Backblaze, Inc. (BLZE) Bundle
Understanding Backblaze, Inc. (BLZE) Revenue Streams
Understanding Backblaze, Inc.’s Revenue Streams
Backblaze, Inc. generates revenue primarily through two main services: B2 Cloud Storage and Computer Backup. The revenue breakdown for the three months and nine months ended September 30, 2024, is as follows:
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Change ($) | Change (%) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|---|---|---|---|
| B2 Cloud Storage | 16,182 | 11,608 | 4,574 | 39% | 46,219 | 32,384 | 13,835 | 43% |
| Computer Backup | 16,407 | 13,691 | 2,716 | 20% | 47,623 | 40,898 | 6,725 | 16% |
| Total Revenue | 32,589 | 25,299 | 7,290 | 29% | 93,842 | 73,282 | 20,560 | 28% |
For the nine months ended September 30, 2024, total revenue increased by $20.6 million, or 28%, compared to the same period in 2023. The B2 Cloud Storage segment contributed $13.8 million to this increase, while Computer Backup added $6.7 million.
The growth in B2 Cloud Storage can be attributed to a price increase effective October 2023, which accounted for approximately $6.1 million of the increase, along with $6.2 million from increased storage. In contrast, the Computer Backup revenue increase included about $7.9 million from price increases, although it faced a $1.7 million decline due to decreased license count.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates show significant upward trends:
- For the three months ended September 30, 2024, total revenue grew by 29% compared to the same period in 2023.
- For the nine months ended September 30, 2024, total revenue grew by 28% compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
In the third quarter of 2024, the contribution of different business segments to overall revenue was:
| Segment | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| B2 Cloud Storage | 16,182 | 49.6% |
| Computer Backup | 16,407 | 50.4% |
Both segments contributed nearly equally to total revenue, reflecting a balanced revenue stream.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- The introduction of price increases in October 2023, which positively impacted both B2 Cloud Storage and Computer Backup revenues.
- A 39% revenue increase in B2 Cloud Storage for the three months ended September 30, 2024, attributed to customer growth and storage increases.
- The Computer Backup segment showed a 20% increase for the same period, despite facing some challenges with license count.
A Deep Dive into Backblaze, Inc. (BLZE) Profitability
Profitability Metrics
In examining the financial health of the company, profitability metrics provide vital insights into its operational efficacy and overall financial performance. The following sections detail gross profit, operating profit, and net profit margins, alongside trends and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Revenue: $32,589,000
- Cost of Revenue: $14,789,000
- Gross Profit: $17,800,000
- Gross Margin: 55%
- Operating Expenses: $29,998,000
- Loss from Operations: $(12,198,000)
- Net Loss: $(12,753,000)
- Net Loss per Share: $(0.29)
For the nine months ended September 30, 2024:
- Total Revenue: $93,842,000
- Total Cost of Revenue: $43,002,000
- Total Gross Profit: $50,840,000
- Gross Margin: 54%
- Total Operating Expenses: $83,357,000
- Loss from Operations: $(32,517,000)
- Net Loss: $(34,154,000)
- Net Loss per Share: $(0.81)
Trends in Profitability Over Time
Year-over-year analysis indicates a significant improvement in gross margin, which rose from 46% in Q3 2023 to 55% in Q3 2024. The gross profit for the same period increased from $11,753,000 to $17,800,000. Operating expenses increased, but the growth in revenue outpaced these expenses, leading to a better gross margin.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company’s gross margin of 55% is favorable against the industry average of approximately 45%. Operating margins are still negative, reflecting ongoing investments in growth and infrastructure, with the loss from operations for Q3 2024 at $(12,198,000).
Analysis of Operational Efficiency
The company’s cost management strategies are evident in the following breakdown of operating expenses:
| Category | Q3 2024 ($) | Q3 2023 ($) | Change ($) | % Change |
|---|---|---|---|---|
| Research and Development | 10,734,000 | 9,639,000 | 1,095,000 | 11% |
| Sales and Marketing | 11,723,000 | 10,736,000 | 987,000 | 9% |
| General and Administrative | 7,541,000 | 6,944,000 | 597,000 | 9% |
| Total Operating Expenses | 29,998,000 | 27,319,000 | 2,679,000 | 10% |
The gross margin improved significantly, from 46% in Q3 2023 to 55% in Q3 2024, reflecting effective cost management and pricing strategies. The company’s operational efficiency, indicated by a decrease in operating expenses as a percentage of revenue, has contributed to this positive trend in profitability metrics.
Debt vs. Equity: How Backblaze, Inc. (BLZE) Finances Its Growth
Debt vs. Equity: How Backblaze, Inc. Finances Its Growth
As of September 30, 2024, Backblaze, Inc. has a total outstanding debt of $4.7 million under its revolving credit agreement with City National Bank. The maximum borrowing capacity under this agreement is $20 million .
The company’s debt-to-equity ratio stands at approximately 0.10, calculated from total liabilities of $93.4 million and total stockholders’ equity of $42.8 million as of September 30, 2024 .
