Backblaze Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and in Part I, Item 1A,“Risk Factors”, for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included in “Part II — Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties, as described under the heading, “Special Note Regarding Forward-Looking Statements” in “Part I — Item 1A. Risk Factors.” You should review the disclosure under the heading, “Risk Factors” for a discussion of important factors that could cause our actual results to differ materially from those described or implied in these forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless the context otherwise requires, all references in this report to “Backblaze,” the “Company,” “we,” our,” “us,” or similar terms refer to Backblaze, Inc. and its consolidated subsidiaries.

Previous wording

We are a leading specialized storage cloud platform, providing businesses and consumers cloud services to store, use, and protect their data in an easy and affordable manner. We provide these cloud services through a purpose-built, web-scale software infrastructure built on commodity hardware. We believe that by substantially reducing the complexity and frustration of storing, using, and protecting data, we can empower customers to focus on their core business operations. Through our blog and culture of transparency, we have built a community of millions of readers and brand advocates. Referrals from our community of brand advocates, combined with our highly efficient and primarily self-serve customer acquisition model and an ecosystem of thousands of partners, have allowed us to attract more than 500,000 customers as of December 31, 2023. These customers use our Storage Cloud platform across more than 175 countries to grow and protect their business data on our over three billion gigabytes of data storage under management.

Current wording

We are a leading specialized storage cloud platform, providing businesses and consumers cloud services to store, use, and protect their data in an easy and affordable manner. We provide these cloud services through a purpose-built, web-scale software infrastructure built on commodity hardware. We believe that by offering an easy to use, cost-effective, performant cloud storage solution, and thereby substantially reducing the cost, complexity and frustration of storing, using, and protecting data, we can empower customers to focus on their core business operations. Customers use us to support their AI workflows, help ensure the cyber-resilience of their organizations, streamline their media workflows, and enable a variety of other data-focused application and IT needs. Through our blog and culture of transparency, we have built a community of millions of readers and brand advocates. Our direct sales activities, channel and technology partners, and referrals from our community of brand advocates, combined with our highly efficient and self-serve customer acquisition model have allowed us to attract over 500,000 customers as of December 31, 2024, and our direct sales activities have historically supported us in acquiring larger customers. As we seek to move up-market, we expect our direct sales activities to increasingly contribute to the acquisition of these customers. Our customers use our Storage Cloud platform across more than 175 countries to store and protect their data with an aggregate of approximately 4 billion gigabytes of data storage under management.

Previous wording

Our Backblaze Storage Cloud provides a platform that is the foundation for our B2 Cloud Storage Infrastructure-as-a-Service (IaaS) offering and our Backblaze Computer Backup Software-as-a-Service (SaaS) offering. B2 Cloud Storage enables customers to store data, developers to build applications, and partners to expand their use cases. The amount of data stored in this cloud service can scale up and down as needed primarily on a pay-as-you-go basis or can be paid for on a capacity basis for greater predictability, which we refer to as our B2 Reserve offering. Backblaze Computer Backup automatically backs up data from laptops and desktops for businesses and individuals. This cloud backup service offers easily understood primarily flat-rate pricing to continuously back up a virtually unlimited amount of data.

Current wording

Our Backblaze Storage Cloud provides a platform that is the foundation for our B2 Cloud Storage Infrastructure-as-a-Service (IaaS) offering and our Backblaze Computer Backup Software-as-a-Service (SaaS) offering. B2 Cloud Storage enables customers to store data, developers to build applications, and partners to expand their use cases. The amount of data stored in this cloud service can scale up and down as needed primarily on a pay-as-you-go basis or can be paid for on a capacity or committed contract basis for greater predictability. Backblaze Computer Backup automatically backs up data from laptops and desktops for businesses and individuals. This cloud backup service offers easily understood primarily flat-rate pricing to continuously back up a virtually unlimited amount of data.

Previous wording

We believe that focusing on storage use cases and promoting an open cloud ecosystem allows us to integrate well with a broad range of partners. We have consistently invested in our technology platform and highly efficient content-driven and self-serve, sales, and channel go-to-market strategy, allowing us to achieve customer, community, and product milestones.

