Summary
Backblaze reported first-quarter 2023 revenue of $23.39 million, up 20% from the prior-year quarter. Gross profit rose 11.8% to $10.97 million. Gross margin slipped to 46.9%, down 3.4 percentage points. The operating loss widened to $16.80 million, and the net loss widened to $17.11 million. Diluted loss per share was -$0.50. Operating margin was negative 71.8%, down 11.8 percentage points. Operating cash flow was negative $5.19 million, down from the prior-year quarter. Capital expenditures were $3.02 million, up from the prior-year quarter. Deferred revenue was $26.50 million, up 2.7%.
Annual recurring revenue was $95.9 million, up 21% year over year. B2 Cloud Storage ARR reached $41.7 million, up 47%. Computer Backup ARR was $54.2 million, up 7%. Overall net revenue retention was 111%, compared with 113% in the prior-year quarter. B2 Cloud Storage net revenue retention was 120%, compared with 131%. Computer Backup net revenue retention was 106%, compared with 105%. Gross customer retention was 91% in both periods. B2 Cloud Storage gross customer retention was 90% in both periods, and Computer Backup gross customer retention was 90%, compared with 91%.
The company said B2 Reserve, its channel-friendly prepaid offering, generated over $1 million in ARR after about a year. It also cited the best quarter of B2 Cloud Storage self-serve customer additions in a year, an expanded partnership with Vultr, SOC 2 Type 2 certification, and a New York Times Wirecutter recommendation. Backblaze served more than 500,000 customers as of December 31, 2022, across more than 175 countries, with more than 2.5 exabytes of data storage under management. The quarter included restructuring actions to reduce headcount and align strategic initiatives. The company expects those measures to be completed during the first six months of 2023.
Non-GAAP results showed adjusted gross profit of $17.0 million, or 72% of revenue, compared with $14.8 million and 76% in the prior-year quarter. Adjusted EBITDA was negative $2.9 million, or (12)% of revenue, compared with negative $3.0 million and (15)% of revenue. Non-GAAP net loss was $9.0 million, compared with $8.7 million, and non-GAAP net loss per share was $0.26, compared with $0.28. Management aims to approach adjusted EBITDA breakeven in the fourth quarter of 2023. For the second quarter of 2023, the company guided revenue to $24.1 million to $24.5 million and basic weighted average shares outstanding to 34.5 million to 36.5 million. For the full year 2023, it continues to expect revenue of $98 million to $102 million.
Risks remain substantial. Backblaze competes with larger providers such as Amazon Web Services. The company cites cyberattacks, the ability to attract and retain customers, supply chain disruption, material weaknesses in internal controls over financial reporting, retention of key employees, COVID-19, litigation, and general market, political, economic, and business conditions. The MD&A adds that recent bank failures and banking industry disruption could reduce access to capital, increase costs of capital, and limit opportunities to invest with investment grade securities. The company believes its existing cash, cash equivalents, short-term investments, and credit facility will support working capital and capital expenditure requirements for at least the next 12 months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $23.4M | $22.9M | +2.0% | $19.5M | +20.0% |
| Gross profit | $11.0M | $11.7M | -6.3% | $9.8M | +11.8% |
| Gross margin | 46.9% | 51.1% | -4.2 pp | 50.3% | -3.4 pp |
| Research & development | $10.5M | $8.6M | +22.3% | $7.9M | +32.6% |
| Sales & marketing | $10.6M | $9.3M | +13.9% | $8.0M | +31.5% |
| General & administrative | $6.7M | $7.4M | -9.3% | $5.5M | +20.8% |
| Total operating expenses | $27.8M | $25.3M | +10.0% | $21.5M | +29.2% |
| Operating income (loss) | -$16.8M | -$13.5M | -24.0% | -$11.7M | -43.7% |
| Operating margin | -71.8% | -59.1% | -12.7 pp | -60.0% | -11.8 pp |
| Net income (loss) | -$17.1M | -$14.5M | -18.1% | -$12.5M | -36.6% |
| Net margin | -73.2% | -63.2% | -9.9 pp | -64.3% | -8.9 pp |
| Diluted EPS | -$0.50 | -$0.46 | -$0.04 | -$0.41 | -$0.09 |
| Customers | 500,000 | 500,000 | ±0.0% | 500,000 | ±0.0% |
| Net retention rate | 111.0% | — | — | 112.0% | -1.0 pp |
Risks
The company reported two outstanding material weaknesses in internal controls over financial reporting as of December 31, 2022, originating as of December 31, 2019, related to insufficient review of significant accounting transactions and equity transaction controls. Failure to remediate could cause material misstatements or delayed filings.
The cloud storage market is intensely competitive with AWS, Google Cloud Platform, Microsoft Azure, EMC/Dell, and NetApp; larger competitors have greater resources, broader offerings, and pricing leverage that could pressure Backblaze's sales, churn, margins, and market acceptance.
Backblaze depends on a limited number of third-party data centers and hard drive and semiconductor suppliers; a 2022 third-party data center vendor bankruptcy and geopolitical tensions such as Russia-Ukraine or Taiwan-China could disrupt supply and service availability.
The company experienced a December 2021 Log4j zero-day vulnerability that led it to take systems offline and a 2021 Facebook ad misconfiguration that may have shared file metadata for less than 2% of customers. Generative AI and evolving attacks could increase breach likelihood and lead to reputational harm, litigation, and fines.
Many customers can terminate at will with little-to-no advance notice, and total company net revenue retention rate was 111% as of March 31, 2023 versus 113% as of March 31, 2022, while B2 Cloud Storage NRR fell to 120% from 131% over the same periods. This limits revenue predictability.
Gross margin was 46.9% in FY2023 Q1, down 3.4 percentage points from 50.3% in FY2022 Q1, as cost of revenue rose 28% versus revenue up 20%, and operating loss widened 43.7% to $16.80 million. Fixed-price Computer Backup data growth can further pressure gross margins.
Operating cash flow was negative $5.19 million in FY2023 Q1, down 476.8% from negative $0.90 million in FY2022 Q1, and the company may need additional capital. Banking industry disruption and its use of City National Bank, a subsidiary of RBC, could reduce access to capital or deposits.
The company is subject to GDPR, CCPA, CPRA, HIPAA, and other privacy laws; GDPR fines can reach 20 million euros or 4% of total worldwide annual turnover, and the invalidated EU-US Privacy Shield required added compliance steps such as standard contractual clauses.
The business is substantially dependent on mid-market organizations, which are more vulnerable to high inflation and recession concerns in the United States and may curtail spending, lengthen sales cycles, or increase churn for cloud storage services.
Backblaze initiated a headcount reduction during the three months ended March 31, 2023 to pursue greater cost efficiency, expected to be completed in the first six months of 2023, and incurred $2.457 million in restructuring charges. Workforce changes could strain management, culture, and execution.
The company owns no issued patents and relies on trade secrets, confidentiality agreements, and copyrights; use of generative AI tools could inadvertently disclose trade secrets, and non-practicing entities have asserted patent infringement claims in the past.
SaaS KPIs
All quarters →Adjusted Gross Margin
B2 Cloud Storage Gross Customer Retention Rate
Computer Backup Gross Customer Retention Rate
Gross Customer Retention Rate
Adjusted EBITDA
Annual Recurring Revenue (ARR)
Net Revenue Retention (NRR)
Total Customers
B2 Cloud Storage ARR
Computer Backup ARR
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q1 FY2023 (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.