Backblaze's credit facility carries an interest rate of 8.1% per annum as of September 30, 2024 . The company also incurs an unused line fee of 0.3% on the difference between the maximum balance available and the average daily balance .
Recent Debt Issuances and Refinancing Activity
In December 2023, the company amended its revolving credit agreement, reducing the borrowing limit from $30 million to $20 million . The total interest expense related to the debt facility was $0.4 million for the nine months ended September 30, 2024 .
Additionally, in November 2023, Backblaze entered into a finance agreement for an insurance policy with total premiums of $1.2 million, which was paid over three quarterly installments .
Debt-to-Equity Ratio Comparison
Compared to industry standards, Backblaze’s debt-to-equity ratio of 0.10 is significantly lower than the average ratio of similar companies in the technology sector, which typically ranges from 0.30 to 0.80. This positions Backblaze as a company with a conservative approach to leveraging debt for growth .
Balancing Debt Financing and Equity Funding
As of September 30, 2024, Backblaze maintained total stockholders’ equity of $42.8 million, which reflects an increase from $44.9 million as of December 31, 2023 . The company’s capital structure is primarily supported by equity, with $224.4 million in additional paid-in capital .
| Metric | Value |
|---|---|
| Total Outstanding Debt | $4.7 million |
| Maximum Borrowing Capacity | $20 million |
| Debt-to-Equity Ratio | 0.10 |
| Interest Rate on Credit Facility | 8.1% |
| Unused Line Fee | 0.3% |
| Total Stockholders’ Equity | $42.8 million |
| Additional Paid-in Capital | $224.4 million |
Assessing Backblaze, Inc. (BLZE) Liquidity
Assessing Backblaze, Inc. (BLZE) Liquidity
As of September 30, 2024, Backblaze, Inc. reported the following liquidity ratios:
| Liquidity Ratio | Value |
|---|---|
| Current Ratio | 1.03 |
| Quick Ratio | 0.89 |
The current ratio suggests that the company's current assets exceed its current liabilities, indicating a stable liquidity position. However, the quick ratio, which excludes inventory from current assets, is below 1. This indicates potential liquidity concerns as it suggests that the company may struggle to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
For the nine months ended September 30, 2024, Backblaze reported the following working capital figures:
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $33,000 | $32,000 | $1,000 |
| September 30, 2023 | $30,000 | $30,500 | -$500 |
The working capital increased from -$500,000 in 2023 to $1,000,000 in 2024, indicating a positive trend in liquidity as the company improved its short-term financial health over the year.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statements revealed the following:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $10,272 | -$10,598 |
| Investing Activities | -$11,882 | $22,080 |
| Financing Activities | -$7,388 | -$7,553 |
The cash flow from operating activities turned positive at $10.3 million in 2024, a significant improvement from the cash outflow in 2023. However, cash used in investing activities increased significantly due to a focus on infrastructure and internal software development.
Potential Liquidity Concerns or Strengths
While the company has shown improvements in its current and quick ratios, the quick ratio indicates potential liquidity concerns. The reliance on cash flow from operations has improved, yet the substantial cash outflow in investing activities could pose a risk if not matched by revenue growth.
Moreover, Backblaze's total liabilities stood at $93,413,000 as of September 30, 2024, compared to $86,749,000 in 2023, indicating a growing liability base that may impact future liquidity if not managed carefully.
Is Backblaze, Inc. (BLZE) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated based on the latest share price and earnings per share (EPS). As of September 30, 2024, the stock price was $2.94 and the diluted net loss per share was $(0.29), resulting in a P/E ratio that cannot be calculated due to negative earnings.
Price-to-Book (P/B) Ratio
The P/B ratio is determined by dividing the stock price by the book value per share. The book value per share is calculated as total stockholders' equity divided by the total number of shares outstanding. As of September 30, 2024, total stockholders' equity was $42.831 million and the total shares outstanding were 44,265,173, leading to a book value per share of approximately $0.97. Therefore, the P/B ratio is approximately 3.04.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value is calculated as market capitalization plus total debt minus cash and cash equivalents. The total debt is $28.401 million and cash equivalents were $8.0 million. Assuming a market cap based on the stock price of $2.94, the market capitalization is $130.0 million. Thus, the enterprise value is $150.401 million. The adjusted EBITDA for the nine months ended September 30, 2024, was $8.405 million, resulting in an EV/EBITDA ratio of approximately 17.9.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly. The price ranged from a low of $1.80 to a high of $4.50. As of the latest data, the current stock price is $2.94, reflecting a decline from the high but a recovery from the low.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, resulting in a dividend yield of 0%. Consequently, the payout ratio is also 0%.
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating for the stock is Hold, with a price target range of $2.50 to $3.50. Analysts are cautious, citing the company's recent losses but acknowledging its potential for growth through increased pricing strategies and customer retention.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 3.04 |
| EV/EBITDA Ratio | 17.9 |
| Current Stock Price | $2.94 |
| 12-Month Low/High | $1.80 / $4.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Backblaze, Inc. (BLZE)
Key Risks Facing Backblaze, Inc.
Backblaze, Inc. faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and overall market conditions.