Current wording

We believe that focusing on storage use cases and promoting an open cloud ecosystem allows us to integrate well with a broad range of partners. We have consistently invested in innovation, showcased by our technology platform and related features, allowing us to achieve customer, community, and product milestones.

Previous wording

During the third quarter of 2023, we announced pricing increases and product updates across our Computer Backup and B2 Cloud Storage products, which became effective in October 2023. Effective October 3, 2023, we increased the monthly B2 pay-as-you-go storage rate from $5 to $6 per terabyte; the price of our B2 Reserve offering and other committed contracts did not change. We also made egress free for all B2 Cloud Storage customers up to 3x per month the amount of data they store with us. In addition, we increased the pricing of our Computer Backup offering to $9 per month, or $99 for a 1-year subscription plan and $189 for a 2-year subscription plan. As part of the Computer Backup price increase, we also bundled One Year Extended Version History, which previously had been a $2 per month add-on expense if customers selected that option. The Computer Backup price increase is being phased in over time based on renewal timing. As part of our leadership in the open cloud movement, we also announced free egress, significant performance improvements, and new functionality to increasingly support our customers’ ability to break free from limitations on their data.

Current wording

During the third quarter of 2023, we announced pricing increases and product updates across our Computer Backup and B2 Cloud Storage products, which became effective in October 2023. Effective October 3, 2023, we increased the monthly B2 pay-as-you-go storage rate from $5 to $6 per terabyte; the price of our B2 Reserve offering and other committed contracts did not change. We also made egress free for all B2 Cloud Storage customers up to 3x per month the amount of data they store with us. In addition, we increased the pricing of our Computer Backup offering to $9 per month, or $99 for a 1-year subscription plan and $189 for a 2-year subscription plan. As part of the Computer Backup price increase, we also bundled One Year Extended Version History, which previously had been a $2 per month add-on expense if customers selected that option. The Computer Backup price increase is being phased in over time based on renewal timing. As part of our leadership in the open cloud movement, we also announced free egress (up to 3x), significant performance improvements, and new functionality to increasingly support our customers’ ability to break free from limitations on their data.

Previous wording

Our solutions are designed for individuals and businesses of all sizes and across all industries but have a particularly strong appeal to mid-market organizations (which we define as organizations with 10 to 999 employees) due to their desire for easy-to-use and cost-effective solutions. We generate revenue primarily from our two cloud services:

Current wording

Our solutions are designed for individuals and businesses of all sizes, from large-scale enterprise businesses to small and medium-sized businesses (“SMB”) and across all industries. Our solutions appeal to customers with a desire for easy-to-use and cost-effective solutions while also delivering reliability and performance. We generate revenue primarily from our two cloud services:

Previous wording

•Backblaze B2 Cloud Storage, which enables customers to store data for any use case, and for developers to embed our platform into their applications. In both cases, our customers use this offering in a consumption-based or capacity based model, and

Current wording

•Backblaze B2 Cloud Storage, which enables customers to store data for a wide range of use cases, and for developers to embed our platform into their applications. In both cases, our customers use this offering on a consumption-based or capacity-based model or committed contract basis, and

Previous wording

•Backblaze Computer Backup, which provides virtually unlimited backup to businesses and consumers in a SaaS subscription model.

Current wording

•Backblaze Computer Backup, which provides virtually unlimited backup to businesses and consumers in a SaaS subscription model using primarily flat-rate pricing.

Previous wording

For prospective customers interested in B2 Cloud Storage, we offer a free tier and a simple, intuitive sign-up process, allowing them to quickly on-board and start using our solutions. Once prospective customers grow beyond the free storage limit, they have the flexibility to only pay for what they need and pay as they go, without any lock-in or long-term commitments. This is delivered via a consumption-based model, and we charge a fixed price per month per gigabyte of data stored on our platform. Customers may purchase our B2 Cloud Storage on a capacity basis for greater predictability, which we refer to as our B2 Reserve offering.

