities

Marketable securities consist of the following for the periods presented (in thousands):
April 30, 2024
Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesTotal Estimated Fair Value
U.S. government securities$319,622 $ $(1,915)$317,707 
Foreign securities6,347 7 (45)6,309 
Corporate debt securities85,228 31 (318)84,941 
Total$411,197 $38 $(2,278)$408,957 
January 31, 2024
Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesTotal Estimated Fair Value
U.S. government securities$319,343 $782 $(1,168)$318,957 
Foreign securities6,349 31 (13)6,367 
Corporate debt securities82,368 340 (134)82,574 
Total$408,060 $1,153 $(1,315)$407,898 

Accrued interest receivables related to our available-for-sale securities of $3.6 million as of April 30, 2024, and $3.4 million as of January 31, 2024, were included within prepaid expenses and other current assets on the consolidated balance sheets.

The Company’s short-term investments consist of available-for-sale debt securities and term deposits. The term deposits are at cost, which approximates fair value. The weighted-average remaining maturity of the Company’s investment portfolio is one and a half years as of the periods presented.

16

The following table summarizes the fair value and gross unrealized losses aggregated by category of individual securities that have been in a continuous unrealized loss position for greater than 12 months (in thousands):

April 30, 2024
Continuous Unrealized Loss for Greater than 12 months
Estimated Fair ValueGross Unrealized Losses
U.S. government securities$76,134 $(315)
Foreign securities1,328 (8)
Corporate debt securities6,477 (20)
Total$83,939 $(343)

No individual security incurred continuous unrealized losses for greater than 12 months as of April 30, 2023.

The Company purchases investment grade marketable debt securities which are rated by nationally recognized statistical credit rating organizations in accordance with its investment policy. This policy is designed to minimize the Company's exposure to credit losses. As of April 30, 2024, the credit-quality of the Company’s marketable available-for-sale debt securities had remained stable. The unrealized losses recognized on marketable available-for-sale debt securities as of April 30, 2024 was primarily related to the continued market volatility associated with market expectations of an aggressive pace of interest rate increases by the Federal Reserve. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments and it is not expected that the investments would be settled at a price less than their amortized cost basis. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company is not aware of any specific event or circumstance that would require the Company to change its assessment of credit losses for any marketable available-for-sale debt security as of April 30, 2024. These estimates may change, as new events occur and additional information is obtained, and will be recognized on the consolidated financial statements as soon as they become known. No credit losses were recognized as of April 30, 2024 for the Company’s marketable debt securities.

The contractual maturities of the investments classified as available-for-sale marketable securities are as follows (in thousands):
April 30, 2024
Amortized CostEstimated Fair Value
Due within 1 year$189,065 $187,947 
Due in 1 year through 5 years222,132 221,010 
Total$411,197 $408,957 
January 31, 2024
Amortized CostEstimated Fair Value
Due within 1 year$173,481 $172,520 
Due in 1 year through 5 years234,579 235,378 
Total$408,060 $407,898 
Investment Income

Investment income consists of interest income and accretion income/amortization expense on our cash, cash equivalents, restricted cash, and marketable securities. Investment income is included within other income, net on the consolidated statements of operations. The primary components of investment income from marketable securities were as follows (in thousands):
17

Three Months Ended
April 30,
20242023
Interest income$4,160 $2,928 
Accretion/amortization of discount/premium, net
487 471 
Investment income$4,647 $3,399 
7. Property and Equipment, Net

Property and equipment, net, consist of the following (in thousands):
April 30,
2024
January 31,
2024
Capitalized internal-use software$14,707 $13,071 
Computer equipment, office equipment, and software10,315 7,411 
Leasehold improvements20,266 18,789 
Furniture and fixtures7,978 4,223 
Total property and equipment53,266 43,494 
Less: accumulated depreciation and amortization(13,938)(14,136)
Total property and equipment, net$39,328 $29,358 

During the three months ended April 30, 2024, the total depreciation expense and amortization expense for property and equipment was $2.2 million, inclusive of $0.3 million net book value for fixed assets written off during the quarter. In addition, the accumulated depreciation decreased by $2.1 million for the disposal of fixed assets substantially consisting of leasehold improvements, computer equipment, office equipment, and software, that was largely depreciated from property and equipment, gross and accumulated depreciation.

The total depreciation expense and amortization expense for property and equipment during the three months ended April 30, 2023 was $1.2 million, partially offset by $0.3 million of fixed assets removed, substantially consisting of leasehold improvements and computer equipment, office equipment, and software, that was largely depreciated from property and equipment, gross and accumulated depreciation.

We capitalized internal-use software of $1.6 million and $1.3 million during the three months ended April 30, 2024 and 2023, respectively. Amortization for capitalized internal-use software costs recognized within cost of revenue, on the consolidated statements of operations, was $0.7 million and $0.5 million for the three months ended April 30, 2024 and 2023, respectively.

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):
April 30,
2024
January 31,
2024
Prepaid software subscriptions$14,167 $14,864 
Prepaid advertising1,054 918 
Prepaid insurance1,758 1,881 
Investment interest receivable3,616 3,426 
Consumption tax receivable1,535 1,606 
Prepaid events
1,978 1,170 
Prepaid employee benefits843 902 
Other5,229 4,599 
Total prepaid expenses and other current assets$30,180 $29,366 
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9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consists of the following (in thousands):
April 30,
2024
January 31,
2024
Accrued compensation costs$16,567 $26,912 
Accrued software subscriptions10,945 10,956 
Accrued commissions5,450 7,440 
Accrued professional service fees2,016 1,555 
Accrued advertising1,743 1,662 
Accrued tax liability8,659 9,048 
ESPP payable
3,977 594 
Other6,910 5,097 
Total accrued expenses and other current liabilities$56,267 $63,264 
10. Employee Benefit Plans

We sponsor a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. Matching contributions under the plan were $2.6 million and $2.4 million for the three months ended April 30, 2024 and 2023, respectively.

