Summary
Backblaze ended 2023 with revenue of $28.74 million for the fourth quarter, up 25.3% from the prior-year quarter. Gross profit for the quarter was $15.08 million, and gross margin was 52.5%, up 1.4 percentage points from the prior-year quarter. The operating loss was $11.62 million, narrower than the prior-year quarter, and operating margin was negative 40.5%, an 18.6 percentage point improvement. Net loss was $12.21 million for the quarter, narrower than the prior-year quarter. Adjusted EBITDA turned positive at $1.6 million, or 6% of revenue, compared with negative $2.5 million, or negative 11% of revenue, in the fourth quarter of 2022. Operating cash flow was $3.25 million for the quarter, an improvement from the prior-year quarter.
Full-year 2023 revenue was $102.0 million, up 19.8%. Gross profit was $49.86 million, up 13.7%, while gross margin slipped to 48.9%, down 2.6 percentage points. The operating loss widened to $57.90 million, and net loss widened to $59.71 million. Diluted EPS was negative $1.66, a wider loss than the prior year. Operating cash flow for the year was negative $7.35 million, an improvement from the prior year. Capital expenditures were $5.51 million, down 25.0% from the prior year. Deferred revenue stood at $30.05 million at December 31, 2023, up 17.7% from the prior-year quarter, and remaining performance obligations were $33.10 million. Fourth-quarter capital expenditures were $0.45 million, down 86.4% from the prior-year quarter.
The company ended the quarter with annual recurring revenue of $117.6 million, up 28%. B2 Cloud Storage ARR was $57.6 million, up 49%, and Computer Backup ARR was $60.0 million, up 12%. Total net revenue retention was 109%, compared with 113% in the prior-year quarter. B2 Cloud Storage net revenue retention was 122%, flat with the prior-year quarter, while Computer Backup net revenue retention fell to 100% from 108%. Gross customer retention was 91% in both periods. Total customers were 511,942, compared with 506,456 a year earlier. B2 Cloud Storage customers rose to 97,842 from 86,874, while Computer Backup customers fell to 431,745 from 436,080. The company completed its October 2023 price increase with added product features, and management reported no material impact on customer retention as of December 31, 2023. Fourth-quarter cash usage declined by more than 70% from the third quarter of 2023 to $2.4 million. Cash, short-term investments, and restricted cash, non-current totaled $33.4 million at December 31, 2023. Backblaze also launched Powered By Backblaze and Computer Backup with Enterprise Control, and hired David Ngo as chief product officer.
Management guided first-quarter 2024 revenue to a range, with adjusted EBITDA margin of 4% to 6% and basic shares outstanding of 39.5 million to 40.5 million. For full-year 2024, the company guided revenue to a range and adjusted EBITDA margin of 8% to 10%. The outlook depends on the company's ability to attract and retain customers, including larger mid-market accounts, and to manage competition from larger rivals. Other risks include cyberattacks, supply chain disruption, material weaknesses in internal controls over financial reporting, retention of key employees, the Israel-Hamas conflict, litigation, and general market and economic conditions. Backblaze also faces customer churn in Computer Backup, where net revenue retention fell. The company's credit facility matures in December 2025, and in December 2023 the maximum borrowing available was reduced from $30 million to $20 million. As of December 31, 2023, the outstanding balance was $4.1 million, the amount available was $15.9 million, and the interest rate was 8.1%. Management noted that banking failures starting in March of 2023 have created heightened uncertainty and risk aversion in the financial sector, which could affect access to capital. The price increase is expected to have a favorable impact on revenue and gross margin over the next 12 months, though the company cautions that the impact has inherent uncertainty.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $28.7M | $25.3M | +13.6% | $22.9M | +25.3% |
| Gross profit | $15.1M | $11.8M | +28.3% | $11.7M | +28.8% |
| Gross margin | 52.5% | 46.5% | +6.0 pp | 51.1% | +1.4 pp |
| Research & development | $9.4M | $9.6M | -2.2% | $8.6M | +9.5% |
| Sales & marketing | $10.1M | $10.7M | -5.9% | $9.3M | +8.9% |
| General & administrative | $7.2M | $6.9M | +3.4% | $7.4M | -2.5% |
| Total operating expenses | $26.7M | $27.3M | -2.2% | $25.3M | +5.8% |
| Operating income (loss) | -$11.6M | -$15.6M | +25.3% | -$13.5M | +14.2% |
| Operating margin | -40.5% | -61.5% | +21.1 pp | -59.1% | +18.6 pp |
| Net income (loss) | -$12.2M | -$16.1M | +24.0% | -$14.5M | +15.8% |
| Net margin | -42.5% | -63.5% | +21.0 pp | -63.2% | +20.7 pp |
| Diluted EPS | -$0.34 | -$0.44 | +$0.10 | -$0.46 | +$0.12 |
| Customers | 500,000 | 500,000 | ±0.0% | 500,000 | ±0.0% |
Risks
The company incurred net losses of $59.7 million for FY2023 and $51.4 million for FY2022, with an accumulated deficit of $147.5 million as of December 31, 2023, and does not expect to be profitable for the foreseeable future.
