Backblaze(US:BLZE)2025-11-06 12:50Revenue Growth - Backblaze reported a revenue growth of 28% for B2 Cloud Storage in the current quarter compared to the same period last year[128]. - The annual recurring revenue (ARR) for B2 Cloud Storage increased to $81.8 million as of September 30, 2025, up from $64.9 million in the previous year, representing a growth of 26%[144]. - Backblaze's total annual recurring revenue reached $147.2 million as of September 30, 2025, compared to $130.5 million in the previous year[144]. - Revenue for the three months ended September 30, 2025, was $37,162 thousand, a 14% increase from $32,589 thousand in the same period of 2024[168]. Customer Retention - The net revenue retention rate for B2 Cloud Storage was 110% as of September 30, 2025, down from 128% in the previous year, attributed to the impact of a price increase announced in October 2023[145]. - Backblaze's gross customer retention rate remained stable at 89% for B2 Cloud Storage and 90% for Computer Backup as of September 30, 2025[144]. Product Development - The company launched B2 Overdrive, a premium cloud storage solution, in April 2025 to cater to data-intensive workloads[139]. - The company is focusing on expanding revenue within existing customers through new features and enhanced customer success programs[136]. - Backblaze's direct sales activities are increasingly contributing to the acquisition of larger customers as the company moves up-market[126]. Financial Performance - Gross margin improved to 62% for the three months ended September 30, 2025, compared to 55% for the same period in 2024, primarily due to a decrease in depreciation expense[174]. - The net loss for the three months ended September 30, 2025, was $3,778 thousand, compared to a net loss of $12,753 thousand in the same period of 2024[168]. - Adjusted gross profit increased to $29,359 thousand for the three months ended September 30, 2025, compared to $25,469 thousand for the same period in 2024, with an adjusted gross margin of 79%[186]. - Adjusted EBITDA increased to $8,387 thousand for the three months ended September 30, 2025, compared to $3,749 thousand for the same period in 2024, with an adjusted EBITDA margin of 23%[189]. Expenses - Research and development expenses for the three months ended September 30, 2025, were $11,235 thousand, representing 30% of total revenue[168]. - Sales and marketing expenses for the three months ended September 30, 2025, were $8,996 thousand, accounting for 24% of total revenue[168]. - The company expects operating expenses, excluding depreciation and stock-based compensation, to remain flat in 2025 compared to the prior year[158]. - Investment in research and development is anticipated to increase in absolute dollars as the company focuses on enhancing cloud service offerings[160]. Cash Flow and Investments - Net cash provided by operating activities was $14,231 thousand for the nine months ended September 30, 2025, compared to $10,272 thousand for the same period in 2024[195]. - Adjusted free cash flow was $(9,485) thousand for the nine months ended September 30, 2025, improving from $(15,603) thousand for the same period in 2024, with an adjusted free cash flow margin of (9%) compared to (17%) in 2024[195]. - The company incurred cash used in investing activities of $22.2 million for the nine months ended September 30, 2025, up from $11.9 million in the same period of 2024[220]. Debt and Financing - The company has $20.0 million available under a senior secured revolving credit facility, with $2.5 million outstanding as of September 30, 2025, and an interest rate of 7.51%[204]. - The company amended its credit agreement in August 2025 to permit share repurchases, allowing up to $10.0 million to be excluded from covenant restrictions[206]. - The company was in compliance with the covenants under the credit agreement as of September 30, 2025, which includes a minimum liquidity requirement of $10.0 million[207]. Market and Currency Risks - The company has minimal foreign currency risk as most sales and operating expenses are denominated in U.S. dollars[230]. - Future international sales increases may expose the company to foreign currency exchange rate fluctuations[230]. - The company may consider using derivatives or other financial instruments in the future to hedge foreign currency exchange risk[230].