11. Stockholders’ Equity

Class A and Class B Common Stock

The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and may be converted at the option of the holder into one share of Class A common stock. In addition, all shares of Class B common stock will automatically convert into shares of Class A common stock in certain circumstances, including on the earlier of (i) the last trading day of the fiscal quarter during which the number of shares of Class B common stock then outstanding represents less than 10% of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, or (ii) the last trading day of the fiscal quarter immediately following the fifth anniversary of the initial public offering. All shares of the Company’s capital stock outstanding immediately prior to our initial public offering, including all shares held by its executive officers, directors and their respective affiliates, and all shares issuable upon the conversion of our then outstanding convertible preferred stock, were reclassified into shares of Class B common stock immediately prior to the completion of the initial public offering.
12. Employee Stock Plans

We have historically issued equity awards under our Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) and our 2021 Equity Incentive Plan (the “2021 Plan”).

Amended and Restated 2011 Equity Incentive Plan

Our 2011 Plan provides for the award of stock options and restricted stock units (“RSUs”) to employees, officers, directors, advisors and other service providers of Braze. The terms of each award and the exercise price of awards under the 2011 Plan are determined by our board of directors. Following effectiveness of the 2021 Plan in connection with our initial public offering, no further awards were made under the 2011 Plan.

2021 Equity Incentive Plan

In November 2021, our board of directors and our stockholders approved the 2021 Plan, which became effective on November 16, 2021. No grants were made under the 2021 Plan prior to its effectiveness. No further grants will be made under the 2011 Plan. At effectiveness, we reserved 25,660,249 shares of our Class A common stock to be issued under the 2021 Plan. In addition, the number of shares of our Class A common stock reserved for issuance under the 2021 Plan will automatically increase on February 1 of each year for a period of ten years, beginning on February 1, 2022 and continuing through February 1, 2031, in an amount equal to (1) 5% of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31, or (2) a lesser number of shares determined by our board of directors no later than the
19

February 1 increase. On February 1, 2024, the number of shares of our Class A common stock reserved for issuance under our 2021 Plan increased by an additional 5,010,520 shares.
Restricted Stock Units

The following table summarizes unvested RSU award activity and related information:
SharesWeighted-Average Grant Date Fair Value
Balance as of January 31, 2024
6,263,739
Granted1,798,592$52.71 
Vested(576,623)$36.90 
Forfeited(131,562)$38.96 
Balance as of April 30, 2024
7,354,146

RSUs granted during the three months ended April 30, 2024 contained a service-based vesting condition of up to approximately a four year period. RSUs typically vest on a quarterly basis or have a one-year cliff vesting period with quarterly vesting thereafter.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense, which was included in the consolidated statements of operations as follows (in thousands):

Three Months Ended,
April 30,
20242023
Cost of revenue$964 $889 
Sales and marketing9,445 7,848 
Research and development10,832 9,843 
General and administrative7,037 5,566 
Stock-based compensation, net of amounts capitalized$28,278 $24,146 
Capitalized stock-based compensation expense597 480 
Total stock-based compensation expense$28,875 $24,626 

As of April 30, 2024, total compensation cost not yet recognized related to unvested equity awards and the weighted-average remaining period over which these costs are expected to be realized were as follows:

Stock OptionsRSUs
Unrecognized compensation costs (in thousands)$23,025$218,665
Weighted-average remaining recognition period (years)1.522.84

Employee Stock Purchase Plan

In November 2021, our board of directors and our stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on November 16, 2021. Following completion of our initial public offering, the ESPP authorized the issuance of 1,825,000 shares of our Class A common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our Class A common stock reserved for issuance will automatically increase on February 1 of each year for a period of ten years, beginning on February 1, 2022 and continuing through February 1, 2031, by the lesser of (i) 1% of the total number of shares of our common stock (both Class A and Class B) outstanding on the preceding January 31; and (ii) 2,737,000 shares, except before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii) above. On February 1, 2024, the number of shares of our Class A common stock reserved for issuance under our ESPP increased by an additional 1,002,104 shares.

The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the Company’s Class A common stock on specified dates during such offerings. Under the ESPP, our board of directors will be permitted to specify offerings with durations of not more than 27 months, and may specify shorter purchase
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periods within each offering. Each offering will have one or more purchase dates on which shares of our Class A common stock will be purchased for employees participating in the offering. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period or (2) the fair market value of the Company’s Class A common stock on the last day of the offering period, as defined by the ESPP.

The Company recognized $0.8 million and $0.8 million of stock-based compensation expense related to the ESPP in the three months ended April 30, 2024 and 2023, respectively.

As of April 30, 2024, $4.0 million has been withheld on behalf of our employees for a future purchase and is classified as accrued expenses and other current liabilities on the consolidated balance sheets.

There were no issuances of Class A common stock under the ESPP in the three months ended April 30, 2024. As of April 30, 2024, there are 4,357,174 shares of Class A common stock that remain available for issuance under the ESPP.
13. Commitments and Contingencies

Indirect Taxes

We are subject to indirect taxation in some, but not all, of the various U.S. states and foreign jurisdictions in which we conduct business. Therefore, we have an obligation to charge, collect and remit Value Added Tax (“VAT”) or Goods and Services Tax (“GST”) in connection with certain of our foreign sales transactions and sales and use tax in connection with eligible sales to subscribers in certain U.S. states. On June 21, 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair. The State of South Dakota alleged that U.S. constitutional law should be revised to permit South Dakota to require remote sellers to collect and remit sales tax in South Dakota in accordance with South Dakota’s sales tax statute. Under the U.S. Supreme Court’s ruling, the longstanding Quill Corp v. North Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances. We began collecting sales tax in relevant jurisdictions for the fiscal year ended January 31, 2019. As a result of this ruling and given the scope of our operations, taxing authorities continue to provide regulations that increase the complexity and risks to comply with such laws and could result in substantial liabilities, prospectively as well as retrospectively. Based on the information available, we continue to evaluate and assess the jurisdictions in which indirect tax nexus exists and believe that the indirect tax liabilities are adequate and reasonable. Due to the complexity and uncertainty around the application of these rules by taxing authorities, results may vary materially from expectations, and we have recognized liabilities for contingencies related to state sales and use tax, VAT, and GST deemed probable and estimable totaling $1.2 million and $1.0 million as of April 30, 2024 and January 31, 2024, respectively, which is included in accrued expenses and other current liabilities on the consolidated balance sheets. As of January 31, 2024, we have filed prior period returns in several jurisdictions in order to remediate this potential exposure, and the Company continues to evaluate the potential exposure on an ongoing basis.

