Summary
Backblaze closed fiscal 2022 with fourth quarter revenue of $22.9 million, up 22.6% from the prior-year quarter. Full-year revenue reached $85.2 million, up 26.2%. Gross profit was $11.7 million in the fourth quarter, up 19.0%, and $43.9 million for the full year, up 27.7%. Fourth quarter gross margin slipped to 51.1% from 52.6%, a decline of 1.5 percentage points. The full-year gross margin improved to 51.5% from 50.9%. The company remained deeply unprofitable on a GAAP basis. Fourth quarter operating loss widened to $13.5 million from $7.6 million in the prior-year quarter. Net loss widened to $14.5 million from $9.6 million. For the full year, operating loss widened to $48.1 million from $18.8 million, and net loss widened to $51.4 million from $21.7 million. Diluted loss per share was $1.62 for the full year compared with $1.07 in 2021. Operating margin was negative 59.1% in the fourth quarter versus negative 40.5% a year earlier, and negative 56.5% for the full year versus negative 27.9%.
Backblaze ended 2022 with 506,456 total customers, up from 493,023 a year earlier. B2 Cloud Storage customers rose to 86,874 from 74,349, while Computer Backup customers increased to 436,080 from 433,079. Total annual recurring revenue was $92.0 million, up from $75.4 million. B2 Cloud Storage ARR was $38.6 million versus $26.8 million, and Computer Backup ARR was $53.4 million versus $48.6 million. Overall net revenue retention was 113%, compared with 111% a year earlier. B2 Cloud Storage net revenue retention was 122%, down from 132%. Computer Backup net revenue retention was 108%, up from 102%. Gross customer retention was 91% overall and 90% for both B2 Cloud Storage and Computer Backup. The company said it had over 500,000 customers in more than 175 countries and 2.5 exabytes of data storage under management. About 28% of full-year revenue came from outside the United States, and roughly 80% of 2022 revenue came from self-serve customers.
Cash generation weakened. Operating cash flow was negative $13.8 million for the full year, compared with positive $3.5 million in 2021. Capital expenditures for the full year were $7.3 million, down from $7.6 million. Deferred revenue stood at $25.5 million at December 31, 2022, up 2.4% from a year earlier. Adjusted EBITDA was negative $9.4 million for the full year, compared with positive $3.2 million in 2021. Adjusted gross margin was 76%, up from 75%.
Backblaze reaffirmed its fourth quarter 2022 revenue guidance of $22.5 million to $22.9 million. It also reaffirmed full-year 2022 revenue guidance of $84.7 million to $85.1 million, with adjusted EBITDA margin expected to stay negative for both periods. The guidance was originally issued on November 9, 2022. CEO Gleb Budman said the reaffirmation reflects continued revenue growth of over 20% year over year in the fourth quarter and the strength of the recurring revenue model. Management planned to attend the Needham Growth Conference on January 11, 2023, with a fireside chat and investor meetings.
