Home Business Wire Backblaze Announces Third Quarter 2021 Financial Results

Backblaze Announces Third Quarter 2021 Financial Results

59% Revenue Growth in B2 Cloud Storage, 25% Revenue Growth Overall

SAN MATEO, Calif.–(BUSINESS WIRE)–Backblaze, Inc. (Nasdaq: BLZE), a leading storage cloud platform, today announced results for its third quarter ended September 30, 2021.

“We delivered continued strong Q3 growth overall, led by rapid 59% revenue growth in B2 Cloud Storage and consistent double-digit growth of 13% in Computer Backup,” said Gleb Budman, CEO of Backblaze. “Our successful IPO in November was an important milestone for the company and a recognition by the markets of the mid-market public cloud storage opportunity. We believe the future is being built on independent clouds, and we plan to use our IPO proceeds to help accelerate future growth in this large and fast-growing market,” continued Mr. Budman.

Third Quarter 2021 Financial Highlights:

  • Revenue was $17.3 million, an increase of 25% year-over-year (YoY).
    • B2 Cloud Storage revenue was $6.0 million, an increase of 59% YoY.
    • Computer Backup revenue was $11.2 million, an increase of 13% YoY.
  • Gross profit of $8.8 million, or 51% of revenue, compared to $6.7 million and 49% of revenue, in Q3 2020.
  • Adjusted gross profit of $12.8 million, or 74% of revenue, compared to $10.0 million and 72% of revenue in Q3 2020.
  • Net loss was $6.0 million compared to $1.9 million in Q3 2020.
  • Net loss per share was $(0.32) compared to $(0.10) in Q3 2020.
  • Adjusted EBITDA was $0.8 million, or 5% of revenue, compared to $2.8 million and 20% of revenue in Q3 2020.
  • Cash and cash equivalents were $4.7 million as of September 30, 2021. This does not include net cash proceeds of $103 million from our IPO in November 2021.

Third Quarter 2021 Operational Highlights:

  • Annual recurring revenue (ARR) was $70.8 million, an increase of 28% YoY.
    • B2 Cloud Storage ARR was $24.6 million, an increase of 58% YoY.
    • Computer Backup ARR was $46.2 million, an increase of 16% YoY.
  • Net revenue retention (NRR) rate was 110% compared to 116% in Q3 2020.
    • B2 Cloud Storage NRR was 129% compared to 139% in Q3 2020.
    • Computer Backup NRR was 103% compared to 109% in Q3 2020.
  • Gross customer retention rate was 91% compared to 90% in Q3 2020.
    • B2 Cloud Storage gross customer retention rate was 92% in both Q3 2021 and Q3 2020.
    • Computer Backup gross customer retention rate was 91% compared to 90% in Q3 2020.

Financial Outlook

Based on information available as of December 13, 2021, for the fourth quarter of 2021 we expect:

  • Revenue between $17.7 million to $18.2 million.
  • Adjusted EBITDA margin between -10% to -6%.

Conference Call Information:

Backblaze will host a conference call today, December 13, 2021, at 2 p.m. PT (5 p.m. ET) to review its financial results.

Attend the webcast here: https://edge.media-server.com/mmc/p/ds4nhqpx

Register and listen via phone here: http://www.directeventreg.com/registration/event/1851278

Phone registrants will receive dial-in information via email.

An archive of the webcast will be available shortly after its completion on the Investor Relations section of the Backblaze website at https://ir.backblaze.com.

About Backblaze

Backblaze is a leading independent cloud provider that makes it astonishingly easy for businesses and consumers to store, use, and protect their data. With nearly two billion gigabytes of data storage under management, the company currently helps approximately 500,000 customers in over 175 countries to back up & archive data, protect it from ransomware, host content, manage media, build their applications, and more. Founded in 2007, the company is headquartered in San Mateo, CA. For more information, please go to www.backblaze.com.

Cautionary Note Regarding Forward-looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. These forward-looking statements are frequently identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or other similar terms or expressions that relate to our future performance, expectations, strategy, plans or intentions, and include statements in the section titled “Financial Outlook” and statements regarding the use and impact of our IPO proceeds.

Our actual results could differ materially from those stated in or implied by the forward-looking statements in this press release due to a number of factors, including but not limited to: market competition, including competitors that may have greater size, offerings and resources; the impact of COVID-19 and its variants on our business and the business of our customers, vendors, supply chain and partners; effectively managing growth; disruption in our service or loss of availability of customers’ data; cyberattacks; ability to attract and retain customers; continued growth consistent with historical levels; offer new features on a timely basis; material defects or errors in our software; supply chain disruption; relationships with partners; ability to remediate and prevent material weaknesses in our internal controls over financial reporting; and general market, political, economic, and business conditions. Further information on these and additional risks, uncertainties, assumptions and other factors that could cause actual results or outcomes to differ materially from those included in or implied by the forward-looking statements contained in this release are included under the caption “Risk Factors” and elsewhere in our final prospectus dated November 10, 2021 as filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) on November 12, 2021 (the “Final Prospectus”), and other filings and reports we make with the SEC from time to time.