Legal Contingencies

From time to time, in the ordinary course of business, we are or may be involved in various legal or regulatory proceedings, claims or purported class actions related to, among other things, alleged infringement of third-party patents and other intellectual property rights, commercial, labor and employment, wage and hour and other claims. We have been, and may in the future be, put on notice or sued by third-parties for alleged infringement of their proprietary rights, including patent infringement. We accrue a liability when we believe that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. We believe we have recorded adequate provisions for any such matters and, as of April 30, 2024, we believe that no material loss will be incurred in excess of the amounts recognized in our financial statements.
14. Leases

The Company’s lease portfolio consists solely of office space with lease terms ranging from approximately one to ten years. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments.

The components of lease cost reflected on the consolidated statements of operations were as follows (in thousands):

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Three Months Ended
April 30,
20242023
Operating lease cost$5,541 $3,651 
Variable lease cost810 672 
Short-term lease cost102 288 
Total net lease cost$6,453$4,611

The future maturities of the Company’s operating lease liabilities by fiscal year are as follows (in thousands):

Amount
Remainder of 2025$11,574 
202615,468 
202714,493 
202813,062 
202912,538 
Thereafter50,987 
Total future undiscounted lease payments$118,122 
Less: imputed interest(30,589)
Total reported lease liability$87,533 

The Company's lease terms and discount rates are as follows:
April 30,
20242023
Weighted-average remaining lease term (years)8.16.3
Weighted-average discount rate7.2 %5.5 %

Other information for the Company's leases is as follows (in thousands):
Three Months Ended
April 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities$3,707 $2,933 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities$ $2,767 
15. Income Taxes

The Company computes its provision for interim periods by applying an estimated annual effective tax rate to anticipated annual pretax income or loss as directed by ASC 740. The estimated annual effective tax rate is applied to the Company’s year to date income or loss, and is adjusted for discrete items recorded in the period. The Company recorded an income tax expense of $0.8 million and $0.4 million for the three months ended April 30, 2024 and 2023, respectively. The effective tax rate for the three months ended April 30, 2024 and 2023 was (2.3)% and (1.0)%, respectively.

The provision for income taxes recorded for the three months ended April 30, 2024 consists of income taxes in state jurisdictions and foreign jurisdictions in which the Company conducts business. The primary difference between the effective tax rate and the statutory rate is the change in the valuation allowance recorded. The Company continues to maintain a full valuation allowance against its net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.
16. Net Loss per Share
We compute the basic and diluted net loss per share of our Class A common stock and Class B common stock. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially
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identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share in the Company’s net loss.

The following table sets forth the computation of basic and diluted net loss per share attributable to Braze, Inc. common stockholders during the periods presented (in thousands, except per share amounts):
Three Months Ended
April 30,
20242023
Numerator:
Net loss attributable to Braze, Inc.$(35,641)$(38,454)
Denominator:
Weighted-average shares of Braze, Inc. common stock outstanding100,788 96,360 
Less: weighted-average unvested shares of Braze, Inc. subject to repurchase (7)
Weighted-average shares used to calculate net loss per share attributable to Braze, Inc. common stockholders, basic and diluted100,788 96,353 
Net loss per share attributable to Braze, Inc. common stockholders, basic and diluted$(0.35)$(0.40)
The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per share attributable to Braze, Inc. common stockholders for the periods presented, because their inclusion would be anti-dilutive (in thousands):
Three Months Ended
April 30,
20242023
Options to purchase common stock5,885 7,440 
Restricted stock units7,354 7,333 
ESPP shares estimated to be purchased124 138 
Total13,363 14,911 

17. Related Party Transactions

In May 2021, the Chief Financial Officer of Datadog, Inc., one of our vendors, joined our board of directors. We have purchased services from Datadog, Inc. in the aggregate amount of approximately $1.4 million and $0.8 million during the three months ended April 30, 2024 and 2023, respectively.


18. Restructuring

In May 2023, the Company implemented a workforce reduction designed to rebalance talent to better meet customer needs and achieve business priorities. No restructuring costs were recognized during the three months ended April 30, 2024 and 2023.


19. Business Combination

Acquisition of North Star Y, Pty Ltd

On June 1, 2023, the Company acquired all the outstanding stock of North Star Y, Pty Ltd (“North Star”), Braze’s then exclusive reseller in Australia and New Zealand. The transaction provides Braze with a direct market presence in Australia and New Zealand, along with local market expertise from the North Star team.

The total purchase price consideration, as adjusted, of $26.9 million consisted of cash payments of $17.6 million, $6.1 million in issuances of Braze Class A common stock, and contingent consideration payments, the fair value of which was $1.8 million as of the acquisition date. The sellers are eligible to receive cash earn-out payments calculated based on qualified revenue performance metrics for the two individual twelve month periods immediately subsequent to the closing of the acquisition. The earn-out payments are capped at $10.0 million for the first earn-out period and $16.0 million for the second earn-out period. The fair value measurement of the contingent consideration liability has been influenced by developments in the significant inputs for such calculation, notably the new and incremental actual and forecasted deal closings from the
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Australia-New Zealand region. As a result, during the quarter ended April 30, 2024, the Company reduced the contingent consideration liability by $0.1 million to $0.1 million.

The preliminary purchase price, as adjusted, was allocated to intangible assets in the amount of $3.8 million and goodwill in the amount of $28.4 million based on the respective estimated fair values. The resulting goodwill is not deductible for income tax purposes.

An indemnification holdback of $2.8 million that was previously recorded within accrued expenses and other current liabilities on the consolidated balance sheets was extinguished in the three months ended April 30, 2024. The indemnification holdback represents security for potential indemnification claims against the seller. The indemnification holdback was released in full.

Of the initial $0.5 million working capital holdback, $0.3 million has been released based on the completion of post-close adjustment procedures.

The results of operations of North Star, which were not material, have been included in the Company’s consolidated statements of operations for the three months ended April 30, 2024.