The company faces a long list of risks. They include market competition, including competitors with greater size, offerings, and resources; managing growth; service disruption or loss of availability of customer data; cyberattacks; the ability to attract and retain customers; growth consistent with historical levels; delivering new features on a timely basis; software defects; supply chain disruption; success with existing and new partnerships; material weaknesses in internal controls over financial reporting; inflation; COVID-19; and general market, political, economic, and business conditions. The MD&A also flags disruption and uncertainty in the banking industry after the sudden closure of Silicon Valley Bank in March 2023. Backblaze said a failure of any financial institution where it maintains deposits could limit timely access to funds and cause significant losses to the extent funds exceed the $250,000 limit insured by the Federal Deposit Insurance Corporation. That disruption could also reduce access to capital, increase costs of capital, and lower investment yields and investment income.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $22.9M | $22.1M | +4.0% | $18.7M | +22.6% |
| Gross profit | $11.7M | $11.2M | +4.4% | $9.8M | +19.0% |
| Gross margin | 51.1% | 50.9% | +0.2 pp | 52.6% | -1.5 pp |
| Research & development | $8.6M | $8.2M | +5.7% | $6.2M | +38.4% |
| Sales & marketing | $9.3M | $9.7M | -4.7% | $6.5M | +41.6% |
| General & administrative | $7.4M | $5.4M | +36.5% | $4.6M | +58.7% |
| Total operating expenses | $25.3M | $23.3M | +8.5% | $17.4M | +45.0% |
| Operating income (loss) | -$13.5M | -$12.1M | -12.3% | -$7.6M | -78.8% |
| Operating margin | -59.1% | -54.7% | -4.4 pp | -40.5% | -18.5 pp |
| Net income (loss) | -$14.5M | -$12.8M | -13.2% | -$9.6M | -50.9% |
| Net margin | -63.2% | -58.0% | -5.2 pp | -51.4% | -11.9 pp |
| Diluted EPS | -$0.46 | -$0.40 | -$0.06 | -$0.47 | +$0.01 |
| Customers | 500,000 | 500,000 | ±0.0% | 500,000 | ±0.0% |
Risks
Net loss was $51.40M for FY2022, widened from $21.70M for FY2021, and operating cash flow was negative $13.78M for FY2022 versus positive $3.52M for FY2021. The company had an accumulated deficit of $87.7M as of December 31, 2022 and does not expect to be profitable for the foreseeable future.
B2 Cloud Storage net revenue retention rate declined to 122% as of December 31, 2022 from 132% as of December 31, 2021, while total company net revenue retention rate increased to 113% from 111%. Customers can terminate at will with little-to-no notice and generally have no obligation to renew or increase usage, making retention and expansion difficult to predict.
The cloud storage market is intensely competitive with larger competitors such as Amazon Web Services, Google Cloud Platform, Microsoft Azure, EMC/Dell, and NetApp, which have greater resources and may offer lower prices or bundled services. Pricing pressures could reduce sales, increase churn, and lower margins.
A third-party vendor that operated one of the company's multiple data center locations filed for Chapter 11 bankruptcy in 2022, and future bankruptcies or similar events could disrupt access to customer data. Russian sanctions and the conflict in Ukraine could also cause service and payment disruptions, including waived charges for customers based in Ukraine.
The company took systems offline in December 2021 to apply a patch for the Apache Log4j zero-day vulnerability, and in March 2021 a misconfigured Facebook ad campaign may have inadvertently shared certain file metadata of less than 2% of Backblaze customers. Breaches or perceived breaches could harm reputation, reduce demand, and lead to litigation and fines.
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.
Inflation recently hit a four-decade high in the United States, and recession concerns could cause mid-market organizations, which the company substantially depends on, to reduce discretionary spending or curtail operations. Adverse economic conditions could reduce sales, lengthen sales cycles, and increase customer churn.
Because Computer Backup is offered at a fixed price, customers backing up unusually large amounts of data, or data growth outpacing decreases in storage costs, could adversely affect costs and gross margins. Gross margin for FY2022 Q4 was 51.1%, down 1.5 pp from 52.6% in FY2021 Q4.
Headcount grew from 188 employees as of December 31, 2020 to 270 as of December 31, 2021 and to 393 as of December 31, 2022, placing strain on management, corporate culture, and administrative and operational infrastructure. Failure to manage growth effectively could harm the business.
The company may require additional capital, and the stock market has experienced disruption and a bear market, while the banking industry faced uncertainty after the sudden closure of Silicon Valley Bank in March 2023. If unable to obtain financing on satisfactory terms, the company's ability to support operations or growth could be significantly impaired.
The company depends 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-based storage solutions could reduce revenue without meaningful offset from other market sectors.
The company relies on third-party vendors and suppliers, including data center and hard drive providers, which may have limited sources of supply. This reliance exposes the company to potential supply and service disruptions that could harm the business.
The company stores personal information and customer data and is subject to privacy laws including GDPR, CCPA, and CPRA, with GDPR fines of up to €20 million or up to 4% of total worldwide annual group turnover of the preceding financial year. Actual or perceived non-compliance could result in significant fines, reputational damage, and loss of customers.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q4 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.