Summary
Backblaze's first quarter of fiscal 2022, ended March 31, 2022, delivered strong top-line growth but a much wider loss. Revenue increased 27.3% to $19.49 million from $15.31 million in the prior-year quarter. Management described the growth as an acceleration from 24% in the same period a year ago. Gross profit rose 31.1% to $9.81 million from $7.48 million. Gross margin improved to 50.3% from 48.9%. The growth came alongside a sharp increase in spending, and operating loss widened to $11.69 million from $2.82 million. Net loss widened to $12.53 million from $3.69 million, and diluted EPS was -$0.41 compared with -$0.20 in the prior-year quarter.
The loss included heavy non-cash and public-company costs. Adjusted EBITDA was $(3.0) million, or (15)% of revenue, compared with $2.1 million and 14% of revenue in Q1 2021. Non-GAAP net loss was $(8.7) million compared with $(2.8) million, and non-GAAP net loss per share was $(0.28) compared with $(0.15). Adjusted gross profit was $14.8 million, or 76% of revenue, compared with $11.4 million and 75%. Those figures exclude stock-based compensation, depreciation, and amortization, among other items. On a GAAP basis, operating margin fell to -60.0% from -18.4%. Operating cash flow was -$0.90 million, down from $2.52 million in the prior-year quarter. Capital expenditures were $0.52 million, down from $2.61 million. Deferred revenue stood at $25.80 million at March 31, 2022.
Operational metrics showed durable customer demand and expansion. Annual recurring revenue reached $79.0 million, up 28% year over year. B2 Cloud Storage ARR was $28.4 million, up 47%, while Computer Backup ARR was $50.6 million, up 19%. Total net revenue retention was 112% compared with 111%. B2 Cloud Storage net revenue retention was 129% compared with 133%, and Computer Backup net revenue retention was 104% compared with 104%. Total gross customer retention was 91% compared with 91%. B2 gross customer retention was 90% compared with 89%, and Computer Backup gross customer retention was 91% compared with 90%. The company reported approximately 500,000 customers across more than 175 countries as of December 31, 2021. It also highlighted product and platform launches, including Universal Data Migration, B2 Reserve, Partner API, and beta Cloud Replication. Partnerships with SoDA, Catalogic, and CTERA expanded its ecosystem. These moves support the B2 Cloud Storage growth engine, though B2 net revenue retention was lower than a year earlier.
Guidance points to continued growth. For the second quarter of 2022, management expects revenue between $20.2 million and $20.6 million and adjusted EBITDA margin between negative 19% and negative 15%. It also expects basic weighted average shares outstanding of 31.0 million to 33.0 million. For full-year 2022, the company continues to expect revenue between $83 million and $86 million and adjusted EBITDA margin between negative 18% and negative 14%. The outlook implies more spending ahead, with adjusted EBITDA still negative.
The main risks are execution and cost pressure. Backblaze faces competition from larger cloud providers, the challenge of managing rapid growth, and the need to keep its service available and secure. The filing cites cyberattacks, potential service disruption or loss of customer data, supply chain disruption, ability to attract and retain customers, timely new features, software defects, partner relationships, and material weaknesses in internal controls. Inflation, COVID-19, and general economic conditions also remain risks. The company's finance lease obligations and infrastructure spending add fixed costs, which pressure margins if growth slows. With operating loss and operating cash flow both negative in the quarter, the company needs growth to translate into improved profitability over time.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $19.5M | $18.7M | +4.2% | — | — |
| Gross profit | $9.8M | $9.8M | -0.3% | — | — |
| Gross margin | 50.3% | 52.6% | -2.3 pp | — | — |
| Research & development | $7.9M | $6.2M | +27.6% | — | — |
| Sales & marketing | $8.0M | $6.5M | +22.6% | — | — |
| General & administrative | $5.5M | $4.6M | +19.1% | — | — |
| Total operating expenses | $21.5M | $17.4M | +23.5% | — | — |
| Operating income (loss) | -$11.7M | -$7.6M | -54.3% | — | — |
| Operating margin | -60.0% | -40.5% | -19.4 pp | — | — |
| Net income (loss) | -$12.5M | -$9.6M | -30.5% | — | — |
| Net margin | -64.3% | -51.4% | -12.9 pp | — | — |
| Diluted EPS | -$0.41 | -$0.47 | +$0.06 | — | — |
| Customers | 500,000 | 500,000 | ±0.0% | — | — |
| Net retention rate | 112.0% | 110.0% | +2.0 pp | — | — |
Risks
The company reported a net loss widened to $12.53 million for the quarter ended March 31, 2022 compared with $3.69 million for the prior-year quarter, and operating loss widened to $11.69 million from $2.82 million. It expects continued investments in sales and marketing, development, data center infrastructure, and technical operations, so it does not expect to be profitable for the foreseeable future.