Current wording

For prospective customers interested in B2 Cloud Storage, we offer a free tier and a simple, intuitive sign-up process, allowing them to quickly on-board and start using our solutions. Once prospective customers grow beyond the free storage limit, they have the flexibility to only pay for what they need and pay as they go, without any lock-in or long-term commitments. This is delivered via a consumption-based model, and we charge a fixed price per month per gigabyte of data stored on our platform. Customers may purchase our B2 Cloud Storage on a capacity or committed contract basis for greater predictability.

Previous wording

For prospective customers interested in Computer Backup, we offer a free 15-day trial and automatically start to back up all their files securely to our Backblaze Storage Cloud. Prospective customers can then choose to sign up on a per computer basis. The service is delivered via a SaaS model where revenue is recognized ratably over the subscription term. Subscriptions are offered to customers on a monthly, annual, or biennial basis, providing customers flexibility to choose their commitment lengths. We charge a flat rate for this solution and provide virtually unlimited backup capabilities to customers. There are no storage limits or tiers.

Current wording

For prospective customers interested in Computer Backup, we offer a free 15-day trial and automatically start to back up all their files securely to our Backblaze Storage Cloud. Prospective customers can then choose to sign up on a per computer basis. The service is delivered via a SaaS model where revenue is recognized ratably over the subscription term. Subscriptions are offered to customers on a monthly, annual, or biennial basis, providing customers flexibility to choose their commitment lengths. We generally charge a flat rate for this solution and provide virtually unlimited backup capabilities to customers.

Previous wording

Our go-to-market model has two primary selling motions, including self-service and sales driven. We believe that we have an efficient self-serve selling motion. Prospective customers find us through a variety of channels including our website, partners, and brand advocates. We have fostered community engagement with content we share on our blog, which includes millions of readers viewing the content we shared in 2023 alone. Our content is intended to encourage organic, inbound traffic that we believe serves as our greatest sourceof advocates and referrals. Our free trial and self-serve sign-up processes help convert our blog readers and referrals from our brand advocates into customers, with approximately 76% of our total revenue in 2023 coming from self-serve customers. In addition to self-serve, we layer on a sales driven selling motion targeting larger customers. The sales driven motion includes our direct sales team that contracts directly with customers and our channel sales team that contracts sales through our channel partners. More recently, we also added our Powered By Backblaze program that enables third parties to integrate Backblaze B2 and thus offer cloud storage as part of their product offering.

Current wording

Our go-to-market model has several selling motions, including direct sales, channel and self-service. Our direct sales team that contracts directly with customers, particularly targeting larger customers, and our channel and partner sales teams that contracts sales through our channel and technology partners. More recently, we also added our Powered By Backblaze program, a white label solution that enables third parties to integrate B2 and thus offer cloud storage as part of their product offering under their brand. In addition, we have aself-serve selling motion. Prospective customers find us through a variety of channels including our website, partners, and brand advocates. We have fostered community engagement with content we share on our blog, which includes millions of readers viewing the content we shared in 2024 alone. Our content is intended to encourage organic, inbound traffic that we believe serves as our greatest sourceof advocates and referrals. Our free trial and self-serve sign-up processes help convert our blog readers and referrals from our brand advocates into customers, with approximately 73% of our total revenue in 2024 coming from self-serve customers.

Previous wording

We believe an increasingly important customer acquisition model is our targeted sales team that is focused on larger customers and channel sales. The sales motion focuses on inbound inquiries, outbound prospecting targeting specific use cases, and volume expansion of our self-serve customers.

Current wording

We believe an increasingly important customer acquisition model is our targeted direct sales team that is focused on larger customers as well as our channel and partner sales teams. We intend to continue to uplevel and expand our sales team to focus on more and larger customers.

Previous wording

Our business depends, in part, on our ability to add new customers. We believe there is a significant opportunity to further grow our customer base by continuing to make investments in sales and marketing. We will continue investing in our customer acquisition and inbound demand generation activities, which is driven predominantly by our blog content, our case studies, social sharing, earned media, and our self-serve sign up model. We also will continue investing in optimizing the conversion rate of visitors to customers. We intend to leverage this model as an efficient approach to attract new customers, turning them into brand advocates, partners, and more referrals. Furthermore, we plan to continue to build and scale our paid lead generation and outbound sales motion to increasingly grow in the mid-market.

