Introduction: Braze, Inc. (ticker: BRZE) is a technology company focused on providing customer engagement solutions and has been committed to improving its internal controls in response to market conditions influenced by the COVID-19 pandemic and other socioeconomic factors. This article will provide an overview of the measures taken by Braze to address these challenges and adhere to the regulatory and legal requirements in a rapidly changing environment.
Table of Contents
Addressing internal control over financial reporting:
Braze acknowledged the presence of a material weakness in its internal control over financial reporting related to revenue recognition, which remained unremediated as of April 30, 2023. The company has been working on establishing and implementing processes and control measures to address the issue, but a complete resolution of the material weakness is yet to be achieved.
Braze recognizes that achieving and maintaining effective internal control over financial reporting is crucial for ensuring accurate and timely disclosure of financial information. The company also acknowledges the risk of potential misstatements in future financial statements if the material weakness is left unaddressed or additional weaknesses are discovered.
Adapting to socioeconomic factors:
The COVID-19 pandemic has prompted governments worldwide to implement stringent measures like lockdowns and social distancing, which has led to a shift in consumer preferences and spending patterns. As a result, Braze has experienced increased demand from certain industries such as e-commerce, food delivery, home fitness, and media streaming services. However, the company acknowledges that these trends may not continue post-pandemic, which could pose a challenge to its growth and revenue.
Moreover, natural calamities, global pandemics, data security breaches, and other disturbances can significantly impact the company’s network infrastructure and information technology systems. Braze emphasizes the need for robust contingency plans to minimize disruptions and potential damages to its business operations.
Unremediated material weakness and its consequences:
The failure to remediate the material weakness in a timely manner or the discovery of additional material weaknesses could result in the misstatement of financial statements and loss of investor confidence. This may lead to a decline in the market price of Braze’s Class A common stock and hamper the company’s ability to acquire other businesses or raise capital by selling shares.
Risks associated with ownership of Class A common stock:
Braze does not plan to pay any cash dividends on its Class A or Class B common stock in the foreseeable future. Investors will have to rely on the appreciation of the price of Class A common stock for potential returns on their investment.
Furthermore, the dual-class structure of Braze’s common stock concentrates the voting control with executive officers, directors, and significant holders of the company’s capital stock. This limits the ability of Class A common stockholders to influence crucial corporate matters, such as the election of directors and approval of business transactions.
Conclusion: Braze, Inc. faces a multitude of challenges amid uncertain market conditions, and the company is proactively working on remedying its internal control weaknesses. While the resolution of the material weakness in financial reporting is yet to be achieved, the company’s commitment to strengthening its internal controls and adapting to the rapidly changing environment indicates its dedication towards maintaining transparency and ensuring the accuracy of its financial statements in the long run.
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!