20. Intangible Assets, Net

Intangible assets, net, consisted of the following (in thousands):

April 30, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountAmortization Period
Amortizable intangible assets
Customer relationships$3,119 $(286)$2,833 10 years
Restrictive covenant relationships186 (85)101 2 years
Trademark465 (427)38 1 year
Total amortizable intangible assets3,770 (798)2,972 
Non-amortizable intangible assets
Technology licenses500 — 500 n/a
Total intangible assets, net$4,270 $(798)$3,472 

January 31, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountAmortization Period
Amortizable intangible assets
Customer relationships$3,119 $(208)$2,911 10 years
Restrictive covenant relationships186 (62)124 2 years
Trademark465 (310)155 1 year
Total amortizable intangible assets3,770 (580)3,190 
Non-amortizable intangible assets
Technology licenses500 — 500 n/a
Total intangible assets, net$4,270 $(580)$3,690 

Intangible amortization expense was approximately $0.2 million for the three months ended April 30, 2024. There were no amortizable intangible assets in the three months ended April 30, 2023; therefore, no intangible amortization expense was recorded.

The future intangible amortization expense by fiscal year is as follows (in thousands):
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Amount
Remainder of 2025$342 
2026343
2027312
2028312
2029312
Thereafter1351
Total$2,972 


21. Goodwill

The changes in the carrying amounts of goodwill were as follows (in thousands):

Amount
Balance at January 31, 2024
$28,448 
Acquisition related adjustments
 
Balance at April 30, 2024
$28,448 



22. Subsequent Events

In May 2024, in connection with our Pledge 1% commitment, we donated 32,155 shares of our Class A common stock to a charitable donor-advised fund that resulted in the recognition of approximately $1.3 million of operating expense.

In May 2024, the Company entered into a lease agreement for a new office space in Sydney, Australia. The lease commencement date, which is when the premises will become available to the Company for use, is expected to be in the fourth quarter of fiscal year 2025. The Company is obligated to pay approximately $0.1 million per month beginning in the fourth quarter of fiscal year 2025 through the third quarter of fiscal year 2030, the expiration date.

In May 2024, the Company granted RSUs for a total of 76,214 shares of Class A common stock to employees pursuant to the 2021 Plan. The RSUs vest over a service period of approximately four years. The grant date fair value of these awards was $3.1 million.

In June 2024, the Company granted RSUs for a total of 5,439 shares of Class A common stock to a member of its Board of Directors pursuant to the 2021 Plan. The RSUs vest over a service period of approximately three years. The grant date fair value of the award was estimated at $0.2 million.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our audited annual consolidated financial statements and related notes for the fiscal year ended January 31, 2024 that are included in our Annual Report on Form 10-K, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on April 1, 2024. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth under the section entitled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward Looking Statements” in this Quarterly Report on Form 10-Q.
Overview
Braze is a leading customer engagement platform that empowers brands to Be Absolutely Engaging™. Our platform empowers brands to listen to their customers better, understand them more deeply, and act on that understanding in a way that is human and personal. Using our platform, brands ingest and process customer data in real time, orchestrate and optimize contextually relevant, marketing campaigns across multiple channels. Our platform is designed so that interactions between brands and consumers have the same relevance and cross-channel continuity as human interactions.

Our customers include many established global enterprises and leading technology innovators, and span a wide variety of sizes and industries, including retail and consumer goods, media and entertainment, restaurants and on-demand healthcare and life sciences, financial services, travel, transportation, and hospitality.

We primarily generate revenue from the sale of subscriptions to customers for the use of our platform. Our subscription fees are principally based on an upfront commitment by our customers for messaging volumes, a specific number of monthly active users, platform access and/or support and certain add-on products. Additionally, we provide professional services, which better enable customers to successfully onboard and use our platform, including certain premium professional services such as email deliverability support and dedicated technical support staff.

We employ a land-and-expand business model centered around offering products that are easy to adopt and have a rapid time to value. We expand our reach within existing customers when our customers add new channels, purchase additional subscription products, implement new engagement strategies, or onboard new business units and geographies. We also grow as our customers grow because our pricing is based in large part on the number of consumers that our customers reach and the volume of messages our customers send. Accordingly, as our customers increase the use of our platform and increase the number of end users reached via our platform, the value of our contracts with such customers also increases.

We have grown significantly in recent periods. We generated revenue of $135.5 million in the three months ended April 30, 2024, representing year-over-year growth of 33.1% from the three months ended April 30, 2023. We had net losses of $35.7 million and $38.8 million in the three months ended April 30, 2024 and 2023, respectively. We had net cash provided by operating activities of $19.4 million in the three months ended April 30, 2024 and net cash provided by operating activities of $22.5 million in the three months ended April 30, 2023, respectively. Our Non-GAAP free cash flow was $11.4 million and $21.7 million in the three months ended April 30, 2024 and 2023, respectively. See the section titled “— Non-GAAP Free Cash Flow” for additional information about how we calculate free cash flow, a non-GAAP financial metric, and a reconciliation to net cash provided by operating activities, the most directly comparable measure calculated in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.
Factors Affecting Our Performance

Acquiring New Customers

We believe there is substantial opportunity to continue to grow our customer base. We intend to continue to expand our customer base in verticals where we already have a strong presence, such as retail, media and entertainment, on-demand services, gaming, health and lifestyle, and financial services — and to increase our presence in verticals where we are not yet strongly represented. Through our sales and marketing efforts, we also plan to capitalize on industries subject to ongoing digital transformation and where direct-to-consumer relationships are accelerating, to further propel adoption of our technology. As of April 30, 2024, we had 2,102 customers across a broad range of sizes and industries. Our ability to attract new customers will depend on a number of factors, including the quality and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

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We define a customer as the separate and distinct, ultimate parent-level entity that has an active subscription with us to use our products. A single organization could have multiple distinct contracting divisions or subsidiaries, all of which together would be considered a single customer.

Expanding Within Our Existing Customer Base

We believe we can achieve significant growth by expanding sales within our existing customer base. We expand the use of our platform by existing customers by, among others, adding new channels and increasing the messaging volume we sell to our customers as their businesses and needs continue to grow and as they connect directly with additional consumers, which in turn leads to a need for greater messaging capacity. We intend to continue to invest in developing and enhancing our products and functionality. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solutions, the ability of our customers to attract new end users, competition, pricing and overall changes in our customers’ spending levels.