The filing states plans to increase sales and marketing investments to scale the business, but if those programs do not provide a reasonable return, revenue and operating results could suffer. For the quarter, revenue increased 27.3% while operating loss widened, and operating cash flow decreased to negative $0.90 million from $2.52 million in the prior-year quarter.
A third-party vendor operating one of the company's multiple data center locations, Sungard Availability Services, filed for Chapter 11 bankruptcy in April 2022 and announced a possible sale. This creates risk of closure or forced relocation with little notice, which could make customer data unavailable or lost.
The company depends on limited sources for hard drives and semiconductors, and COVID-19, cryptocurrency mining demand, and geopolitical tensions such as Ukraine could cause shortages or price increases. It began acquiring additional hard drives through finance leases in April 2020, which increased capital equipment, lease liability, interest, and depreciation expense.
In December 2021, the Log4j zero-day vulnerability led the company to take systems offline briefly as a precaution. In late March 2021, a Facebook ad network misconfiguration may have inadvertently shared certain file metadata for less than 2% of Backblaze customers, and Russia-Ukraine tensions increase the likelihood of cybersecurity incidents.
The company identified four material weaknesses in internal controls over financial reporting as of December 31, 2019 and an additional material weakness as of December 31, 2021 relating to IT general controls. As of December 31, 2021 the prior weaknesses had not been remediated, and failure to remediate could lead to inaccurate or delayed financial reporting.
The markets are intensely competitive, with competitors including Amazon Web Services, Google Cloud Platform, Microsoft Azure, EMC/Dell, and NetApp. Many competitors have greater resources and brand recognition and could offer lower prices or bundled services, causing pricing pressure, reduced sales, increased churn, and lower margins.
The Russia-Ukraine conflict and related sanctions have led the company to waive charges for customers based in Ukraine until June 1, 2022 and to be unable to receive payments from customers in certain regions including Russia and Belarus. The conflict has also raised oil prices and energy costs for data centers.
The company is dependent on a small number of service offerings, with B2 Cloud Storage and Computer Backup accounting for substantially all revenue. Any general or industry decline in demand for cloud storage or computer backup would have an outsized effect because there is no meaningful revenue from other market sectors.
The business is substantially dependent on mid-market organizations, which may have limited budgets, are more vulnerable to economic downturns, and may be harder and more expensive to acquire and retain than larger customers.
The company plans aggressive hiring in sales, marketing, cloud operations, and engineering and faces intense competition for such personnel, particularly in the San Francisco Bay Area. Founders and other key personnel hold shares or equity awards that are largely vested, which may reduce retention incentives.
Headcount grew from 82 employees as of December 31, 2018 to 270 employees as of December 31, 2021, and storage deployed has more than doubled in the last two years. Rapid growth places strain on management, corporate culture, quality of cloud services, and administrative, operational, security, and financial infrastructure.
The company stores personal information and customer data and is subject to GDPR, CCPA, CPRA, and HIPAA, among other laws. Noncompliance could result in significant fines, such as up to 20 million euros or 4% of total worldwide annual group turnover under GDPR, and the CPRA final regulations are due July 1, 2022.
Many customers pay by credit card, and the company relies on internal systems and third parties including Stripe. Banking institutions and credit card companies began prohibiting payments from persons located in Russia, which impacts the ability to receive payments from customers and potential new customers in those regions.
Weak economic conditions due to COVID-19, inflation, or uncertainty relating to Russian acts in Ukraine could cause customers to reduce discretionary spending on cloud storage, lengthen sales cycles, increase customer churn, and lower demand for cloud services.
The dual class structure gives Class B common stock 10 votes per share while Class A has one vote per share. At the completion of the IPO, Class B holders, including executives, employees, and directors, collectively held approximately 96% of voting power, limiting other stockholders' ability to influence important transactions including a change in control.
SaaS KPIs
All quarters →Adjusted Gross Margin
Adjusted EBITDA Margin
B2 Cloud Storage Gross Customer Retention Rate
Computer Backup Gross Customer Retention Rate
Gross Customer Retention Rate
Annual Recurring Revenue (ARR)
Net Revenue Retention (NRR)
Total Customers
B2 Cloud Storage Net Revenue Retention (NRR)
Computer Backup Net Revenue Retention (NRR)
B2 Cloud Storage Annual Recurring Revenue (ARR)
Computer Backup Annual Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.