Business Overview and History

Backblaze, Inc. (BLZE) has emerged as a disruptive force in the cloud storage industry, providing businesses and consumers with a modern, cost-effective alternative to the complex and expensive solutions offered by industry giants like Amazon, Google, and Microsoft. With its innovative Backblaze B2 Cloud Storage and Computer Backup offerings, the company has carved out a unique niche, catering to the evolving data storage and management needs of organizations across a wide range of sectors.

Backblaze was founded in 2007 with the mission of making cloud storage easy, affordable, and accessible to everyone. The company's early focus was on developing a consumer-friendly online backup service, which quickly gained traction and a loyal customer base. Over the years, Backblaze has expanded its product portfolio, introducing the Backblaze B2 Cloud Storage solution in 2015, which has become a core driver of the company's growth.

Incorporated in the state of Delaware and headquartered in San Mateo, California, Backblaze has consistently focused on simplifying the process of storing, using, and protecting data for both businesses and consumers. The company's relentless efforts to cut away the complexity common among traditional cloud vendors and legacy on-premises system vendors have set it apart in the industry.

In its early years, Backblaze developed a purpose-built, web-scale software infrastructure built on commodity hardware, which became the foundation for its two main cloud service offerings - Backblaze B2 Cloud Storage and Backblaze Computer Backup. The company's growth strategy included attracting customers through a highly efficient self-serve model, as well as direct sales activities and partnerships.

Like many technology companies, Backblaze faced challenges such as the need for continuous innovation to maintain competitive advantages, scaling infrastructure and operations to meet growing customer demands, and retaining and attracting top talent. Despite these obstacles, the company achieved steady growth in its customer base and the amount of data under management on its Storage Cloud platform.

A significant milestone in Backblaze's history came in 2021 when the company completed its initial public offering. This provided additional resources for further investment in the business and expansion of its reach. However, the company continued to prioritize growth over profitability in its early years as a public company, resulting in ongoing operating losses.

The Backblaze B2 Cloud Storage platform is designed to provide businesses and developers with a simple, high-performance, and cost-effective object storage solution. Complementing this is the Backblaze Computer Backup service, which offers continuous, unlimited backup for laptops and desktops, catering to both individual and business users.

Financials

Backblaze's revenue has grown steadily over the years, reaching $127.63 million in 2024, up from $102.02 million in 2023. The company's net loss has narrowed from $59.71 million in 2023 to $48.53 million in 2024. While Backblaze has yet to achieve profitability, the company's focus on cost control and operational efficiency is evident in its improving financial metrics.

In the fourth quarter of 2024, Backblaze reported revenue of $33.79 million, representing an 18% year-over-year growth. The net loss for the quarter was $14.38 million. The company's B2 Cloud Storage revenue grew 22% year-over-year, driven by increased storage from new and existing customers, as well as the impact of a price increase implemented in Q4 2023. Computer Backup revenue grew 13% year-over-year, primarily due to the same price increase.

Liquidity

Backblaze's current ratio, a measure of its short-term liquidity, stood at 1.10 as of December 31, 2024, indicating an improvement in its working capital management compared to the previous year. The company's debt-to-equity ratio remained relatively low at 0.60, suggesting a prudent approach to leverage.

The company's gross profit margin has improved, reaching 54% in 2024 compared to 49% in 2023, driven by price increases and operating leverage. Backblaze's operating margin has also shown improvement, reflecting ongoing efforts to streamline operations and control costs.

Backblaze's cash and short-term investments totaled $54.92 million as of December 31, 2024, providing a solid foundation for the company's growth initiatives. The company's operating cash flow turned positive in 2024, reaching $12.51 million, a significant improvement from the previous year. Similarly, Backblaze's free cash flow, while still negative at $20 million in 2024, has also shown improvement.

In December 2024, the company terminated its $20 million revolving credit facility with City National Bank, as it no longer needed the facility, further demonstrating its improved liquidity position.

Market Presence and Customer Base

Backblaze has a diversified customer base across small, medium, and enterprise-sized businesses, as well as individual consumers, spanning over 175 countries worldwide. No single customer accounted for more than 10% of total revenue in 2024 or 2023. The company's revenue is substantially recurring in nature, and it employs a land-and-expand model to drive additional revenue from existing customers as their storage needs grow.

As of December 31, 2024, Backblaze had attracted over 500,000 customers, up from approximately 512,000 customers at the end of 2023. The company's net revenue retention rate was 116% in 2024, up from 109% in 2023, demonstrating strong customer retention and expansion.

Approximately 26% of the company's revenue in 2024 came from customers outside the United States. To expand its international footprint, Backblaze recently opened a new data center region in Toronto, Canada.

Navigating the AI Data Explosion

The rise of artificial intelligence (AI) and machine learning (ML) has had a significant impact on the data storage and management landscape. As organizations across various industries embrace these transformative technologies, the demand for flexible, high-performance, and cost-effective cloud storage solutions has skyrocketed.

Backblaze has recognized this shift and has positioned itself as a strategic partner for companies navigating the AI data explosion. The company's B2 Cloud Storage platform, with its S3-compatible API and free egress up to 3x per month, has become a popular choice for AI and ML workloads, enabling seamless integration with a wide range of open-source and proprietary AI/ML tools and platforms.

In the fourth quarter of 2024, Backblaze reported that AI-focused customers now account for three of its top 10 customers, with the data stored by these companies increasing tenfold over the past year. This surge in AI-driven demand has become a significant growth driver for the company, complementing its more traditional storage and backup use cases.