Current wording

Our business depends, in part, on our ability to add new customers. We believe there is a significant opportunity to further grow our customer base by continuing to make investments in sales and marketing. We will continue investing in our customer acquisition and inbound demand generation activities, which is driven predominantly by our blog content, our case studies, social sharing, earned media, and our self-serve sign up model. We also will continue investing in optimizing the conversion rate of visitors to customers. We intend to leverage this model as an efficient approach to attract new customers, turning them into brand advocates, partners, and more referrals.

Previous wording

We are committed to delivering market-leading products that continue to make cloud storage and backup easy. We believe we must maintain our product quality and strength of our brand in order to retain the current customer base as well as drive further revenue growth in our business. We intend to continue investing in our research and development activities to build upon our strong position in the technology community. We also plan to launch new products that are adjacent to our current offerings, which will provide us with the ability to further cross-sell and upsell.

Current wording

We are committed to delivering market-leading products that continue to make cloud storage and backup easy. We believe we must maintain our product and platform quality and strength of our brand in order to retain the current customer base as well as drive further revenue growth in our business. We intend to continue investing in our research and development activities to build upon our strong position in the technology community. We also plan to launch new products that are adjacent to our current offerings, which will provide us with the ability to further cross-sell and upsell.

Previous wording

While our sales and marketing efforts have primarily focused on the United States, our existing customer base spans more than 175 countries, with approximately 28% of our total revenue originating outside of the United States for the year ended December 31, 2023. We believe international expansion represents a meaningful opportunity to generate further demand for our solutions in international geographies. We may invest in our operations internationally to reach new customers by expanding in targeted key geographies where we believe there are opportunities for significant return on investment.

Current wording

While our sales and marketing efforts have primarily focused on the United States, our existing customer base spans more than 175 countries, with 26% of our total revenue originating outside of the United States for the year ended December 31, 2024. We believe international expansion may represent a meaningful opportunity. We may invest in our operations internationally to reach new customers by expanding in targeted key geographies where we believe there are opportunities for significant return on investment. For example, in January 2025 we opened a data center region in Toronto, Canada and partnered with a leader in hybrid cloud solutions in Canada, to extend our market reach in Canada, as noted above.

Previous wording

(1)The number of customers for each of B2 Cloud Storage and Computer Backup solutions include customers that use both our B2 Cloud Storage and Computer Backup solutions.

Current wording

(1) The number of customers for each of B2 Cloud Storage and Computer Backup solutions include customers that use both our B2 Cloud Storage and Computer Backup solutions.

Previous wording

We believe the growth in use of our platform by our existing customers is an important measure of the health of our business and our future growth prospects. We measure this growth by monitoring our overall net revenue retention rate, which measures our ability to retain and expand revenue from existing customers. We believe that we can drive this metric by continuing to focus on our customers and by adding additional products and functionality to our platform.

Current wording

We believe the growth in the use of our platform by our existing customers is an important measure of the health of our business and our future growth prospects. We measure this growth by monitoring our overall net revenue retention rate, which measures our ability to retain and expand revenue from existing customers. We believe that we can drive this metric by continuing to focus on our customers and by adding additional products and functionality to our platform.

Previous wording

Our Net Revenue Retention Rate was flat for B2 Cloud Storage for the year ended December 31, 2023 compared to the year ended December 31, 2022. Our Net Revenue Retention Rate decreased by 8% for Computer Backupfor the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to customer churn.

Current wording

Our Net Revenue Retention Rate was essentially flat for B2 Cloud Storage for the year ended December 31, 2024 compared to the year ended December 31, 2023. Our Net Revenue Retention Rate increased by 9% for Computer Backupfor the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the price increase.