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

Braze supports interactions across a broad range of both in-product and out-of-product messaging channels. The flexibility of our platform also allows us to add new channels quickly and efficiently as they become relevant to our customers. The breadth of channels we offer, and our ability to efficiently expand our offering of channels, allows us to expand our reach within existing customers as they purchase additional channels from us.

In addition to monthly active users, we have a history of increasing annual recurring revenue, or ARR, from our customers. We define ARR as the annualized value of customer subscription contracts, including certain premium professional services that are subject to contractual subscription terms, as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms (including contracts for which we are negotiating a renewal). Our calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, expansion or contraction of existing customers relationships or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. Our ARR may decline or fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with our products and professional services, pricing, competitive offerings, economic conditions or overall changes in our customers’ spending levels. ARR should be viewed independently of revenue and does not represent our GAAP revenue on an annualized basis or a forecast of revenue, as it is an operating metric that can be impacted by contract start and end dates and renewal rates.

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

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

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Expanding Geographically

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

Sustaining Innovation and Technology Leadership

Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We are focused on investing in research and development to continue to enhance our platform. For example, we continue to develop our artificial intelligence capabilities, to enable brands to better analyze and act on customer data, and to expand our channel offerings. We believe our market-driven product development approach maximizes the return on new feature development and channel expansion. Our customers consistently volunteer to participate in the testing of new products, which indicates their appetite for new and innovative functionality. We believe our continued innovation will provide new avenues for growth through which we will continue to deliver differentiated outcomes for our customers. We intend to continue to invest in building additional products that expand our capabilities and facilitate the extension of our platform to new channels and use cases.

Macroeconomic Conditions on Our Business

Unfavorable conditions in the economy, both in the United States and abroad, may negatively affect the growth of our business and our results of operations. General macroeconomic and socioeconomic conditions such as, among others, instability in the banking and financial services sector, international and domestic supply chain risks, inflationary pressure, interest rate increases, declines in consumer confidence, international conflicts and domestic and foreign political unrest have led to increased economic uncertainty. We cannot predict if these trends will continue, and, accordingly, we are not able to estimate the ongoing effects on our results of operations, financial condition or liquidity as a result of these macroeconomic factors. For additional details, see the section titled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

Revenue is derived from two primary sources: (1) subscription services and (2) professional services and other.

Subscription services primarily consist of access to our customer engagement platform and related customer support. Our customers enter into a subscription for committed contractual entitlements. To the extent that our customers’ usage exceeds the committed contractual entitlements under their subscription plans, they are charged for excess usage, or they may exercise an option to purchase an incremental volume tier of committed contractual entitlements. Revenue associated with platform subscriptions is recognized ratably over the contract term, which is consistent with the period over which services are provided to the customer. Fees associated with excess usage and incremental volume are also treated as subscription revenue. To date, fees associated with excess usage have not been material.

Professional services and other revenue consists of fees for distinct services rendered in training and assisting our customers to configure our platform for their use at the onset of their initial contract or when a new product is purchased. Such revenue is generally recognized over a period of up to six months from providing access to the platform. We also provide additional platform and feature enhancement and optimization services which are generally recognized ratably over the contract term.

Deferred revenue consists of customer billings in advance of revenue being recognized. We generally invoice our customers for subscription services arrangements annually in advance and for professional services upfront.

Cost of Revenue

Cost of revenue consists of direct costs related to providing platform access to our customers and to performing onboarding and professional services including consulting services. These costs primarily include payments to third-party cloud infrastructure providers for hosting software solutions, costs associated with application service providers utilized to deliver the platform, personnel-related costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, and overhead cost allocations, including rent, utilities, depreciation, information technology costs, amortization of internal use software and certain administrative personnel costs.
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We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capabilities of our platform. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future. We expect our cost of revenue to increase for the foreseeable future as we continue to grow our business.

Gross Profit and Gross Margin

Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue and cost of revenue fluctuates, including as a result of the timing and amount of resources we dedicate to improving our platform and expanding our products.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. Personnel costs, including salaries, cash-based performance compensation, benefits and stock-based compensation, are the most significant component of operating expenses. Operating expenses also include allocated overhead costs, which include rent, utilities, depreciation, information technology costs and certain administrative personnel costs. As we continue to expand our operations, we expect an increase in personnel headcount and expansion of our global footprint.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs for our sales and marketing organization, sales commissions, costs related to brand awareness, sponsorships, customer marketing events and advertising, agency costs, travel-related expenses and allocated overhead costs.

We intend to continue to invest in sales and marketing to help drive the growth of our business. We expect our sales and marketing expenses will increase in absolute dollars as we continue to invest in sales and marketing activities to acquire new customers and increase sales to existing customers.

Research and Development

Research and development expenses consist primarily of personnel costs for our engineering, service, design and information technology teams. Additionally, research and development expenses include allocated overhead costs and contractor fees. Research and development costs are expensed as incurred. Capitalized internal-use software development costs are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and amortized to cost of revenue over the software’s expected useful life, which is generally three years.

We expect to continue our investment in research and development to enhance the user experience of our current customers and attract new customers. We expect research and development expenses to increase in absolute dollars as we continue to invest in enhancing our platform.

General and Administrative

General and administrative expenses consist primarily of personnel costs for finance, legal, human resources and other administrative functions, as well as non-personnel costs such as legal, accounting and other professional service fees, software costs, certain tax, license and insurance-related expenses and allocated overhead costs. Additionally, from time to time general and administrative expenses may include expenses associated with our donation of shares of Class A common stock to a charitable donor-advised fund in connection with our Pledge 1% commitment.

We expect that general and administrative expenses will increase in absolute dollars and vary from period to period as a percentage of revenue for the foreseeable future but decrease as a percentage of revenue over the long term, as we focus on processes, systems, and controls to enable our internal support functions to scale with the growth of our business. We have incurred, and expect to continue to incur, additional expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on The Nasdaq Stock Market LLC, expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for insurance, investor relations and professional services.

