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Backblaze, Inc. (BLZE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue grew 18% YoY to $33.8M with B2 Cloud Storage +22% YoY; adjusted EBITDA margin expanded to 14% (vs 6% LY) amid record bookings and early go‑to‑market (GTM) transformation traction .
  • Management guided Q1 2025 revenue to $34.1–$34.5M and FY 2025 to $144–$146M with adjusted EBITDA margin of 13–15% (Q1) and 16–18% (FY); B2 growth expected to accelerate to 30%+ exiting 2025 .
  • Non‑GAAP profitability improved: Q4 adjusted EBITDA $4.6M (14%) and non‑GAAP net loss narrowed to $3.0M ($0.06/sh) despite restructuring costs; adjusted gross margin held at 78% .
  • Balance sheet fortified by a $35M follow‑on in Nov‑2024 (net proceeds ~$37M) and payoff/closure of line of credit; cash and short-term investments were $54.9M at year-end, with >$80M in equipment lease credit lines available—supporting growth and capex flexibility .
  • Likely stock catalysts: sustained B2 acceleration (AI workloads; Powered by Backblaze wins), operating leverage drive to 20%+ adjusted EBITDA margin by Q4’25, and progress to adjusted FCF positive exit in Q4’25 .

What Went Well and What Went Wrong

  • What Went Well

    • Record Q4 sales bookings; sales productivity doubled YoY and team “meaningfully beat quota” for Q4 and FY despite mid‑year leadership change .
    • B2 growth re‑accelerated organically (Q3 organic ~19% vs Q4 22% YoY) with record $5M sequential B2 ARR increase—largest since IPO; AI customers now 3 of top 10 by Dec‑2024 .
    • Profitability inflected: adjusted EBITDA margin rose to 14% (vs 6% LY), aided by cost actions; adjusted gross margin sustained at 78% .

  • What Went Wrong

    • GAAP losses remain: Q4 net loss $(14.4)M; restructuring charges of $4.9M in Q4 (severance/sublease/pro services) underline ongoing cost transition .
    • Customer count declined YoY (507,647 vs 511,942), reflecting consumer backup headwinds (secular decline) despite business-side opportunities .
    • Management disclosed a larger customer loss in Q1’25 when discussing the outlook; estimates were prudently set despite AI momentum .

Financial Results

Revenue, EPS, Margins (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$31.285 $32.589 $33.786
GAAP Gross Margin (%)55% 55% 55%
Adjusted Gross Margin (%)78% 78% 78%
Adjusted EBITDA ($M)$2.744 $3.749 $4.631
Adjusted EBITDA Margin (%)9% 12% 14%
GAAP Net Loss/Share$(0.25) $(0.29) $(0.30)
Non‑GAAP Net Loss/Share$(0.11) $(0.10) $(0.06)
Versus S&P Global ConsensusUnavailable (see Estimates Context)Unavailable (see Estimates Context)Unavailable (see Estimates Context)

Segment revenue and growth

SegmentQ2 2024 Revenue ($M)YoYQ3 2024 Revenue ($M)YoYQ4 2024 Revenue ($M)YoY
B2 Cloud Storage$15.4 43% $16.2 39% $17.1 22%
Computer Backup$15.9 15% $16.4 20% $16.7 13%

Key KPIs across quarters

KPIQ2 2024Q3 2024Q4 2024
ARR – Total ($M)$126.3 $130.5 $136.7
ARR – B2 ($M)$62.8 $64.9 $70.2
ARR – Computer Backup ($M)$63.5 $65.6 $66.5
NRR – Total114% 118% 116%
NRR – B2126% 128% 123%
NRR – Computer Backup105% 109% 109%
Gross Customer Retention – Total90% 90% 90%

Q4‑specific customer/ARPU snapshot

Metric (Q4 2024)Value
Total Customers507,647
B2 Customers107,616
Computer Backup Customers417,845
ARPU – Total$268
ARPU – B2$645
ARPU – Computer Backup$159

Non‑GAAP adjustments – Q4 2024 (select)