Previous wording

We use gross customer retention rate to measure our ability to retain our customers. Our gross customer retention rate reflects only customer losses and does not reflect the expansion or contraction of revenue we earn from our existing customers. We believe our high gross customer retention rates demonstrate that we serve a vital service to our customers, as the vast majority of our customers tend to continue to use our platform from one period to the next. To calculate our gross customer retention rate, we take the trailing four-quarter average of the percentage of cohort of customers who were active at the end of the quarter in the prior year that are still active at the end of the current quarter. We calculate our gross customer retention rate for a quarter by dividing (i) the number of accounts that generated revenue in the last month of the current quarter that also generated recurring revenue during the last month of the corresponding quarter in the prior year, by (ii) the number of accounts that generated recurring revenue during the last month of the corresponding quarter in the prior year.

Current wording

We use gross customer retention rate to measure our ability to retain our customers. Our gross customer retention rate reflects only customer losses and does not reflect the expansion or contraction of revenue we earn from our existing customers. We believe our high gross customer retention rates demonstrate that we provide a vital service to our customers, as the vast majority of our customers tend to continue to use our platform from one period to the next. To calculate our gross customer retention rate, we take the trailing four-quarter average of the percentage of cohort of customers who were active at the end of the quarter in the prior year that are still active at the end of the current quarter. We calculate our gross customer retention rate for a quarter by dividing (i) the number of accounts that generated revenue in the last month of the current quarter that also generated recurring revenue during the last month of the corresponding quarter in the prior year, by (ii) the number of accounts that generated recurring revenue during the last month of the corresponding quarter in the prior year.

Previous wording

Our Gross Customer Retention Rate was essentially flat for both B2 Cloud Storage and Computer Backup for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Current wording

Our Gross Customer Retention Rate decreased by 1% for both B2 Cloud Storage and Computer Backup for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Previous wording

While ARR is not a guarantee of future revenue, we consider over 98% of our total revenue recurring for the periods presented. As noted above, our gross customer retention rate has been consistent over the periods presented at approximately 90%. Although most B2 Cloud Storage is paid for by customers in arrears, we recognize revenue in the month these storage services are delivered, and consider this revenue recurring as customers are charged as long as their data is stored with us. Further, during the periods presented, customers who store data with us generally increase the amount of their data stored over time, as evidenced by our B2 Cloud Storage net revenue retention rate of 122% as of December 31, 2023. Fees from B2 Cloud Storage (consumption-based arrangements) are recognized as services are delivered. Computer Backup and B2 Cloud Storage (subscription-based arrangements) revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that the service commences, provided that all other revenue recognition criteria have been met. See Note 2 to the consolidated financial statements for details on our revenue recognition policy. Additional limitations of ARR include the fact that consumption-based revenue is not guaranteed for future periods, although we believe that our high historic gross customer retention rate is indicative of ARR, and the fact that our subscription terms can be on a monthly basis, although the significant majority of our customers have subscription terms of one year or longer during the periods presented above.

Current wording

While ARR is not a guarantee of future revenue, we consider substantially all of our revenue as recurring in nature for the periods presented. As noted above, our gross customer retention rate has been consistent over the periods presented at approximately 90%. Although B2 Cloud Storage is generally paid for by customers in arrears, we recognize revenue in the month these storage services are delivered, and consider this revenue recurring as customers are charged as long as their data is stored with us. Further, during the periods presented, customers who store data with us generally increase the amount of their data stored over time, as evidenced by our B2 Cloud Storage net revenue retention rate of 123% as of December 31, 2024. Fees from B2 Cloud Storage (consumption-based arrangements) are recognized as services are delivered. Computer Backup (subscription-based arrangements) revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that the service commences, provided that all other revenue recognition criteria have been met. See Note 2 to our consolidated financial statements for details on our revenue recognition policy. Additional limitations of ARR include the fact that consumption-based revenue is not guaranteed for future periods, although we believe that our high historic gross customer retention rate is indicative of ARR, and the fact that our subscription terms can be on a monthly basis, although the significant majority of our customers have subscription terms of one year or longer during the periods presented above.