Other Income, Net

Other income, net, primarily consists of net exchange gains or losses on foreign currency transactions and investment income consists primarily of income earned on our investments, cash and cash equivalents, and restricted cash.
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Provision for Income Taxes

Provision for income taxes consists of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance in jurisdictions where we had net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
Results of Operations
The following table sets forth the unaudited condensed consolidated statements of operations data for each of the periods indicated:
Three Months Ended
April 30,
20242023
(in thousands)
Revenue$135,459 $101,780 
Cost of revenue (1)
44,548 32,687 
Gross profit90,911 69,093 
Operating expenses:
Sales and marketing (1)
69,827 57,262 
Research and development (1)
34,373 29,745 
General and administrative (1)
26,791 23,983 
Total operating expenses130,991 110,990 
Loss from operations(40,080)(41,897)
Other income, net
5,171 3,459 
Loss before provision for income taxes(34,909)(38,438)
Provision for income taxes
798 388 
Net loss$(35,707)$(38,826)
(1) Includes stock-based compensation expense, net of amounts capitalized as follows:
Three Months Ended
April 30,
20242023
(in thousands)
Cost of revenue$964 $889 
Sales and marketing9,445 7,848 
Research and development10,832 9,843 
General and administrative7,037 5,566 
Total stock-based compensation expense$28,278 $24,146 

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The following table sets forth the unaudited condensed consolidated statements of operations data expressed as a percentage of revenue for each of the periods indicated:

Three Months Ended
April 30,
20242023
(as a percentage of revenue)
Revenue100 %100 %
Cost of revenue33 %32 %
Gross profit67 %68 %
Operating expenses:
Sales and marketing52 %56 %
Research and development25 %29 %
General and administrative20 %24 %
Total operating expenses97 %109 %
Loss from operations(30)%(41)%
Other income, net
%%
Loss before provision for income taxes(26)%(38)%
Provision for income taxes
— %— %
Net loss(26)%(38)%

Comparison of the Three Months Ended April 30, 2024 and April 30, 2023
Revenue
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
Revenue$135,459 $101,780 $33,679 33.1 %
The increase in revenue of $33.7 million, or 33.1%, for the three months ended April 30, 2024 compared to the three months ended April 30, 2023, was primarily driven by a $33.0 million or 34.0% increase in subscription revenue. Approximately 56.3% of the increase in subscription revenue was attributable to the growth from existing customers, increase in monthly active users, expansion across channels, and committed entitlements and features, and the remaining 43.7% was attributable to new customers. Total customers grew to 2,102 as of April 30, 2024, from 1,866 as of April 30, 2023. Professional services revenue increased $0.7 million or 15% due to an increase in deliverability services, technical account management, and support engagement services. These increases were partially offset by the decline in onboarding revenue as a result of the continued engagement of new customers with third-party partner-led onboarding. Additionally, in the three months ended April 30, 2024, our international revenue increased by $16.5 million as we continued to expand market penetration in regions such as Europe and Asia-Pacific.
Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
Cost of revenue$44,548$32,687$11,861 36.3 %
Gross profit$90,911$69,093$21,818 31.6 %
Gross margin67.1 %67.9 %
The increase in cost of revenue of $11.9 million, or 36.3%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase of $4.7 million in hosting, infrastructure and other third-party fees associated with delivering our platform and a $5.9 million increase in third-party messaging fees associated with growth in SMS and new channel offerings. In addition, we had an increase in personnel costs and overhead costs of $1.0 million. The increased infrastructure, messaging, and personnel costs were incurred to support overall revenue growth.

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

Sales and Marketing Expense
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
Sales and marketing$69,827 $57,262 $12,565 21.9 %
The increase in sales and marketing expense of $12.6 million, or 21.9%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase in personnel costs and overhead costs of $6.9 million, which included $1.6 million of stock-based compensation costs. Additionally, the increase was driven in part by an increase of $4.1 million in promotional and product marketing, primarily related to the hosting of regional customer events and sales related events.
Research and Development Expense
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
Research and development$34,373 $29,745 $4,628 15.6 %

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

General and Administrative Expense
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
General and administrative$26,791 $23,983 $2,808 11.7 %

The increase in general and administrative expenses of $2.8 million, or 11.7%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was primarily driven by an increase in personnel and overhead costs of $3.6 million, which included $1.5 million of stock-based compensation costs. The increases were primarily due to investments in our finance and administrative functions to continue to scale our processes, systems, and controls, to enable our ongoing compliance with public company legal and regulatory requirements. The increases were partially offset by a decrease of $0.6 million in professional services costs and a decrease in the fair value measurement of the contingent consideration related to the acquisition of North Star Y, Pty Ltd, or North Star, of $0.1 million, as a result of developments in significant inputs for such calculation, notably new and incremental actual and forecasted deal closings from the Australia-New Zealand region.

Other Income, Net
Three Months Ended
April 30,
20242023Change% Change
($ in thousands)
Other income, net
$5,171 $3,459 $1,712 49.5 %
The increase in other income, net of $1.7 million, or 49.5%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, was attributable to a $1.6 million increase in investment income from marketable securities.
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The investment income increase was driven primarily by the graded maturation of the portfolio positions at higher interest rates and the reinvestment of proceeds in a high interest rate environment.
Liquidity and Capital Resources
Sources of Funds
As of April 30, 2024, our principal source of liquidity was cash, cash equivalents, and marketable securities of $487.7 million. Our cash and cash equivalents consist of deposit accounts, interest-bearing money market accounts, and U.S. government securities that are stated at fair value. Our marketable securities positions consist mostly of highly liquid short-term investments. The investment income that we generate on these investments is not material to our overall cash balance, but may be adversely affected due to volatility in interest rates.

Since our inception, we have financed our operations primarily through the net proceeds received from the sales of equity securities and cash generated from the sale of subscriptions to our platform. We have generated losses from our operations as reflected in our accumulated deficit of $518.7 million as of April 30, 2024, and cash flows provided by operating activities for the three months ended April 30, 2024 of $19.4 million.

