Summary
Backblaze posted revenue of $20.7 million for the second quarter of 2022, up 28.1% from the prior-year quarter. Gross profit grew faster, rising 35.4% to $11.1 million, and gross margin expanded to 53.8% from 50.9%. Storage demand carried the top line. B2 Cloud Storage revenue rose 45% year over year, while Computer Backup revenue rose 20%. Annual recurring revenue reached $82.7 million, also up 28%, and total net revenue retention was 113%, up from 110%. For the first six months of 2022, revenue was $40.2 million, up 27.7% from the same period a year earlier.
Profitability moved sharply the other way. Operating expenses grew far faster than revenue. Research and development expense rose 78%, sales and marketing 93%, and general and administrative 78%, with stock-based compensation a large driver of each line and headcount additions behind much of the rest. The operating loss widened to $10.8 million from $3.7 million a year earlier. Operating margin fell to negative 52.3% from negative 23.1%. Net loss widened to $11.6 million from $2.4 million, and diluted net loss per share was $0.37 compared with $0.13. Interest expense tied to finance lease agreements for data center equipment remained a steady drag.
Cash flow reflected the heavier spending. Operating cash flow was negative $7.3 million for the quarter, down from positive $0.07 million a year earlier. Capital expenditures fell 46.7% to $1.0 million. Deferred revenue stood at $25.4 million at June 30, 2022.
Non-GAAP measures followed the same pattern. Adjusted EBITDA was negative $1.9 million, or negative 9% of revenue, compared with positive $1.5 million and 9% of revenue a year earlier. Adjusted gross profit was $15.9 million, or 77% of revenue, and non-GAAP net loss was $7.2 million, or $0.23 per share, compared with $3.5 million and $0.19.
Retention and usage metrics were mixed. Total net revenue retention of 113% came with a split: B2 Cloud Storage net revenue retention slipped to 126% from 132%, while Computer Backup net revenue retention improved to 107% from 102%. Gross customer retention was 91%, the same as a year earlier. Management pointed to a record quarter for the amount of data added by B2 customers, the largest purchase order in company history, general availability of B2 Cloud Replication in June, new partnerships with Carahsoft and Veritas, and the hiring of Kevin Gavin as chief marketing officer.
Guidance calls for continued investment. For the third quarter of 2022, management guided revenue of $21.4 million to $21.8 million and an adjusted EBITDA margin that stays negative. For the full year 2022, revenue guidance is $83 million to $86 million, with an adjusted EBITDA margin also expected to remain negative. The company held cash and short-term investments of $88.1 million at June 30, 2022, and in April it increased borrowing capacity under its City National Bank revolver to $30.0 million from $9.5 million.
Risks named in the filing include competition from larger, better-resourced rivals, disruption of service or loss of customer data, cyberattacks, the ability to attract and retain customers, delivering new features on time, software defects, supply chain disruption, execution on partnerships, inflation, COVID-19, and material weaknesses in internal controls over financial reporting. The gap between 28% revenue growth and a widening net loss leaves the company dependent on the spending ramp moderating before the cash balance thins out.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $20.7M | $19.5M | +6.1% | — | — |
| Gross profit | $11.1M | $9.8M | +13.5% | — | — |
| Gross margin | 53.8% | 50.3% | +3.5 pp | — | — |
| Research & development | $8.4M | $7.9M | +5.8% | — | — |
| Sales & marketing | $8.4M | $8.0M | +4.2% | — | — |
| General & administrative | $5.2M | $5.5M | -6.3% | — | — |
| Total operating expenses | $22.0M | $21.5M | +2.1% | — | — |
| Operating income (loss) | -$10.8M | -$11.7M | +7.4% | — | — |
| Operating margin | -52.3% | -60.0% | +7.7 pp | — | — |
| Net income (loss) | -$11.6M | -$12.5M | +7.6% | — | — |
| Net margin | -56.0% | -64.3% | +8.3 pp | — | — |
| Diluted EPS | -$0.37 | -$0.41 | +$0.04 | — | — |
| Customers | 500,000 | 500,000 | ±0.0% | — | — |
| Net retention rate | 113.0% | 112.0% | +1.0 pp | — | — |
Risks
We have a history of cumulative losses and do not expect to be profitable for the foreseeable future. Net loss widened to $11.6 million in FY2022 Q2 from $2.4 million in FY2021 Q2, operating loss widened to $10.8 million from $3.7 million, and accumulated deficit was $60.4 million as of June 30, 2022.
We have identified material weaknesses in internal controls over financial reporting as of December 31, 2019. If we cannot remediate them or maintain effective controls, we may be unable to accurately report financial results or timely file periodic reports, harming investor confidence and the Class A common stock price.
Sungard Availability Services, which operates one of our multiple data center locations, filed for Chapter 11 bankruptcy in April 2022 and is undergoing a sale process. This could result in closure of our data center or forced relocation with limited notice, making customer data unavailable or lost.
We took systems offline for a short period after the December 2021 Apache Log4j zero-day vulnerability, and a misconfigured 2021 marketing campaign inadvertently shared certain file metadata with Facebook. The Russia-Ukraine conflict increases the likelihood of cybersecurity incidents.
The market is intensely competitive with AWS, Google Cloud Platform, Microsoft Azure, and on-premises offerings from EMC/Dell and NetApp, many of which have greater resources, brand recognition, and pricing leverage. Increased competition could reduce sales, raise churn, or lower margins.
Inflation recently hit a four-decade high in the United States amid a slowing economy, and recession concerns could reduce spending on cloud storage, lengthen sales cycles, and increase customer churn, especially among mid-market organizations on which we are substantially dependent.
Many customers can terminate cloud services at will with little-to-no notice, and even longer-term agreements generally have no renewal obligation. Our B2 Cloud Storage net revenue retention rate decreased to 126% as of June 30, 2022 from 132% as of June 30, 2021, while total net revenue retention rate was 113%.
We rely on limited third-party suppliers for hard drives and semiconductors, and COVID-19 and cryptocurrency mining demand have affected availability. Supply interruptions could increase costs, lease liabilities, interest and depreciation expenses.
We plan to increase sales and marketing investments to scale our business, but these programs may not provide a reasonable return on investment. Sales and marketing expense increased 93% in FY2022 Q2 compared to FY2021 Q2, and advertising costs or channel effectiveness could worsen.
Headcount grew to 270 employees as of December 31, 2021, and storage deployed more than doubled in the last two years, placing strain on management, corporate culture, and operational and financial infrastructure. Failure to manage growth could harm service quality and results.
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 Net Revenue Retention (NRR)
Computer Backup Net Revenue Retention (NRR)
B2 Cloud Storage ARR
Computer Backup ARR
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q2 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.