Previous wording

Our ARR increased by $19.0 million, or 49.2% for B2 Cloud Storage for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increased storage by our customers and to a lesser extent, the price increase and increased sales from B2 Reserve. Our ARR increased by $6.6 million, or 12.4%, for Computer Backup for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the price increase and, to a lesser extent, growth from existing customers.

Current wording

Our ARR increased by $12.6 million, or 22% for B2 Cloud Storage for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the price increase and increased storage from new and existing customers. Our ARR incre ased by $6.5 million, or 11%, for Comp uter Backup for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the price increase.

Previous wording

We define a customer at the end of any period as a distinct account, as identified by a unique account identifier, that has paid for our cloud services, which makes up substantially all of our user base. In Q4 2023, we refined our customer definition to include end-user customers that purchase through a reseller. This resulted in no impact to previously reported metrics other than a 1% decrease to the 120% NRR metric reported for Q3 2023.

Current wording

We define a customer at the end of any period as a distinct account, as identified by a unique account identifier, that has paid for our cloud services, which makes up substantially all of our user base. In the fourth quarter of 2023, we refined our customer definition to include end-user customers that purchase through a reseller.

Previous wording

Our Annual ARPU increased for B2 Cloud Storage and Computer Backup by 32% and 13%, respectively, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the 2023 price increase and our focus on adding larger customers.

Current wording

Our Annual ARPU increased for B2 Cloud Storage and Computer Backup by 12% and 14%, respectively, for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to increased storage and our focus on adding larger customers.

Previous wording

We generate revenue primarily from our B2 Cloud Storage and Computer Backup cloud services offered on our platform. Our platform is offered to our customers primarily through either a consumption or a subscription-based arrangement through B2 Cloud Storage and Computer Backup, respectively. Our subscription arrangements generally range in duration from one month to three years, for which we bill our customers up front for the entire period. Our consumption-based arrangements do not have a contractual term and are billed monthly in arrears.

Current wording

We generate revenue primarily from our B2 Cloud Storage and Computer Backup cloud services offered on our platform. Our platform is offered to our customers primarily through either a consumption or committed contract basis or a subscription-based arrangement through B2 Cloud Storage and Computer Backup, respectively. Our subscription arrangements generally range in duration from one month to three years, for which we bill our customers up front for the entire period.

Previous wording

During the third quarter of 2023, we announced pricing increases across our Computer Backup and B2 Cloud Storage products, which became effective in October 2023. While the impact of these price increases have inherent uncertainty, we expect a favorable impact to total revenue across our products over the next 12 months, and do not expect a significant change in costs solely as a result of the increase. As a result of this price increase, we have not experienced a material impact on customer retentionas of December 31, 2023.

Current wording

During the third quarter of 2023, we announced pricing increases across our Computer Backup and B2 Cloud Storage products, which became effective in October 2023. We realized a favorable impact to total revenue across our products, and did not experience a significant change in costs as a result of the increase. We have not experienced a material impact on customer retention as a result of this price increase through December 31, 2024.

Previous wording

Cost of revenue consists of expenses for providing our platform and cloud services to our customers. These expenses include operating in co-location facilities, network and bandwidth costs, and depreciation of our equipment and capital lease equipment in co-location facilities. Personnel-related costs associated with customer support and maintaining service availability, including salaries, benefits, bonuses, and stock-based compensation are also included. Cost of revenue also includes credit card processing fees, amortization of capitalized internal-use software development costs, and allocated overhead costs.

Current wording

Cost of revenue consists of our expenses in providing our platform and cloud services to our customers. These expenses include operating in colocation facilities, network and bandwidth costs, and depreciation of our equipment and finance leased equipment in colocation facilities. Personnel-related costs associated with customer support and maintaining service availability, including salaries, benefits, bonuses, and stock-based compensation are also included. Cost of revenue also includes credit card processing fees, amortization of capitalized internal-use software development costs, and allocated overhead costs.

Previous wording

We intend to continue to invest additional resources in our infrastructure and related personnel, and our customer support organization, to support the growth of our business. Some of these investments, including costs of infrastructure equipment (including related depreciation) and expansion, are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period.