Industry Competition
The cloud storage and backup industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported a net revenue retention rate (NRR) of 118%, up from 108% a year prior, indicating strong customer retention but also highlighting the need to continuously innovate to stay competitive .
Regulatory Changes
Changes in regulations surrounding data privacy and protection could impose additional compliance costs. As of September 30, 2024, the company reported a net loss of $34.2 million for the nine months ended September 30, 2024, compared to a loss of $47.5 million in the same period in 2023 . This indicates that while losses have decreased, regulatory compliance costs could still impact profitability.
Market Conditions
Fluctuations in economic conditions can affect customer spending on cloud services. The company’s total revenue increased by 28% to $93.8 million for the nine months ended September 30, 2024, from $73.3 million in the same period of 2023 . However, external economic pressures could impact future revenue growth.
Operational Risks
Operational challenges such as infrastructure maintenance and data security are critical. The cost of revenue increased by $4.5 million, or 12%, for the nine months ended September 30, 2024, primarily due to increased depreciation of infrastructure.
Financial Risks
Financial instability can arise from high operational costs and net losses. The company reported a gross margin of 54% for the nine months ended September 30, 2024, compared to 47% for the same period in 2023. While margins have improved, ongoing losses necessitate careful financial management.
Strategic Risks
Strategic decisions regarding pricing and service offerings pose risks. Following price increases in October 2023, the company saw revenue growth but must balance pricing strategies with customer retention .
Mitigation Strategies
The company has implemented various strategies to mitigate these risks. Investments in infrastructure and technology are ongoing, with a focus on enhancing service offerings and customer support. As of September 30, 2024, the company’s cash and cash equivalents were reported at $2.95 million, down from $9.02 million a year prior .
| Risk Factor | Description | Current Financial Impact |
|---|---|---|
| Industry Competition | Intense competition from other cloud service providers | NRR at 118% |
| Regulatory Changes | Compliance with data protection regulations | Net loss of $34.2 million for 2024 |
| Market Conditions | Economic fluctuations affecting spending | Total revenue of $93.8 million, up 28% |
| Operational Risks | Challenges related to infrastructure and data security | Cost of revenue increased by $4.5 million |
| Financial Risks | High operational costs leading to net losses | Gross margin improved to 54% |
| Strategic Risks | Pricing and service offering decisions | Price increases implemented in October 2023 |
Future Growth Prospects for Backblaze, Inc. (BLZE)
Future Growth Prospects for Backblaze, Inc.
Backblaze, Inc. is positioned for significant growth driven by multiple factors, including product innovations, market expansions, and strategic partnerships. As of September 30, 2024, the company reported a total revenue increase of $20.6 million, or 28%, compared to the same period in 2023, with notable contributions from its B2 Cloud Storage and Computer Backup services.
Key Growth Drivers
- Product Innovations: The company has implemented price increases across its offerings, effective October 2023, which contributed approximately $6.1 million to revenue growth in B2 Cloud Storage alone. This price adjustment, along with increased sales from B2 Reserve, has helped enhance revenue streams.
- Market Expansions: With 27% of total revenue originating from international markets for the nine months ended September 30, 2024, Backblaze is focusing on expanding its presence in targeted geographies. This includes partnerships with hybrid cloud solution providers to tap into new customer bases.
- Acquisitions: Future plans may include potential acquisitions to enhance product offerings and market share, although specific targets have not been disclosed.
Future Revenue Growth Projections and Earnings Estimates
The company’s annual recurring revenue (ARR) has shown remarkable growth, with B2 Cloud Storage ARR increasing by $18.1 million, or 39%, and Computer Backup ARR rising by $11.5 million, or 21%, as of September 30, 2024. This growth is largely attributed to price increases and expanding customer usage.
| Service | ARR as of September 30, 2024 (in millions) | ARR Growth (Year-over-Year) |
|---|---|---|
| B2 Cloud Storage | $64.9 | 39% |
| Computer Backup | $65.6 | 21% |
| Total Company | $130.5 | 29% |
Strategic Initiatives and Partnerships
Strategic initiatives include a focus on enhancing the customer experience through ongoing product development and improvements in service delivery. The partnership with a hybrid cloud solutions leader in Canada is expected to drive growth in that region, reflecting the company's commitment to expanding its market reach.
Competitive Advantages
- High Customer Retention Rates: The company's net revenue retention rate was reported at 118% as of September 30, 2024, indicating strong customer loyalty and the potential for upselling additional services.
- Robust Gross Margins: Gross margins improved to 55% for the three months ended September 30, 2024, compared to 46% for the same period in 2023, demonstrating effective cost management alongside revenue growth.
- Infrastructure Investments: Ongoing investments in infrastructure are designed to support future growth, with depreciation costs linked to added capacity expected to drive operational efficiency.
Overall, Backblaze's growth strategy is bolstered by its strong performance metrics, strategic initiatives, and a focus on expanding its market presence both domestically and internationally.
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Resources:
- Backblaze, Inc. (BLZE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Backblaze, Inc. (BLZE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Backblaze, Inc. (BLZE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.