Summary
Backblaze reported third quarter revenue of $32.6 million, up 28.8% from the prior-year quarter, and nine-month revenue of $93.8 million, up 28.1%. Gross profit was $17.8 million, and gross margin reached 54.6%, up from 46.5% a year earlier. The company remains unprofitable. Net loss of $12.75 million narrowed from a loss of $16.06 million in the prior-year quarter, and diluted loss per share of $0.29 narrowed from $0.44. Operating loss narrowed to $12.2 million from $15.6 million, and operating margin improved to -37.4% from -61.5%.
The mix matters. B2 Cloud Storage revenue grew 39% year over year while Computer Backup revenue grew 20%, and management credits much of the gain to the price increase that took effect in October 2023. For Computer Backup, about $3.4 million of the quarterly increase came from pricing and $0.2 million from version history fees, partly offset by a $0.8 million decrease from fewer licenses. Total annual recurring revenue was $130.5 million, up 29%. B2 ARR rose 39% to $64.9 million, and Computer Backup ARR rose 21% to $65.6 million. Net revenue retention of 118% compared with 108% a year earlier, while gross customer retention eased to 90% from 91%.
Profitability metrics improved sharply on a non-GAAP basis. Adjusted gross profit was $25.5 million, or 78% of revenue, compared with $18.7 million, or 74% of revenue, in the prior-year quarter. Adjusted EBITDA was $3.7 million, or 12% of revenue, versus $(0.8) million, or (3)% of revenue, a year earlier, a 1,500 basis point improvement. Non-GAAP net loss was $4.3 million compared with $7.8 million. Nine-month adjusted free cash flow was $(15.6) million, better than $(38.0) million in the same period of 2023.
Cash generation turned a corner. The quarter produced $4.6 million of operating cash flow, compared with $0.17 million used in the prior-year quarter, and the nine-month figure was $10.3 million against $10.6 million used a year earlier. Capital expenditures were $0.19 million, down 45.0% from $0.35 million. Deferred revenue was $35.3 million, up 30.0%, and remaining performance obligations were $38.6 million, up 30.8%.
Guidance is split between the next quarter and the full fiscal year. For the fourth quarter of 2024, management issued a revenue outlook and guided to an adjusted EBITDA margin between 12% and 14%, with basic weighted average shares outstanding of 44.9 million to 45.4 million shares. For the full fiscal year 2024, the outlook is an adjusted EBITDA margin between 9% and 11%.
Backblaze is midway through a go-to-market overhaul. It revamped sales and marketing, hired new senior sales leadership, and launched a zero-based budgeting program aimed at cost savings, with the goal of being adjusted free cash flow positive by the fourth quarter of 2025. The company also signed two multi-year deals worth roughly $1 million each, won three new AI customers carrying $500k in annual revenue run rate, and doubled the data stored by AI customers. A Canadian data region is expected to open in the first quarter of 2025. Management still expects the October 2023 price increase to help revenue and gross margin over the remainder of 2024.
The price increase is now the main engine of growth, and the company has not yet shown it can hold those prices without losing customers. Gross customer retention already slipped to 90% from 91%, and Computer Backup lost licenses even as revenue rose. Competition from larger cloud providers, execution risk in the go-to-market change, and material weaknesses in internal controls all appear on the risk list in the filings. The 2024 Restructuring Plan, approved in November 2024, cuts headcount and office space, which adds near-term disruption. The revolving credit facility matures in December 2025. International markets supplied 27% of nine-month revenue, and the filings cite foreign exchange losses and geopolitical events among the factors that could affect results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $32.6M | $31.3M | +4.2% | $25.3M | +28.8% |
| Gross profit | $17.8M | $17.2M | +3.3% | $11.8M | +51.5% |
| Gross margin | 54.6% | 55.1% | -0.5 pp | 46.5% | +8.2 pp |
| Research & development | $10.7M | $9.6M | +11.9% | $9.6M | +11.4% |
| Sales & marketing | $11.7M | $11.0M | +6.7% | $10.7M | +9.2% |
| General & administrative | $7.5M | $6.5M | +16.8% | $6.9M | +8.6% |
| Total operating expenses | $30.0M | $27.0M | +10.9% | $27.3M | +9.8% |
| Operating income (loss) | -$12.2M | -$9.8M | -24.4% | -$15.6M | +21.6% |
| Operating margin | -37.4% | -31.4% | -6.1 pp | -61.5% | +24.1 pp |
| Net income (loss) | -$12.8M | -$10.3M | -23.2% | -$16.1M | +20.6% |
| Net margin | -39.1% | -33.1% | -6.1 pp | -63.5% | +24.3 pp |
| Diluted EPS | -$0.29 | -$0.25 | -$0.04 | -$0.44 | +$0.15 |
| Customers | 500,000 | 500,000 | ±0.0% | 500,000 | ±0.0% |
| Net retention rate | 118.0% | 114.0% | +4.0 pp | 108.0% | +10.0 pp |
Risks
The Risk Factors summary discloses that the company has identified material weaknesses in its internal controls over financial reporting. Failure to achieve and maintain effective internal controls could harm the business and negatively impact the value of the Class A common stock.
Risk Factors and MD&A emphasize the October 2023 price increases for Computer Backup and B2 Cloud Storage. Total net revenue retention rate increased to 118% as of September 30, 2024 from 108% a year earlier, but gross customer retention rate decreased by 1% for both B2 Cloud Storage and Computer Backup; future price increases or competitor price reductions could cause customer loss or reduced data storage.
The business depends on a small number of offerings, B2 Cloud Storage and Computer Backup, which have accounted for substantially all total revenue and are expected to continue to do so. Any decline in demand for cloud storage or cloud backup could disproportionately reduce revenue.
Risk Factors highlight managing data center capacity and costs, including significant lease and infrastructure commitments. As of September 30, 2024, future minimum commitments for finance leases and lease financing obligations including interest were $5.9 million for the remainder of 2024 and $25.6 million thereafter, and operating lease commitments were $2.7 million for the remainder of 2024 and $37.7 million thereafter; misestimating capacity could reduce margins or impair service.
The growth strategy depends in part on attracting larger businesses and organizations, which may have longer sales cycles, less predictability, higher negotiation leverage, and greater demands for customization and support. These factors could increase costs and divert resources from other customers.
In the nine months ended September 30, 2024, approximately 27% of revenue was derived from customers outside the United States. International expansion increases compliance, data residency, tax, and geopolitical risks, including the Russia-Ukraine and Israel-Hamas conflicts, and may raise costs or delay market entry.
Risk Factors note intense competition for executive, software development, sales, and operations personnel, particularly in the San Francisco Bay Area, and a new 2024 sales commission structure. If the commission program does not effectively incentivize the sales team, the company may struggle to retain or hire qualified sales personnel and obtain new customers.
Risk Factors state that the use of generative artificial intelligence could increase the likelihood of cybersecurity incidents and could expose trade secrets or confidential information or cause inadvertent violation of third-party intellectual property rights.
In November 2024, management approved the 2024 Restructuring Plan, which includes a reduction in headcount and facilities footprint. MD&A expects operating expenses and sales and marketing expenses to decrease in the near term as a percentage of revenue, but execution and cost-savings risks remain.
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
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
Adjusted Free Cash Flow
Adjusted Gross Profit
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q3 FY2024 (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.