Braze, Inc.BRZE

Braze, Inc. Fair Value Disclosure

10-KFiled Mar 31, 20253 min read
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):
January 31, 2025
Level 1Level 2Level 3Total
Financial assets:
Cash equivalents
Money market funds$20,487 $— $— $20,487 
U.S. government securities4,998 — — 4,998 
Total cash equivalents25,485 — — 25,485 
Marketable securities
U.S. government securities$317,649 $— $— $317,649 
Corporate debt securities— 112,808 — 112,808 
Total marketable securities317,649 112,808 — 430,457 
Total financial assets$343,134 $112,808 $— $455,942 
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 $— $— $318,957 
Corporate debt securities— 88,941 — 88,941 
Total marketable securities318,957 88,941 — 407,898 
Liabilities
Contingent consideration$— $— $223 $223 
Total liabilities— — 223 223 
Total financial assets$346,711 $88,941 $223 $435,875 

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 January 31, 2025 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. If applicable, changes in the fair value are recorded in operating income in the consolidated statements of operations. As of January 31, 2025, the Company reduced the contingent consideration liability to zero as it was determined that the likelihood of the sellers satisfying the qualifications is remote.

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):

Fiscal Years Ended January 31,
20252024
Beginning fair value $223 $— 
Additions (1) / (adjustments) in the period
(223)223 
Ending fair value$— $223 

(1) Includes measurement period adjustments related to the Company’s preliminary fair values of the assets acquired and liabilities assumed in business combinations, which did not have a material impact on goodwill.
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About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

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