Capitalizing on the AI Opportunity

To capitalize on the growing AI opportunity, Backblaze has implemented a multi-pronged strategy. The company has focused on enhancing its product features and capabilities to better serve the evolving needs of AI and ML practitioners. This includes improving data transfer performance, expanding multi-cloud support, and introducing new tools for managing the complete AI data lifecycle.

Additionally, Backblaze has intensified its sales and marketing efforts to target AI-centric organizations, leveraging its technical expertise and the inherent advantages of its platform, such as cost-effectiveness, scalability, and data mobility. The company's "Powered by Backblaze" program, which allows third-party providers to integrate Backblaze's storage services into their own offerings, has also emerged as a valuable channel for reaching AI-focused customers.

Furthermore, Backblaze has forged strategic partnerships with leading AI and ML ecosystem players, integrating its solutions with popular frameworks and platforms. This collaborative approach has not only expanded the company's reach but also strengthened its position as a trusted provider in the AI data management landscape.

Product Offerings and Growth Drivers

Backblaze operates two main cloud service offerings: B2 Cloud Storage and Computer Backup. B2 Cloud Storage, the company's Infrastructure-as-a-Service (IaaS) offering, enables customers to store data, develop applications, and expand their use cases. Customers can access the B2 Cloud Storage platform through industry-standard APIs, SDKs, web interfaces, and integrations with hundreds of third-party providers. This flexible and open platform allows customers to scale their storage up and down as needed, primarily on a pay-as-you-go basis, or customers can purchase capacity or committed contracts for greater predictability.

B2 Cloud Storage revenue grew 36% year-over-year in 2024 to $63.34 million, driven by increased storage from new and existing customers, the impact of the October 2023 price increase, and stronger sales of the company's B2 Reserve offering.

Backblaze's Computer Backup is a Software-as-a-Service (SaaS) offering that automatically backs up data from laptops and desktops for businesses and individuals. This cloud backup service provides flat-rate pricing to continuously back up a virtually unlimited amount of data. Computer Backup revenue increased 16% in 2024 to $64.29 million, primarily due to the impact of the October 2023 price increase and increased revenue from customers selecting longer backup history options, partially offset by a decrease in the licensed user count.

The company's Storage Cloud platform, which powers both B2 Cloud Storage and Computer Backup, is designed to be durable, scalable, performant, and secure. Backblaze has invested significantly in developing the proprietary software that manages its global physical infrastructure of over 300,000 hard drives and 1 terabit per second of network capacity across multiple data centers. This web-scale software layer intelligently allocates storage locations, handles load balancing, caching, and numerous other essential functions to deliver reliable and cost-effective cloud storage services to customers.

Risks and Challenges

While Backblaze's growth prospects appear promising, the company faces several risks and challenges that warrant consideration. The cloud storage market is highly competitive, with established players like Amazon, Google, and Microsoft wielding significant market power and resources. Backblaze's ability to maintain its competitive edge and continue its rapid growth will depend on its agility, innovation, and effective execution of its go-to-market strategies.

Additionally, the company's reliance on a limited number of large customers, particularly in the AI segment, introduces concentration risk. The loss of one or more of these key customers could have a material impact on Backblaze's financial performance.

The company's ability to achieve profitability remains a concern, as it has yet to report positive net income. Backblaze's ongoing investments in research and development, sales and marketing, and infrastructure to support its growth may continue to weigh on its bottom line in the near term.

Future Outlook and Guidance

Backblaze has shared two key initiatives: a go-to-market transformation focused on driving B2 growth and a plan to be adjusted free cash flow positive by Q4 2025. The company is already seeing strong early signs of progress on its go-to-market transformation, with ARR win rates up significantly, sales productivity in Q4 2024 doubling year-over-year, and the team meaningfully beating quota for Q4 2024 and the full year. Additionally, Backblaze signed a significant expansion deal for over $1 million in annual contract value.

For the full-year 2025, Backblaze expects revenue to be in the range of $144 million to $146 million. For Q1 2025, the company expects revenue to be within the range of $34.1 million to $34.5 million. Backblaze projects adjusted EBITDA for the full-year 2025 to be in the range of 16% to 18% and adjusted EBITDA guidance for Q1 2025 to be in the range of 13% to 15%.

The company remains on track to exit Q4 2025 with adjusted EBITDA margin above 20% and expects to be adjusted free cash flow positive in Q4 2025. For B2 Cloud Storage, Backblaze expects to exit 2025 with over 30% year-over-year growth, a significant acceleration from the low point in Q3 2024.

Conclusion

Backblaze's positioning in the rapidly evolving cloud storage and data management landscape is both compelling and promising. The company's focus on simplicity, affordability, and open ecosystem integration has resonated with a wide range of customers, from individual users to large enterprises, particularly those embracing the transformative power of AI and ML.

The surge in AI-driven demand for Backblaze's solutions, as evidenced by the increasing contribution of AI-focused customers to the company's top line, underscores the relevance and adaptability of its platform. As organizations continue to grapple with the exponential growth of data and the need for scalable, high-performance storage solutions, Backblaze is poised to capitalize on this trend and drive further growth.

With improving financial metrics, a growing customer base, and a clear focus on operational efficiency, Backblaze is well-positioned to navigate the competitive landscape and work towards profitability. The company's ability to continue innovating, forging strategic partnerships, and executing its go-to-market strategies will be critical in determining its future success in the dynamic cloud storage market.