Current wording

We intend to continue to invest additional resources in our infrastructure to support the growth of our business. Some of these investments, including costs of infrastructure equipment (including related depreciation) and expansion, and software development costs and related amortization are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period.

Previous wording

The most significant components of our operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation. We also incur other non-personnel costs related to our general overhead expenses. We expect that our operating expenses will increase in absolute dollars as we grow our business.

Current wording

The most significant components of our operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation. We also incur other non-personnel costs related to our general overhead expenses.

Previous wording

Research and development expenses consist primarily of our investment in personnel costs, consultant fees, costs related to technical operations, subscription services for use by our research and development organization and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meets the criteria for capitalization.

Current wording

Research and development expenses consist primarily of our investment in personnel costs, costs related to technical operations, and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meets the criteria for capitalization.

Previous wording

We expect our investment in research and development expenses to increase in absolute dollars for the foreseeable future as we continue to focus our research and development investments on adding new features to our platform, improving our cloud service offerings, and increasing the functionality of our existing features. Our research and development expenses may fluctuate as a percentage of total revenue from period to period due to the timing and extent of these expenses.

Current wording

We expect our investment in research and development to increase in absolute dollars for the foreseeable future as we continue to focus our research and development investments on adding new features to our platform, improving our cloud service offerings, and increasing the functionality of our existing features. Our research and development expenses may fluctuate as a percentage of total revenue from period to period due to the timing and extent of these expenses.

Previous wording

Sales and marketing expenses consist primarily of our investment in personnel costs. Sales and marketing expenses also include investments related to advertising, marketing, our brand awareness activities, commissions paid to marketing partners, and an allocation of our general overhead expenses.

Current wording

Sales and marketing expenses consist primarily of our investment in personnel costs. Sales and marketing expenses also include investments related to advertising, marketing, our brand awareness activities, commissions paid to marketing partners, sales commissions paid to our employees that are recognized as expenses over the period of benefit, and an allocation of our general overhead expenses.

Previous wording

We plan to continue investing in sales and marketing by increasing our sales and marketing headcount, supplementing our self-serve model with a direct sales approach, expanding our partner ecosystem, driving our go-to-market strategies, building our lead generation and brand awareness, and sponsoring additional marketing events. As a result, we expect our investment in sales and marketing to increase in absolute dollars for the foreseeable future. Sales and marketing expenses may fluctuate as a percentage of total revenue from period to period because of the timing and extent of these expenses.

Current wording

We plan to continue investing in sales initiatives, supplementing our self-serve model with a direct sales approach, expanding our partner ecosystem, driving our go-to-market strategies, building our lead generation and brand awareness, and sponsoring marketing events. As a result, we expect our investment in sales and marketing to decrease as a percentage of revenue in the near-term as a result of our 2024 Restructuring Plan, however, our investment in sales and marketing may increase over time in absolute dollars as we grow our business. Sales and marketing expenses may fluctuate as a percentage of total revenue from period to period because of the timing and extent of these expenses.

Previous wording

General and administrative expenses consist primarily of personnel costs for our accounting, finance, legal, IT, security, human resources, and administrative support personnel and executives. General and administrative expenses also include costs related to legal and other professional services fees, sales and other taxes; depreciation and amortization; and an allocation of our general overhead expenses. We expect to continue incurring general and administrative expenses as a result of operating as a public company, including expenses for insurance, costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, investor relations, and professional services expenses.

Current wording

General and administrative expenses consist primarily of personnel costs for our accounting, finance, legal, IT, security, human resources, and administrative support personnel and executives. General and administrative expenses also include costs related to legal and other professional services fees, sales and other taxes; depreciation and amortization; and an allocation of our general overhead expenses. We expect to continue incurring general and administrative expenses as a result of operating as a public company, including expenses for insurance, costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, investor relations, and professional services expenses. As a result, we expect our general and administrative costs to increase over time, as our business continues to grow.

Previous wording

Interest expense consists primarily of interest related to our finance lease agreements and interest on the outstanding balance of our existing credit facility.