The forward-looking statements made in this release reflect our views as of the date of this press release. We undertake no obligation to update any forward-looking statements in this press release, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP adjusted gross margin and adjusted EBITDA margin. These non-GAAP financial measures exclude certain items and are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. We present these non-GAAP measures because management believes they are a useful measure of the company’s performance and provide an additional basis for assessing our operating results. Please see the appendix attached to this press release for a reconciliation of non-GAAP adjusted gross margin and adjusted EBITDA margin to the most directly comparable GAAP financial measures.

A reconciliation of non-generally accepted accounting principles (GAAP) guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses and other factors in the future. For example, stock-based compensation expense-related charges are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict with reasonable accuracy and subject to constant change.

Adjusted Gross Profit (and Margin)

We believe adjusted gross profit (and margin), when taken together with our GAAP financial results, provides a meaningful assessment of our performance and is useful to us for evaluating our ongoing operations and for internal planning and forecasting purposes.

We define adjusted gross margin as gross profit, exclusive of stock-based compensation expense, depreciation expense of our property and equipment, and amortization expense of capitalized internal-use software included within cost of revenue, as a percentage of adjusted gross profit to revenue. We exclude stock-based compensation, which is a non-cash item, because we do not consider it indicative of our core operating performance. We exclude depreciation expense of our property and equipment and amortization expense of capitalized internal-use software, because these may not reflect current or future cash spending levels to support our business. We believe adjusted gross margin provides consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric eliminates the effects of depreciation and amortization.

Adjusted EBITDA

We define adjusted EBITDA as net loss adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, income tax provision, unrealized loss on SAFE and gain on extinguishment of debt. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that adjusted EBITDA, when taken together with our GAAP financial results, provides meaningful supplemental information regarding our operating performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

Key Business Metrics:

Annual Recurring Revenue (ARR)

We define annual recurring revenue (ARR) as the annualized value of all Backblaze B2 and Computer Backup arrangements as of the end of a period. Given the renewable nature of our business, we view ARR as an important indicator of our financial performance and operating results, and we believe it is a useful metric for internal planning and analysis. ARR is calculated based on multiplying the monthly revenue from all Backblaze B2 and Computer Backup arrangements, which represent greater than 98% of our revenue for the periods presented (and excludes Physical Media revenue), for the last month of a period by 12. Our annual recurring revenue for Computer Backup and B2 Cloud Storage is calculated in the same manner as our overall annual recurring revenue based on the revenue from our Computer Backup and B2 Cloud Storage solutions, respectively.

Net Revenue Retention Rate (NRR)

Our overall net revenue retention rate (NRR) is a trailing four-quarter average of the recurring revenue from a cohort of customers in a quarter as compared to the same quarter in the prior year. We calculate our overall net revenue retention rate for a quarter by dividing (i) recurring revenue in the current quarter from any accounts that were active at the end of the same quarter of the prior year by (ii) recurring revenue in the current corresponding quarter from those same accounts. Our overall net revenue retention rate includes any expansion of revenue from existing customers and is net of revenue contraction and customer attrition, and excludes revenue from new customers in the current period. Our net revenue retention rate for Computer Backup and B2 Cloud Storage is calculated in the same manner as our overall net revenue retention rate based on the revenue from our Computer Backup and B2 Cloud Storage solutions, respectively.

Gross Customer Retention Rate

We use gross customer retention rate to measure our ability to retain our customers. Our gross customer retention rate reflects only customer losses and does not reflect the expansion or contraction of revenue we earn from our existing customers. We believe our high gross customer retention rates demonstrate that we serve a vital service to our customers, as the vast majority of our customers tend to continue to use our platform from one period to the next. To calculate our gross customer retention rate, we take the trailing four-quarter average of the percentage of cohort of customers who were active at the end of the quarter in the prior year that are still active at the end of the current quarter. We calculate our gross customer retention rate for a quarter by dividing (i) the number of accounts that generated revenue in the last month of the current quarter that also generated recurring revenue during the last month of the corresponding quarter in the prior year, by (ii) the number of accounts that generated recurring revenue during the last month of the corresponding quarter in the prior year.