  • Stock‑based compensation: $9.133M (includes $2.5M restructuring SBC) .
  • Restructuring charges: $4.861M (severance $3.9M; HQ sublease $0.9M; pro services $0.1M) .
  • Adjusted EBITDA reconciliation provided; adjusted gross margin excludes SBC, D&A, and restructuring in cost of revenue .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2024$33.5–$33.9M (issued Nov‑7‑2024) Actual: $33.786M In‑line (at high end)
Adjusted EBITDA MarginQ4 202412–14% Actual: 14% At high end
RevenueQ1 2025N/A (first issuance)$34.1–$34.5M New
Adjusted EBITDA MarginQ1 2025N/A13–15% New
RevenueFY 2025N/A$144–$146M New
Adjusted EBITDA MarginFY 2025N/A16–18% New
B2 YoY Growth Trajectory2025 quarterlyN/AQ1: 21–23%; Q2: 23–25%; Q3: 25–28%; Q4: 30%+ New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI / Technology initiativesLaunched B2 Live Read; enterprise momentum; customers >$50k ARR +55% YoY Won 3 new AI customers ($500k run rate); AI data doubled; GTM transformation launched AI customers now hundreds; AI data 10x; 3 AI firms in top 10 customers; multi‑cloud GPU data hub positioning Accelerating
Go‑to‑Market transformationNew CRO and CFO announced to drive growth GTM transformation + ZBB cost program launched Record bookings; sales productivity doubled YoY; B2 ARR +$5M QoQ, largest since IPO Strong execution
Cost actions / ProfitabilityAdj. EBITDA 9%; margin expansion Adj. EBITDA margin 12%; 1,500 bps YoY improvement Adj. EBITDA margin 14%; Q4 included only ~half run‑rate benefit from restructuring; path to 20%+ by Q4’25 Improving
Regional expansion—Canadian data center expected Q1’25 Canada region launched Jan’25 with anchor tenant model; minimal FX exposure Executed
Partnerships / ChannelsInternet2 peering Opti9 partnership (largest Veeam MSP in Canada) Channel deal size nearly doubled YoY; alliances on co‑build/market/sell Building leverage
Product performanceB2 +43% YoY (Q2) B2 +39% YoY; record adj. margin B2 +22% YoY; organic acceleration vs Q3 Re‑accelerating organically
Computer Backup outlook+15% YoY (Q2) +20% YoY (Q3) Secular consumer decline; expect flattish FY’25 with exit around -2% YoY; business backup opportunity remains Mixed

Management Commentary

  • “Record Q4 sales bookings capped a strong year… we also saw AI starting to meaningfully contribute… with 3 AI companies now in our top 10 customers in December 2024.” — CEO Gleb Budman .
  • “We should finish 2025 with B2 growing year‑over‑year at 30% plus… and [adjusted gross margin] 78% we exited the year with should be pretty stable into next year.” — CFO Marc Suidan .
  • “We had a record sales booking quarter… B2 Cloud Storage had net new ARR sequential growth of $5 million, a record outside of [price increases].” — CEO Gleb Budman .
  • “We decided it was best to pay off and close the line of credit… [and] significantly increased our equipment leasing credit lines… now have access to over $80 million in credit.” — CFO Marc Suidan .
  • “Powered by Backblaze… enabled a significant expansion… over $1 million in annual contract value.” — CEO Gleb Budman .

Q&A Highlights

  • AI use cases and data pipeline: Backblaze is core storage across AI lifecycle (collection, processing/labeling via free egress, training via multi‑cloud GPUs, inference, monitoring) driving 10x AI data and inclusion of 3 AI companies in top 10 customers .
  • B2 acceleration visibility: Q3 organic B2 growth ~19% vs Q4 22%; outlook hinges on consistent execution, doubled sales capacity, and pipeline—channel/alliances benefits more 2026‑skewed .
  • Computer Backup outlook: Consumer in secular decline; business backup/cyber‑resilience remains an opportunity; expect backup to be flattish in 2025, exiting around -2% YoY .
  • Margins: Adjusted gross margin expected to remain stable around 78% into 2025; operating leverage targeted with OpEx roughly flat YoY in 2025 enabling 20%+ adjusted EBITDA margin by Q4’25 .
  • Regional expansion/FX: Canada region opened with anchor‑tenant model to de‑risk; minimal FX exposure with USD billing predominance .

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global) for Q4 2024 revenue and EPS comparisons, but the data was unavailable at the time due to access limits (API daily request limit exceeded). As a result, vs‑consensus comparisons are unavailable in this recap.
  • Management indicated Q4 revenue was “slightly ahead of the midpoint of our guidance,” and adjusted EBITDA margin came in at the high end of prior guidance ranges .

Key Takeaways for Investors

  • B2 is the growth engine; organic re‑acceleration is underway (Q4 22% YoY vs Q3 organic ~19%) with visibility to 30%+ exiting 2025—driven by GTM execution, larger deal sizes, and AI data pipelines .
  • Operating leverage is materializing: adjusted EBITDA margin scaled to 14% in Q4 with stable 78% adjusted gross margin; plan to surpass 20% adjusted EBITDA margin by Q4’25 while keeping OpEx roughly flat YoY .
  • Balance sheet/liquidity improved post follow‑on; line of credit repaid/closed; >$80M equipment lease capacity supports capex without equity/debt reliance near term .
  • Consumer backup remains a headwind for customer count; enterprise/business backup and cross‑sell into B2 offset—investors should track ARPU, ARR mix shift, and business backup traction .
  • Near‑term trading setup: watch for B2 growth momentum (bookings → revenue lag), stability of adjusted gross margin, and quarterly progress toward adjusted FCF positive exit in Q4’25 .
  • Structural narrative: “Open cloud” positioning with free egress and multi‑cloud GPU workflows aligns with AI data mobility needs—differentiated vs hyperscalers’ “walled gardens” .

Appendix: Additional Relevant Q4‑Period Press Releases

  • Follow‑on Offering (Proposed/Pricing/Overallotment): Nov 20 and 21, 2024; upsized $35M offering priced at $5.60/share; over‑allotment later fully exercised (Nov 26) .
  • Q3 2024 Financials (for context): revenue $32.6M (+29% YoY); B2 +39% YoY; adjusted EBITDA margin 12% .
  • Q2 2024 Financials (for context): revenue $31.3M (+27% YoY); B2 +43% YoY; adjusted EBITDA margin 9% .