Sign in

You're signed outSign in or to get full access.

BI

Backblaze, Inc. (BLZE)·Q2 2025 Earnings Summary

Executive Summary

  • Beat on revenue and EPS; Q2 revenue was $36.3M vs S&P consensus $35.4M*, and Primary EPS was $0.01 vs $(0.05)*, driven by accelerating B2 growth (29% YoY) and stronger AI-related demand .
  • Raised FY25 revenue guidance to $145–$147M (from $144–$146M) and guided Q3 revenue to $36.7–$37.1M; reiterated FY25 adjusted EBITDA margin of 17–19% .
  • Gross margin expanded 800 bps YoY to 63% largely from extending hardware useful lives (plus scale efficiencies); adjusted EBITDA margin reached 18%, above guidance .
  • Announced a cash‑neutral $10M share repurchase (funded by option/ESPP proceeds) and secured a new $20M credit facility, supporting dilution management and flexibility; expects adjusted FCF positive in Q4’25 .

What Went Well and What Went Wrong

What Went Well

  • B2 acceleration and AI momentum: B2 revenue +29% YoY to $19.8M; three of top 10 customers are AI companies; first six-figure Overdrive win signed early Q3, pipeline expanding .
    • Quote: “We’re pleased with our continued strong quarterly performance… and solidifying our journey to be Adjusted Free Cash Flow positive in Q4.” — CEO Gleb Budman .
  • Margin expansion and operating leverage: Gross margin 63% (vs 55%), adjusted EBITDA margin 18% (vs 9%); drivers include hardware life re-estimate and scale .
  • Capital allocation: Authorized $10M buyback (cash‑neutral), reduced projected SBC dilution by ~15–25% trajectory; added $20M revolver to lower non‑US capex costs .

What Went Wrong

  • NRR down as price increase laps: Company NRR 109% (vs 114% LY); B2 NRR 112% (vs 126% LY) with CFO noting price increase lapping effect .
  • Backup growth decelerating: Computer Backup revenue +4% YoY but management expects low‑to‑mid single‑digit quarterly declines through 2025; secular pressure in consumer backup offset by enterprise features (e.g., Legal Hold) .
  • Adjusted FCF still negative YTD: 1H25 adjusted FCF $(6.0)M and Q2 adj FCF margin (11)%, though improvement vs LY and guided to positive in Q4 .

Financial Results

Multi-period summary (GAAP and non‑GAAP)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$33.8 $34.6 $36.3
Gross Margin (%)55% 56% 63%
Adjusted Gross Margin (%)78% 79% 79%
GAAP Net Income ($M)$(14.4) $(9.3) $(7.1)
GAAP Diluted EPS ($)$(0.30) $(0.17) $(0.13)
Adjusted EBITDA ($M)$4.6 $6.4 $6.6
Adjusted EBITDA Margin (%)14% 18% 18%
Non-GAAP Net Income ($M)$(3.0) $(1.8) $0.8

Q2 2025 vs Wall Street consensus (S&P Global)

MetricActualConsensus*Surprise
Revenue ($M)$36.3 $35.4*+$0.9M (~+2.5%)
Primary EPS ($)$0.01 $(0.05)*+$0.06

*Values retrieved from S&P Global.

Segment revenue and growth

SegmentQ4 2024 ($M)YoYQ1 2025 ($M)YoYQ2 2025 ($M)YoY
B2 Cloud Storage$17.1 22% $18.0 23% $19.8 29%
Computer Backup$16.7 13% $16.6 8% $16.5 4%

KPIs and liquidity

KPIQ4 2024Q1 2025Q2 2025
ARR – Total ($M)$136.7 $140.8 $145.9
ARR – B2 ($M)$70.2 $73.8 $80.7
ARR – Computer Backup ($M)$66.5 $67.0 $65.2
NRR – Company (%)116 113 109
NRR – B2 (%)123 117 112
NRR – Computer Backup (%)109 108 106
Gross Customer Retention (%)90 90 90
Cash & Marketable Securities ($M)$54.9 $53.2 $50.5