A substantial source of our cash provided by operating activities is our deferred revenue, which is included on the consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the term of the subscription agreement. As of April 30, 2024, we had total deferred revenue of $229.7 million, of which $229.3 million was recorded as a current liability. Deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.
Cash Flow Overview
The following table summarizes our cash flows for the periods presented:
Three Months Ended
April 30,
20242023
(in thousands)
Net cash provided by operating activities$19,395 $22,549 
Net cash (used in)/provided by investing activities$(10,604)$24,297 
Net cash (used in)/provided by financing activities$(1,881)$2,211 
Operating Activities
For the three months ended April 30, 2024, net cash provided by operating activities was $19.4 million, primarily due to a net loss of $35.7 million adjusted for non-cash charges of $39.1 million and net changes in our operating assets and liabilities of $16.0 million. The non-cash adjustments primarily relate to stock-based compensation of $28.6 million, amortization of deferred contract costs of $8.3 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $9.9 million and increase in deferred revenue of $25.3 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $10.7 million as a result of commissions on new bookings and renewals.

For the three months ended April 30, 2023, net cash provided by operating activities was $22.5 million, primarily due to a net loss of $38.8 million adjusted for non-cash charges of $33.8 million and net changes in our operating assets and liabilities of $27.6 million. The non-cash adjustments primarily relate to stock-based compensation of $24.2 million, amortization of deferred contract costs of $6.7 million. The cash inflow from changes in our operating assets and liabilities were primarily due to a decrease in accounts receivable of $11.0 million and increase in deferred revenue of $15.2 million as a result of billings for new bookings and renewals. The cash inflow was offset by cash outflows primarily from an increase in deferred contract costs of $9.5 million as a result of commissions on new bookings and renewals.
Investing Activities
Net cash used in investing activities was $10.6 million for the three months ended April 30, 2024, primarily consisting of purchases of marketable securities of $59.7 million and purchases of property and equipment of $6.9 million, partially offset by maturities of marketable securities of $57.0 million.

Net cash provided by investing activities was $24.3 million for the three months ended April 30, 2023, primarily consisting of maturities of marketable securities of $71.5 million, partially offset by purchases of marketable securities of $46.3 million and capitalization of internal-use software costs of $0.9 million.
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Financing Activities
Net cash used in financing activities was $1.9 million for the three months ended April 30, 2024, primarily consisting payments of deferred purchase consideration of $2.9 million, partially offset by proceeds from the exercise of common stock options of $1.0 million.

Net cash provided by financing activities was $2.2 million for the three months ended April 30, 2023, consisting solely of proceeds from the exercise of common stock options.
Non-GAAP Free Cash Flow
We report our financial results in accordance with GAAP. To supplement our unaudited condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Our management uses free cash flow to assess our operating performance and our progress towards our goal of positive free cash flow. We define free cash flow as net cash used in operating activities less cash used for purchases of property and equipment and amounts capitalized for internal-use software development costs. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments.

Free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are (1) it is not a substitute for net cash provided by/(used in) operating activities, (2) other companies may calculate free cash flow or similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison, and (3) the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.

The following table presents a reconciliation of free cash flow to net cash provided by/(used in) operating activities, the most directly comparable measure calculated in accordance with GAAP, for the periods presented:
Three Months Ended
April 30,
20242023
(in thousands)
Net cash provided by operating activities$19,395 $22,549 
Less:
Purchases of property and equipment(6,915)(40)
Capitalized internal-use software costs(1,039)(852)
Non-GAAP Free cash flow$11,441 $21,657 
Net cash (used in)/provided by investing activities$(10,604)$24,297 
Net cash (used in)/provided by financing activities$(1,881)$2,211 
Our free cash flow decreased for the three months ended April 30, 2024 from the three months ended April 30, 2023, primarily due to the significant outflow related to purchases of property and equipment, mainly associated with our new offices, including our New York City headquarters. We expect our free cash flow to fluctuate in future periods with changes in our operating expenses and as we continue to invest in our growth.

Liquidity Outlook
We assess our liquidity primarily through our cash on hand as well as the projected timing of billings under contracts with our paying customers and related collection cycles. While our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer usage and growth in our customer base, increased research and development expenses to support the growth of our business and related infrastructure, and increased general and administrative expenses to support being a publicly-traded company, we believe our current cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Our most significant funding requirements are principally comprised of employee compensation and related taxes and benefits, non-cancelable purchase commitments, and operating lease obligations. Non-cancelable purchase commitments for
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business operations and operating lease obligations total $210.7 million and $118.6 million, respectively, as of April 30, 2024. Purchase commitments for business operations are predominately related to cloud hosting, infrastructure, and other software-based services and due primarily over the next three years. Our future funding requirements to settle our obligations in foreign jurisdictions are subject to fluctuations due to changes in foreign exchange rates.

While we anticipate being able to satisfy our commitments through a combination of our available current cash, cash equivalents, and marketable securities, and cash generated from the sale of subscriptions to our platform, if our estimates prove to be inaccurate we may seek to sell additional equity or other securities that may result in dilution to our stockholders, issue debt or seek other third-party funding, in order to satisfy our future funding requirements.

Seasonality
We have experienced seasonality in our cost of revenue as a result of our customers’ increased usage of our platform based on their business demands. We typically experience the highest sequential increase in overall messaging volume and compute and storage requirements during the fourth quarter due to the increased activity related to the holiday season and general customer engagement efforts around the end of the calendar year.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

There have been no material changes to our critical accounting policies and estimates from those previously reported and disclosed in our Annual Report other than those referenced in Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q. The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report provides a more complete discussion of our critical accounting policies and estimates.

Recently Adopted Accounting Pronouncements

Refer to Note 2. Summary of Significant Accounting Policies, to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements, if applicable.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations, other than its impact on the general economy. Nonetheless, if our costs were to become subject to inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Interest Rate Risk and Market Risk

We had cash, cash equivalents and marketable securities of $487.7 million as of April 30, 2024, of which $409.0 million was invested in government securities, foreign securities, and corporate debt securities. Our cash and cash equivalents are held for working capital and general corporate purposes. Our investments in marketable securities are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. As of April 30, 2024, a hypothetical 10% change in interest rates would not have had a material impact on our consolidated financial statements. Because we classify our debt securities as
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“available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or unless declines in fair value are determined to be non-temporary.

