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Backblaze, Inc. (BLZE): Powering the Open Cloud Revolution
Published on September 24, 2024 | Ticker: BLZE

Backblaze, Inc. (NASDAQ: BLZE) is a leading specialized storage cloud platform, providing cloud services to store, use, and protect data in an easy and affordable manner. The company's purpose-built, web-scale software infrastructure built on commodity hardware has allowed it to emerge as a trusted partner for businesses and individuals seeking a reliable and cost-effective cloud storage solution.

Financials

Backblaze's financial performance in recent years has been impressive, with the company reporting annual revenue of $102,019,000 in 2023. However, the company has continued to invest heavily in its growth, resulting in an annual net loss of $59,713,000 and negative annual operating cash flow of $7,350,000. Despite these losses, Backblaze's annual free cash flow of -$27,578,000 demonstrates the company's commitment to long-term value creation.

In the first quarter of 2024, Backblaze continued to deliver strong results, with revenue growing 28% year-over-year to $29,968,000. This growth was driven by a 47% increase in B2 Cloud Storage revenue to $14,622,000 and a 14% increase in Computer Backup revenue to $15,346,000. The company's total net revenue retention rate (NRR) stood at 112%, with B2 Cloud Storage NRR at 126% and Computer Backup NRR at 101%.

Business Overview

Backblaze's focus on providing an open and flexible cloud ecosystem has been a key driver of its success. The company's "Cloud 2.0" approach, which emphasizes interoperability and the ability for customers to freely use their data across multiple cloud services, has resonated with businesses seeking to avoid the "walled garden" approach of traditional cloud providers. This strategy has been bolstered by the company's robust partner ecosystem and continued product innovation, such as the recently launched Event Notifications feature, which enables customers to build automated workflows across different cloud platforms.

The company's geographic diversification is also noteworthy, with 27% of its revenue in the first quarter of 2024 coming from outside the United States. This international presence provides Backblaze with exposure to growing cloud storage demand in markets such as the United Kingdom, Canada, and other regions.

Outlook

Looking ahead, Backblaze has provided guidance for the second quarter of 2024, expecting revenue to be in the range of $30.7 million to $31.1 million and adjusted EBITDA margin between 6% and 8%. For the full year 2024, the company is reiterating its revenue guidance of $126 million to $128 million and adjusted EBITDA guidance range of 8% to 10%. Backblaze also expects to have at least $20 million in cash by the end of 2024.

Backblaze's strong financial performance, innovative product offerings, and commitment to the open cloud ecosystem have positioned the company as a compelling investment opportunity. The company's focus on serving the underserved mid-market segment, combined with its growing international presence and robust partner network, suggest that Backblaze is well-positioned to continue its growth trajectory and capitalize on the significant opportunities in the $50 billion cloud storage market.

Risks and Challenges

However, Backblaze is not without its risks. The company operates in a highly competitive industry, with larger cloud providers such as Amazon, Google, and Microsoft offering their own storage solutions. Additionally, Backblaze's reliance on third-party vendors and suppliers, including data center and hard drive providers, exposes the company to potential supply chain disruptions and service interruptions that could harm its business.

Furthermore, Backblaze has identified material weaknesses in its internal controls over financial reporting, which could impact the accuracy and reliability of its financial reporting. The company is actively working to remediate these issues, but the successful implementation and testing of new controls will be crucial to maintaining investor confidence.

Conclusion

Despite these risks, Backblaze's strong financial performance, innovative product offerings, and commitment to the open cloud ecosystem make it a compelling investment opportunity for those seeking exposure to the growing cloud storage market. As the company continues to execute on its strategic initiatives and address its internal control challenges, it may emerge as a leading player in the industry's shift towards Cloud 2.0.

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