BACKBLAZE, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

September 30,
2021

 

December 31,
2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,684

 

 

$

6,076

 

Accounts receivable, net

115

 

 

209

 

Prepaid expenses and other current assets

4,004

 

 

2,947

 

Total current assets

8,803

 

 

9,232

 

Property and equipment, net

40,395

 

 

38,746

 

Capitalized internal-use software, net

7,719

 

 

5,682

 

Other assets

3,480

 

 

809

 

Total assets

$

60,397

 

 

$

54,469

 

Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,403

 

 

$

1,710

 

Accrued expenses and other current liabilities

4,089

 

 

3,596

 

Accrued value-added tax (“VAT”) liability

2,275

 

 

1,533

 

Capital lease liability and lease financing obligation, current

11,966

 

 

11,320

 

Deferred revenue, current

21,127

 

 

17,587

 

Debt, current

 

 

628

 

Total current liabilities

40,860

 

 

36,374

 

Capital lease liability and lease financing obligation, non-current

17,238

 

 

17,886

 

Deferred revenue, non-current

3,367

 

 

1,801

 

Other long-term liabilities

698

 

 

820

 

Simple agreement for future equity (“SAFE”) notes

10,359

 

 

 

Debt, non-current

 

 

1,644

 

Total liabilities

$

72,522

 

 

$

58,525

 

Commitments and contingencies

 

 

 

Convertible Preferred Stock

 

 

 

Convertible preferred stock, $0.001 par value; 9,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 3,359,195 issued and outstanding with aggregate liquidation preference of $2,852 as of September 30, 2021 and December 31, 2020, respectively

2,784

 

 

2,784

 

Stockholders’ Deficit

 

 

 

Common stock, $0.001 par value; 36,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 18,936,698 and 18,614,905 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

5

 

 

5

 

Additional paid-in capital

11,824

 

 

7,794

 

Accumulated deficit

(26,738)

 

 

(14,639)

 

Total stockholders’ deficit

(14,909)

 

 

(6,840)

 

Total liabilities, convertible preferred stock and stockholders’ deficit

$

60,397

 

 

$

54,469

 

BACKBLAZE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

Revenue

$

17,320

 

 

 

$

13,817

 

 

 

$

48,782

 

 

 

$

39,196

 

 

Cost of revenue

8,519

 

 

 

7,097

 

 

 

24,275

 

 

 

18,775

 

 

Gross profit

8,801

 

 

 

6,720

 

 

 

24,507

 

 

 

20,421

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

5,338

 

 

 

3,300

 

 

 

14,314

 

 

 

9,132

 

 

Sales and marketing

5,025

 

 

 

2,956

 

 

 

13,149

 

 

 

8,379

 

 

General and administrative

3,104

 

 

 

1,519

 

 

 

8,261

 

 

 

4,157

 

 

Total operating expenses

13,467

 

 

 

7,775

 

 

 

35,724

 

 

 

21,668

 

 

Loss from operations

(4,666

)

 

 

(1,055

)

 

 

(11,217

)

 

 

(1,247

)

 

Interest expense

(968

)

 

 

(793

)

 

 

(2,686

)

 

 

(1,946

)

 

Gain on extinguishment of debt

 

 

 

 

 

 

2,299

 

 

 

 

 

Unrealized loss on SAFE

(359

)

 

 

 

 

 

(359

)

 

 

 

 

Loss before provision for income taxes

(5,993

)

 

 

(1,848

)

 

 

(11,963

)

 

 

(3,193

)

 

Income tax provision

 

 

 

(12

)

 

 

(136

)

 

 

(12

)

 

Net loss

$

(5,993

)

 

 

$

(1,860

)

 

 

$

(12,099

)

 

 

$

(3,205

)

 

Net loss per share, basic and diluted

$

(0.32

)

 

 

$

(0.10

)

 

 

$

(0.64

)

 

 

$

(0.17

)

 

Weighted average shares used in computing net loss per share, basic and diluted

18,936,698

 

 

 

18,614,869

 

 

 

18,775,908

 

 

 

18,607,705

 

 

BACKBLAZE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Nine Months Ended September 30,

 

2021

 

 

2020

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Net loss

$

(12,099

)

 

 

$

(3,205

)

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Gain on extinguishment of Paycheck Protection Program (“PPP”) loan

(2,299

)

 

 

 

 

Unrealized loss on SAFE

359

 

 

 

 

 

Depreciation and amortization

12,041

 

 

 

9,111

 

 

Stock-based compensation

3,611

 

 

 

1,214

 

 

Amortization of deferred contract costs

579

 

 

 

489

 

 

(Gain) loss on disposal of assets and other

(17

)