Current wording

Interest expense, net consists primarily of interest related to our finance lease agreements and interest on the previously outstanding balance of our debt facility.

Previous wording

The following table sets forth our consolidated statements of operations data for the periods indicated:

Current wording

The following table sets forth our consolidated statements of operations and comprehensive loss data for the periods indicated:

Previous wording

The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

Current wording

The following table sets forth our consolidated statements of operations and comprehensive loss data expressed as a percentage of revenue for the periods indicated:

Previous wording

Revenue increased by $16.9 million, or 20%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. B2 Cloud Storage increased by $13.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, approximately $10.0 million of which was due to increased storage by our customers, $1.9 million from theprice increase in October 2023 and$1.3 million from sales of B2 Reserve. Computer Backup increased by$3.6 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, approximately $2.7 million of which was due to a prior price increases that went into effect in September 2021 and October 2023, and approximately a $0.9 million impact due to growth from existing customers. Our price increase amounts noted above are inherent estimates that are based on an average price charged per customer and other assumptions that may offset the increase, such as free egress and impact of the price increase on the amount of data stored and customer license count.

Current wording

Revenue increased by $25.6 million, or 25%, for the year ended December 31, 2024. B2 Cloud Storage increased by $16.9 million, or 36% for the year ended December 31, 2024. The increase was largely due to increased storage from new and existing customers of $8.9 million, the impact of the price increase in October 2023 of $6.0 million, and increased sales of B2 Reserve of $2.0 million. Computer Backup increased by$8.7 million, or 16% for the year ended December 31, 2024. The increase was due to the impact of the price increase in October 2023 of $10.6 million and increased storage fees for version history longer than 1 year of $0.7 million. The increases were partially offset by $2.6 million due to the decreased license count. Our price increase amounts noted above are inherent estimates that are based on an average price charged per customer and other assumptions that may offset the increase, such as free egress and impact of the price increase on the amount of data stored and customer license count.

Previous wording

Total cost of revenue increased by$10.9 million, or 26%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily attributable to an increase of $6.0 million related to managing and operating our co-location facilities, and an increase of $4.9 million for depreciation of our infrastructure equipment, which resulted from purchasing additional hard drives and related infrastructure in order to support the growth of our business. The increase of $6.0 million related to managing and operating our co-location facilities includes a $2.9 million increase in rent expense, a $1.7 million increase in personnel related costs, such as salaries, benefits, bonuses, and stock-based compensation due to an increase in headcount and equity awards, $0.9 million of bandwidth and utility expenses, and $0.6 million increase in credit card fees.

Current wording

Total cost of revenue increased by $6.1 million, or 12%, for the year ended December 31, 2024. The increase was primarily attributable to an increase of $3.4 million for depreciation of our infrastructure equipment, resulting from purchasing additional hard drives and related infrastructure in order to support the growth of our business, a $2.0 million increase in rent, bandwidth, and utility expenses, an increase of $0.8 million in credit card fees, and an increase of $0.5 million related to restructuring charges. These increases were partially offset by a $0.4 million decrease in stock-based compensation.

Previous wording

Sales and marketing expense increased by $5.9 million, or 17%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase in sales and marketing expense was primarily attributable to an increase of $3.4 million related to stock-based compensation, $2.7 million in personnel-related expenses as a result of increased headcount, $1.0 million related to restructuring charges, $0.5 million in fees for consultants and contractors, and $0.1 million in overhead and general expenses, partially offset by $2.1 million decreased advertising expenses related primarily to our B2 Cloud Storage offering as we continue to focus marketing expenditures on high return initiatives.

Current wording

Sales and marketing expense increased by $3.2 million, or 8%, for the year ended December 31, 2024. The increase in sales and marketing expense was primarily attributable to $2.6 million in personnel-related expenses as a result of increased headcount, $0.8 million related to restructuring charges, $0.6 million increased advertising and other expenses related primarily to our B2 Cloud Storage offering as we continue to focus marketing expenditures on high return initiatives, partially offset by a decrease of $0.4 million related to stock-based compensation, and a $0.4 million decrease in fees for consultants and contractors.