It faces intense competition from larger cloud providers including AWS, Google Cloud Platform and Microsoft Azure, as well as on-premises vendors, which could result in pricing pressure and reduced sales. The price increases to Computer Backup and B2 Cloud Storage took effect in Q4 2023, and there was some incremental decline in the rate at which customers increase storage during the fourth quarter of 2023.
The Q3 2023 price increases for Computer Backup and B2 Cloud Storage may not have fully flowed through; the company may lose existing customers, reduce new customer additions, or see customers store less data. Computer Backup net revenue retention rate decreased by 8% for the year ended December 31, 2023 compared to 2022, primarily due to customer churn.
The company has identified material weaknesses in its internal controls over financial reporting, and failure to achieve and maintain effective internal controls could harm the business and negatively impact the Class A common stock.
Cash, short-term investments and restricted cash decreased to $33.4 million as of December 31, 2023 from $69.7 million as of December 31, 2022, and operating cash flow was negative $7.35 million for FY2023 despite improving 46.7%. The company may need additional equity or debt financing, and the credit facility borrowing capacity was reduced from $30 million to $20 million in December 2023.
Revenue is substantially dependent on two offerings, B2 Cloud Storage and Computer Backup, with B2 revenue up 40% to $46.4 million and Computer Backup revenue up 7% to $55.6 million for the year ended December 31, 2023. Any decline in demand for cloud storage would not be offset by other market sectors.
The company must manage data center capacity and costs; overestimating capacity could materially increase capital expenditures and reduce operating margins, while underestimating could impair service. Cost of revenue increased 26% for the year ended December 31, 2023 while revenue increased 19.8%, and gross margin decreased to 48.9% for FY2023 from 51.5% in FY2022.
The business is substantially dependent on mid-market organizations, which are more vulnerable to economic downturns, high inflation, and reduced discretionary spending. Recent high inflation and recession concerns in the United States could have a greater adverse impact on these customers.
The company derived approximately 28% of revenue outside the United States in 2023 and is subject to data privacy laws such as GDPR, CCPA and CPRA. Non-compliance could result in significant fines and penalties, including GDPR fines of up to €20 million or 4% of total worldwide annual group turnover.
Its growth strategy depends on attracting larger businesses and organizations, which may have longer sales cycles, less predictability, higher volatility in data stored, and increased pricing leverage. These demands could require greater sales, engineering and support resources and increase costs.
Competition for software developers, sales personnel and executives is intense, particularly in the San Francisco Bay Area, and a new sales commission structure was implemented in 2024. If the new commission program does not effectively incentivize the sales team, the company may fail to retain or hire qualified sales personnel.
Approximately 76% of total revenue in 2023 came from self-serve customers, and a portion of potential customers locate the website through search engines such as Google, Bing and Yahoo. If search engine algorithms reduce Backblaze's prominence or advertising costs rise, customer acquisition and operating results could be adversely affected.
The company relies on third-party vendors and suppliers, including data center and hard drive providers, which may have limited sources of supply. A third-party vendor that operated one data center filed for bankruptcy in 2022; future bankruptcies or similar events could disrupt access to customer data or cause data loss.
The risk factors note that use of generative artificial intelligence tools could expose the company to inadvertently disclosing trade secrets or violating third-party intellectual property rights, and could increase the likelihood of cybersecurity incidents.
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)
B2 Cloud Storage Net Revenue Retention (NRR)
Computer Backup Net Revenue Retention (NRR)
Adjusted Gross Profit
B2 Cloud Storage Annual Recurring Revenue (ARR)
Computer Backup Annual Recurring Revenue (ARR)
B2 Cloud Storage Number of Customers
Computer Backup Number of Customers
Number of Customers
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q4 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.