 

 

12

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

94

 

 

 

(11

)

 

Prepaid expenses and other current assets

(1,985

)

 

 

(1,546

)

 

Other assets

(256

)

 

 

272

 

 

Accounts payable

(258

)

 

 

(449

)

 

Accrued expenses and other current liabilities

444

 

 

 

1,297

 

 

Accrued VAT liability

742

 

 

 

43

 

 

Deferred revenue

5,105

 

 

 

1,743

 

 

Other long-term liabilities

(97

)

 

 

596

 

 

Net cash provided by operating activities

5,964

 

 

 

9,566

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Proceeds from disposal of property and equipment

17

 

 

 

 

 

Purchases of property and equipment, net

(6,893

)

 

 

(1,776

)

 

Capitalized internal-use software costs

(3,013

)

 

 

(2,163

)

 

Net cash used in investing activities

(9,889

)

 

 

(3,939

)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Principal payments on capital lease and lease financing obligations

(8,715

)

 

 

(7,701

)

 

Payments of deferred offering costs

(1,807

)

 

 

 

 

Proceeds from PPP

 

 

 

2,272

 

 

Proceeds from SAFE

10,000

 

 

 

 

 

Proceeds from lease financing

2,907

 

 

 

 

 

Proceeds from exercises of stock options

148

 

 

 

19

 

 

Net cash provided by (used in) financing activities

2,533

 

 

 

(5,410

)

 

Net (decrease) increase in cash and cash equivalents

(1,392

)

 

 

217

 

 

Cash and cash equivalents at beginning of period

6,076

 

 

 

6,978

 

 

Cash and cash equivalents at end of period

$

4,684

 

 

 

$

7,195

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

Cash paid for interest

$

2,578

 

 

 

$

1,955

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

Stock-based compensation capitalized internal-use software

$

271

 

 

 

$

159

 

 

Equipment acquired through capital lease obligations

$

8,895

 

 

 

$

20,538

 

 

Accruals related to purchases of property and equipment

$

250

 

 

 

$

4

 

 

Extinguishment of PPP loan

$

2,299

 

 

 

$

 

 

BACKBLAZE, INC.

RECONCILIATION OF GAAP TO NON-GAAP DATA

(in thousands)

(unaudited)

 

 

 

 

Adjusted Gross Profit and Adjusted Gross Margin

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

2021

 

2020

 

2021

 

2020

 

 

Gross profit

$

8,801

 

 

$

6,720

 

 

$

24,507

 

 

$

20,421

 

Adjustments:

 

 

 

 

 

 

 

Stock-based compensation

139

 

 

34

 

 

333

 

 

57

 

Depreciation and amortization

3,896

 

 

3,224

 

 

11,580

 

 

8,758

 

Adjusted gross profit

12,836

 

 

9,978

 

 

36,420

 

 

29,236

 

Gross margin

51

%

 

49

%

 

50

%

 

52

%

Adjusted gross margin

74

%

 

72

%

 

75

%

 

75

%

Adjusted EBITDA

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

Net loss

$

(5,993

)

 

 

$

(1,860

)

 

 

$

(12,099

)

 

 

$

(3,205

)

 

Adjustments:

 

 

 

 

 

 

 

Depreciation and amortization

4,059

 

 

 

3,362

 

 

 

12,041

 

 

 

9,111

 

 

Stock-based compensation

1,448

 

 

 

471

 

 

 

3,611

 

 

 

1,214

 

 

Interest expense

968

 

 

 

793

 

 

 

2,686

 

 

 

1,946

 

 

Income tax provision

 

 

 

12

 

 

 

136

 

 

 

12

 

 

Unrealized loss on SAFE

359

 

 

 

 

 

 

359

 

 

 

 

 

Gain on extinguishment of debt

 

 

 

 

 

 

(2,299

)

 

 

 

 

Adjusted EBITDA

$

841

 

 

 

$

2,778

 

 

 

$

4,435

 

 

 

$

9,078

 

 

BACKBLAZE, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(in thousands)

(unaudited)

 

Stock-based Compensation

 

For the Three Months Ended

September 30,

 

For the Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Cost of revenue

$

139

 

$

34

 

$

333

 

$

57

Research and development

466

 

195

 

1,377

 

536

Sales and marketing

489

 

137

 

1,057

 

386

General and administrative

354

 

105

 

844

 

235

Total stock-based compensation expense

$

1,448

 

$

471

 

$

3,611

 

$

1,214

 

Contacts

Investors Contact
James Kisner

Vice President of Investor Relations

ir@backblaze.com

Press Contact
Jeremy Milk

Senior Director of Marketing

press@backblaze.com

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