Non-GAAP adjustment context (Q2): Non-GAAP net income excludes $7.3M SBC, $0.477M FX loss, $0.138M legal settlement, and a small restructuring credit; GAAP net loss was $(7.1)M vs non-GAAP net income $0.8M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025—$36.7–$37.1M New
Adjusted EBITDA MarginQ3 2025—17%–19% New
RevenueFY 2025$144–$146M $145–$147M Raised
Adjusted EBITDA MarginFY 202517%–19% 17%–19% Maintained
B2 YoY GrowthQ3 202525%–28% 28%–30% Raised
B2 YoY GrowthQ4 202530%+ 30%+ Maintained
Basic Wtd Avg SharesQ3 2025—56.9–57.0M New
Adjusted FCFQ4 2025On track positive (prior commentary) On track positive Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/technology initiativesAI customers up; 3 AI in top 10 by Dec’24; launched Overdrive in Q1’25 3 of top 10 in Q2; AI customer count +70% YoY; data stored by AI +40x; first 6‑figure Overdrive deal; dozen Overdrive prospects Accelerating
Go-to-market transformationRecord Q4 bookings, upmarket focus; Q1 B2 +23% B2 +29% YoY; pipeline doubled YoY; 150 customers >$50k ARR (+30% YoY) Strengthening
Margins/costAdj EBITDA margin doubled YoY in Q4; 14% GM 63% from useful-life change + scale; adj EBITDA margin 18%, beat guide Improving
PricingPrior across-the-board price increase benefit No new B2 price hikes planned; Overdrive priced ~250% above standard, multi‑PB focus Mix shift to premium
Capital structureSecondary offering; stronger cash $20M revolver; $10M cash-neutral buyback to manage dilution More flexible
Computer Backup+13% YoY in Q4; +8% in Q1 +4% YoY; expect low‑mid single digit declines quarterly; enterprise features (Legal Hold) Moderating

Management Commentary

  • CEO strategic message: “We’re… solidifying our journey to be Adjusted Free Cash Flow positive in Q4… Through product innovation, go-to-market transformation, and the power of AI, we are expanding our role as the leading independent cloud storage provider” .
  • On Overdrive and AI: “Two months after launch, we’ve already signed our first six-figure B2 OverDrive customer… the performance and cost savings were clear” .
  • CFO on transformation: “Zero-based budgeting freed up $8M… redeploying nearly half to growth… two consecutive quarters of increased B2 revenue growth… We remain on track to achieve our guidance of becoming free cash flow positive in Q4” .
  • CFO on gross margin: “Estimated useful life of fixed assets now ~6 years vs 3–5 before… accounts for most of the gross margin improvements this quarter” .

Q&A Highlights

  • AI/Overdrive pipeline and pricing: Early pipeline ~a dozen large opportunities; Overdrive priced ~250% above standard B2; target multi‑PB customers needing throughput (e.g., model training) .
  • NRR dynamics: Reported declines driven by lapping price increase; underlying expansion stable to improving after adjusting for one-off customer changes .
  • Computer Backup outlook: Focus shifts to steadying business with enterprise controls and Legal Hold; no current plan for price increases; expect low‑mid single digit quarterly declines near term .
  • Sales cycle: AI customers moving faster; consumption model suits those avoiding long commitments .
  • Capex timing: Pulling some Overdrive-related DC capex into Q3 to support POCs; free cash flow positive still targeted for Q4 .

Estimates Context

  • Q2 2025: Revenue $36.3M vs $35.4M*; Primary EPS $0.01 vs $(0.05)* — both beats .
  • Q3 2025: Company guides $36.7–$37.1M; Street at ~$36.9M* revenue and $(0.02)* EPS; guidance brackets consensus revenue .
  • FY 2025: Guide raised to $145–$147M; Street quarterly path implies modest sequential acceleration into Q4*; target price consensus ~$11.3*.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • B2 growth inflecting with AI tailwinds and Overdrive; management now targeting 30%+ B2 growth exiting FY25 — a key narrative driver .
  • Profitability trajectory improved: 63% GM from asset life changes and scale; adj EBITDA margin 18% with continued operating leverage .
  • Capital returns/dilution: $10M cash‑neutral buyback plus SBC management expected to reduce dilution trajectory by ~15–25%; supports share supply/demand .
  • Watch NRR stabilization into 2026 as price increase laps; customer success motions expected to lift expansion .
  • Near-term risks: Backup softness, AI customer concentration/variability, and capex timing for Overdrive ramp .
  • Setup into Q3: Guide brackets consensus revenue; any incremental AI/Overdrive wins or durable NRR uptick could catalyze estimate revisions .

Appendix: Additional Relevant Press Releases in Q2

  • $10M Share Repurchase Program (cash‑neutral, through Aug 1, 2026) .
  • Security features update (AI-powered Anomaly Alerts, Bucket Access Logs, enterprise web console/RBAC) .
  • 8‑K exhibits: first amendment to credit agreement (permits repurchase), $20M credit facility details .