Foreign Currency Exchange Rate Risk

Our reporting and functional currency is the U.S. dollar, and the functional currency of our foreign subsidiaries is primarily the respective local currency. Substantially all of our sales are denominated in U.S. dollars. Our only sales denominated in a currency other than the U.S. dollars are our sales in Japan, which are denominated in Yen. Therefore, our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily the United States, United Kingdom, Singapore and Japan. Our consolidated results of operations and cash flows are therefore subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The assets and liabilities of each of our foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the consolidated statements of comprehensive loss. Gains or losses due to transactions in foreign currencies are included in interest and other income, net in the consolidated statements of operations.

The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains and losses related to changes in foreign currency exchange rates. In the event our foreign currency denominated assets, liabilities, revenue, or expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. To date we have not engaged in the hedging of foreign currency transactions, although we may choose to do so in the future. A hypothetical 10% change in the relative value of the U.S. dollar to other currencies during any of the periods presented would not have had a material effect on our realized and unrealized gains (losses) on foreign exchange transactions.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of April 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of April 30, 2024.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings

From time to time, we may become involved in various legal proceedings arising from the normal course of business activities. As of the date of this Quarterly Report on Form 10-Q, we are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. Defending such proceedings can be costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described below. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the events or circumstances described in the following risk factors is realized, our business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

Risk Factors Summary

Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and share price.
Our rapid revenue growth may not be indicative of our future revenue growth. Our rapid revenue growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
We have a limited history operating at our current scale, and our future results of operations may fluctuate significantly due to a wide range of factors, which make it difficult to forecast our future results of operations.
We have a history of operating losses and may not achieve or sustain profitability in the future.
The estimates of market opportunity and forecasts of market growth may prove to be inaccurate. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
We face intense competition, including from well-established companies that offer products that compete with ours.
We may lack sufficient financial or other resources to maintain or improve our competitive position, which may harm our ability to add new customers, retain existing customers, and grow our business.
If we are unable to attract new customers and renew existing customers, our business, financial condition and results of operations will be adversely affected.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, or changing regulations, or to changing customer or consumer needs, requirements or preferences, our platform may become less competitive.
We are substantially dependent upon customers renewing their subscriptions to, and expanding their use of, our platform to maintain and grow our revenue, which requires us to scale our platform infrastructure and business quickly enough to meet our customers’ growing needs. If we are not able to grow in an efficient manner, our business, financial condition and results of operations could be harmed.
Failure to effectively develop our sales and marketing capabilities could harm our ability to expand our customer base and achieve broader market adoption of our platform and products.
We are dependent on a single platform, and the failure to achieve continued market acceptance of our platform could cause our results of operations to suffer.
If our platform fails to perform properly or there are defects or disruptions in the rollout of our platform updates or enhancements, our reputation could be adversely affected, our market share could decline, and we could be subject to liability claims.
We may need to reduce prices or change our pricing model to remain competitive.
Our business depends on our ability to send consumer engagement messages over a number of different channels and any significant disruption in service with our third-party providers or on mobile operating systems could result in a
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loss of customers or less effective consumer-brand engagement, which could harm our business, financial condition and results of operations.
We rely upon third-party providers of cloud-based infrastructure, including Amazon Web Services, to host our products. Any disruption in the operations of these third-party providers or limitations on capacity or interference with our use could adversely affect our business, financial condition and results of operations.
We are subject to stringent and changing laws and regulations, industry standards and contractual obligations related to privacy, data security and data protection. The restrictions and costs imposed by these requirements and our actual or perceived failure to comply with them, could harm our business.
If we or our third-party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers’ data, our data or our platform, our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced and we may incur significant liabilities.
Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our platform and could have a negative impact on our business.
We employ third-party licensed software for use in or with our platform, and the inability to maintain these licenses or errors or vulnerabilities in the software we license could result in increased costs, or reduced service levels, which would adversely affect our business.
The dual class structure of our common stock has the effect of concentrating voting control with our executive officers, directors and significant holders of our capital stock, which limits the ability of holders of our Class A common stock to influence the outcome of important transactions.

Risks Related to Our Growth and Capital Requirements

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability. These unfavorable conditions have been, and may continue to be, exacerbated in the United States and abroad by global and domestic socioeconomic conditions, including the failure of high-profile banking and other financial institutions, the Federal Reserve’s attempts to combat inflation through interest rate increases, unrest in international trade relations, domestic and foreign political turmoil, natural catastrophes, pandemics related to highly infectious diseases, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, and international military conflicts and the related political and economic responses, such as the conflicts between Israel and Hamas and between Russia and Ukraine and the resulting sanctions on Russia. Continued volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the financial, equity or credit markets further deteriorate, including as a result of the measures taken to combat inflation, volatility in the banking and financial services sector, political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefits costs. In addition, higher inflation and macroeconomic turmoil and uncertainty could also adversely affect our customers, which could reduce demand for our products and services. For instance, we were founded in 2011, but our business and revenue have grown rapidly over the last several years. As a result of our limited history operating at our current scale, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth, particularly in a volatile economic environment. Recent increases in inflation, economic volatility and related increases in interest rates have affected customer spending behavior. Significant continued increases in inflation, continued economic volatility and related increases in interest rates could have a material adverse effect on our business, financial condition and results of operations. To the extent there is a sustained general economic downturn and our customer engagement platform is perceived by customers and potential customers as too costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in general customer engagement technology spending. This perception has previously, and may continue to, result in an extension of our sales cycle with potential customers, thus increasing the time and cost associated with our sales process. Further, even if our customers choose to use our platform, they may nonetheless reduce their customer engagement technology spending and elect not to purchase additional products and services in the future due to budget limitations. Also, competitors may respond to market conditions by lowering prices and attempting to lure away our current and potential customers. In addition, macroeconomic uncertainty may result in an increased pace of consolidation in certain industries in which our customers operate. If this were to occur it may result in reduced overall spending on our services, particularly if our customers are acquired by organizations that do not use our services. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or the markets in which we operate worsen from present levels, our business, results of operations and financial condition could be materially and adversely affected.

Our rapid revenue growth may not be indicative of our future revenue growth. Our rapid revenue growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
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Our revenue was $135.5 million and $101.8 million for the three months ended April 30, 2024 and 2023, respectively. You should not rely on our historical revenue growth as an indication of our future performance. Even if our revenue continues to increase, we expect that our annual revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on several factors, including our ability to: