Backblaze, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2023 included in the Annual Report on Form 10-K for the year ended December 31, 2023. 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 About Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q 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. 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.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 included in the Annual Report on Form 10-K for the year ended December 31, 2024 (our “Annual Report”). 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 About Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q 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. 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 cloud services to store, use, and protect 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 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. 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, and our sales and channel efforts have supported us acquiring larger customers. These customers use our Storage Cloud platform across more than 175 countries to grow and protect their business data on our over 3 billion gigabytes of data storage under management.

Current wording

We are a leading specialized storage cloud platform, providing businesses and consumers with 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, 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 innovation, showcased by our technology platform and related features, as well as a 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. Starting in the second half of 2024, we initiated a go-to-market transformation that is actively moving the company up-market, which has been evidenced by the signing of multiple deals valued at over $1.0 million each. We also continue to innovate to further drive differentiated value for these larger customers.

Previous wording

We also plan to continue to build our ecosystem of partners. We believe that delivering our Storage Cloud solutions through our alliance, developer, and MSP partnerships is an area of opportunity for us. By adding more partners and deepening our relationships with them, we expand our use cases and drive new customer acquisition.

Current wording

We also plan to continue to build our ecosystem of partners. We believe that delivering our Storage Cloud solutions through our alliance, developer, channel, and managed service provider partnerships is an area of opportunity for us. By adding more partners and deepening our relationships with them, we expand our use cases and drive new customer acquisition.

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.

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 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. In April 2025, we launched B2 Overdrive, a new offering that provides the leading throughput to price performance ratio in the market. This new offering is targeting AI use cases, which need to move large amounts of data in a short timeframe.

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 27% of our total revenue originating outside of the United States for thenine months ended September 30, 2024. We believe international expansion may represent 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. We recently partnered with a leader in hybrid cloud solutions in Canada, which will extend our market reach in this region, as noted above.

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 27% of our total revenue originating outside of the United States for thethree months ended March 31, 2025. We believe international expansion may represent a meaningful opportunity. We may invest in our operations internationally to reach new customers by expanding into targeted key geographies where we believe there are opportunities for significant return on investment. In January 2025, for example, we collaborated with a leading hybrid cloud solutions provider in Canada to extend our market reach in this region. This collaboration led to the launch of a new data center region in Canada in January 2025.

Previous 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.

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. Our continued focus on our customers is driving significant revenue retention, as evidenced by our overall net revenue retention rates (“NRRs”) of 113% and 112% as of March 31, 2025 and March 31, 2024, respectively. The enhancement of our B2 Cloud Storage offerings is a key contributor to this success, resulting in NRRs of 117% and 126% for the same periods. The decrease in the NRR for B2 is largely driven by the lapped impact of the October 2023 price increase, which we announced during the third quarter of 2023, and resulted in pricing increases across our Computer Backup and B2 Cloud Storage products.

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 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.

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 have maintained gross customer retention rates of approximately 90% across our revenue products as of both March 31, 2025 and March 31, 2024. 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 our quarterly gross customer retention rates. We calculate the quarterly gross customer retention rates 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

We define annual recurring revenue (ARR) as the annualized value of all B2 Cloud Storage and Computer Backup arrangements as of the end of a period. Given the renewable nature of our business, we view ARR as an important indicator of our financial performance and operating results, and we believe it is a useful metric for internal planning and analysis. ARR is calculated based on multiplying the monthly revenue from all B2 Cloud Storage and Computer Backup arrangements, which represent greater than 98% of our total revenue for the periods presented (and excludes Physical Media revenue), for the last month of a period by 12. Our annual recurring revenue for B2 Cloud Storage and Computer Backup is calculated in the same manner as our overall annual recurring revenue based on the revenue from our Computer Backup and B2 Cloud Storage solutions, respectively. See Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on revenue from B2 Cloud Storage and Computer Backup arrangements.

Current wording

We define annual recurring revenue (“ARR”) as the annualized value of all B2 Cloud Storage and Computer Backup arrangements as of the end of a period. Given the renewable nature of our business, we view ARR as an important indicator of our financial performance and operating results, and we believe it is a useful metric for internal planning and analysis. ARR is calculated based on multiplying the monthly revenue from all B2 Cloud Storage and Computer Backup arrangements, which represent greater than 98% of our total revenue for the periods presented (and excludes Physical Media revenue), for the last month of a period by 12. Our annual recurring revenue for B2 Cloud Storage and Computer Backup is calculated in the same manner as our overall ARR based on the revenue from our Computer Backup and B2 Cloud Storage solutions, respectively. See Note 3 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on revenue from B2 Cloud Storage and Computer Backup arrangements.

Previous wording

While ARR is not a guarantee of future revenue, we consider over 98% of our revenue recurring in nature for the periods presented. As noted above, our gross customer retention rate has been consis tent 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 128% as of September 30, 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 thearrangement beginning on the date that the service commences, provided that all other revenue recognition criteria have been met. See Note 2 to our audited consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K 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 consis tent 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 117% as of March 31, 2025. 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 thearrangement beginning on the date that the service commences, provided that all other revenue recognition criteria have been met. See Note 2 to our audited consolidated financial statements included in our Annual Report 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

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.

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 five years, forwhich we bill our customers up front for the entire period.

Previous wording

Cost of revenue consists of our expenses in providing our platform and cloud services to customers. These expenses include operating in co-location facilities, network and bandwidth costs, and depreciation of our equipment and finance leased 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 decrease in the near-term as a result of our 2024 Restructuring Plan, however, our operating expenses may increase over time 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 expect that our operating expenses, excluding depreciation, amortization and stock-based compensation expenses, to remain relatively flat during 2025 compared to the prior year as a result of our restructuring activities in 2024; however, some of our sales and marketing expenses may increase as we continue to ramp up our hiring and external marketing spend over time in absolute dollars as we grow our business.

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 infrastructure engineering, and an allocation of certain facility and IT-related expenses. We capitalize the portion of our software development costs that meets the criteria for capitalization.

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, sales commissions paid to our employees that are recognized as expenses over the period of benefit, and an allocation of our general overhead expenses.

Current wording

Sales and marketing expenses include the cost of personnel focused on developing and executing selling and marketing activities. 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, and an allocation of our general overhead expenses.

Previous 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 todecrease 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.

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. 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

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

Current wording

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

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Current wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Previous wording

(1) For the periods presented, Physical Media revenue has been consolidated into B2 Cloud Storage or Computer Backup revenue based on the underlying offering from which it originates.

Current wording

(1) For the periods presented, Physical Media revenue has been allocated to B2 Cloud Storage or Computer Backup revenue based on the underlying offering from which it originates.

Previous wording

Research and development expe nses increased by $1.1 million, or 11%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily attributable to an increase of $1.3 million in personnel-related expenses, net of capitalization for internal-use software to support our storage cloud features and offerings, and an increase of $0.2 million related to stock-based compensation. These increases were partially offset by a decrease of $0.3 million related to overhead and general office expenses.

Current wording

•an increase of $0.8 million related to personnel-related expenses, net of capitalization for internal-use software, to support our storage cloud features and offerings; and

Previous wording

General and adminis trative expenses increased by $0.6 million, or 9%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase was primarily attributable to an increase of $0.5 million in overhead and general office expenses, an increase of $0.3 million in stock-based compensation expenses, and an increase of $0.2 million in personnel-related expenses due to increased headcount. These increases were partially offset by a decrease of $0.3 million related to insurance expenses.

Current wording

•an increase of $0.5 million in stock-based compensation expense.

Previous wording

Our provision for income taxes was immaterial for the three and nine months ended September 30, 2024 and 2023.

Current wording

Our provision for income taxes was immaterial for the three months ended March 31, 2025 and 2024.

Previous wording

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including adjusted gross margin and adjusted EBITDA, each as defined below. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these measures as tools for comparison. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.

Current wording

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with non-GAAP financial measures including adjusted gross profit (and margin), adjusted EBITDA, adjusted EBITDA margin, adjusted free cash flow, and adjusted free cash flow margin, each as defined below. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these measures as tools for comparison. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.

Previous wording

We believe adjusted gross margin, when taken together with our GAAP financial results, provides a meaningful assessment of our performance, and is useful to us for evaluating our ongoing operations and for internal planning and forecasting purposes.

Current wording

We believe adjusted gross profit (and margin), when taken together with our GAAP financial results, provides a meaningful assessment of our performance, and is useful to us for evaluating our ongoing operations and for internal planning and forecasting purposes.

Previous wording

We define adjusted gross margin as gross profit, excluding stock-based compensation expense, depreciation and amortization within cost of revenue, as a percentage of adjusted gross profit to revenue. We exclude stock-based compensation, which is a non-cash item, because we do not consider it indicative of our core operating performance. We exclude depreciation expense of our property and equipment and amortization expense of capitalized internal-use software because these may not reflect current or future cash spending levels to support our business. We believe adjusted gross margin provides consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric eliminates the effects of depreciation and amortization.

Current wording

We define adjusted gross profit as gross profit, excluding stock-based compensation expense, depreciation and amortization and restructuring charges within cost of revenue. We define adjusted gross margin as a percentage of adjusted gross profit to revenue. We exclude stock-based compensation, which is a non-cash item, and restructuring charges because we do not consider it indicative of our core operating performance. We exclude depreciation expense of our property and equipment and amortization expense of capitalized internal-use software because these may not reflect current or future cash spending levels to support our business. We believe adjusted gross profit (and margin) provides consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric eliminates the effects of depreciation and amortization.

Previous wording

The following table presents a reconciliation of gross margin, the most directly comparable financial measure stated in accordance with GAAP, to adjusted gross margin, for each of the periods presented:

Current wording

The following table presents a reconciliation of gross profit, the most directly comparable financial measure stated in accordance with GAAP, to adjusted gross profit (and margin), for each of the periods presented:

Previous wording

Our management uses adjusted EBITDA to assess our operating performance. We define adjusted EBITDA as net loss adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, investment income, income tax provision, realized and unrealized gains and losses on foreign currency transactions, impairment of long-lived assets, and other non-recurring charges. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that adjusted EBITDA, when taken together with our GAAP financial results, provides meaningful supplemental information regarding our operating performance by excluding certain items that may not be indicative of our business, results of operations or outlook. We consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of total revenue.

Current wording

We define Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization, stock-based compensation, interest expense, investment income, income tax provision, realized and unrealized gains and losses on foreign currency transactions, impairment of long-lived assets, restructuring charges, legal settlement costs, and other non-recurring charges. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenues for the period. We use Adjusted EBITDA and Adjusted EBITDA Margin to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA and Adjusted EBITDA Margin, when taken together with our GAAP financial results, provide meaningful supplemental information regarding our operating performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA and Adjusted EBITDA Margin to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

Previous wording

Our calculation of adjusted EBITDA may differ from the calculations of adjusted EBITDA by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results. The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA for each of the periods presented. The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with GAAP, to adjusted EBITDA for each of the periods presented:

Current wording

Our calculation of Adjusted EBITDA may differ from the calculations of Adjusted EBITDA by other companies and therefore comparability may be limited. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results. The following table presents a reconciliation of net loss, the most directly comparable financial measure stated in accordance with GAAP, to Adjusted EBITDA for each of the periods presented.

Previous wording

(2)As of September 30, 2024, the Company included foreign exchange loss (gain) in its reconciliation of net loss to Adjusted EBITDA. Adjusted EBITDA and Adjusted EBITDA margin for the prior periods presented have been updated to conform with current presentation.

Current wording

(1)We began including foreign exchange loss (gain) in its reconciliation of net loss to Adjusted EBITDA beginning in the third quarter of 2024. Adjusted EBITDA and Adjusted EBITDA margin for the prior periods presented have been updated to conform with current presentation.

Previous wording

Since inception, we have financed operations primarily through payments received from our customers and, in later periods from the net proceeds from our IPO. As of September 30, 2024 and December 31, 2023, our principal sources of liquidity were cash, short-term investments and restricted cash, non-current of $25.6 million and $33.4 million, respectively. In general, our restricted cash may only be used to pay down our debt facility.

Current wording

Since inception, we have financed operations primarily through payments received from our customers and, in later periods, from the net proceeds from our public offerings. As of March 31, 2025 and December 31, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities of $53.2 million and $54.9 million, respectively.

Previous wording

We believe that our existing cash, cash equivalents, and short-term investments, together with cash provided by operations and our revolving debt facility, will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our material cash requirements include contractual and other obligations under our debt facility, finance and operating lease agreements, and purchase commitments as discussed below. Our future capital requirements will depend on many factors, including our total revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the potential expansion of our data centers, the price at which we are able to purchase or lease infrastructure equipment, the introduction of platform enhancements, and the continuing market adoption of our platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We plan to continue to enter into finance lease agreements for purchase of infrastructure equipment and may also be required or choose to seek additional equity or debt financing in addition to our existing debt facility. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.

Current wording

We believe that our existing cash, cash equivalents, and marketable securities, together with cash provided by operations will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our material cash requirements include contractual and other obligations under our finance and operating lease agreements and purchase commitments as discussed below. Our future capital requirements will depend on many factors, including our total revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the potential expansion of our data centers, the price at which we are able to purchase or lease infrastructure equipment, the impact of inflation on interest rates, the introduction of platform enhancements, and the continuing market adoption of our platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We plan to continue to enter into finance lease agreements for purchase of infrastructure equipment and may also be required or choose to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.

Previous wording

We use City National Bank, a subsidiary of RBC, for our banking needs. In the event of a failure of any financial institutions where we maintain deposits, we may lose timely access to our funds at such institutions and incur significant losses to the extent our funds exceed the $250,000 limit insured by the Federal Deposit Insurance Corporation. In addition, the disruption and uncertainty impacting the banking industry from failures of other banks resulted in some reduced access to capital, increased costs of capital, and reduced opportunities to invest with investment grade securities, which may have also resulted in lower investment yields and investment income. Any further impact could have a material adverse effect upon our liquidity and business.

Current wording

We use City National Bank, a subsidiary of RBC, for our banking needs. In the event of a failure of any financial institutions where we maintain deposits, we may lose timely access to our funds at such institutions and incur significant losses to the extent our funds exceed the $250,000 limit insured by the Federal Deposit Insurance Corporation. We are currently evaluating other options for our banking needs, which may allow greater flexibility and access to additional capital in the future.

Previous wording

We generally enter into finance lease arrangements to obtain hard drives and related equipment for our data center operations. We also generally enter into leases for our facilities for data centers and office space under non-cancelable operating leases with various expiration dates. As of September 30, 2024, our future minimum commitments for these finance leases and lease financing obligations including interest were $5.9 million and $25.6 million for the remainder of the year ending December 31, 2024 and thereafter, respectively.

Current wording

We generally enter into finance lease arrangements to obtain hard drives and related equipment for our data center operations. We also generally enter into leases for our facilities for data centers and office space under non-cancelable operating leases with various expiration dates. See Note 8 to our condensed consolidated financial statements in this

Previous wording

In addition, we have purchase commitments that relate mainly to infrastructure agreements used to facilitate our operations. As of September 30, 2024, we had non-cancelable purchase commitments of $0.3 million and $0.9 million payable during the remainder of the year ending December 31, 2024 and the year ending December 31, 2025, respectively.

Current wording

In addition, we have purchase commitments that relate mainly to infrastructure agreements used to facilitate our operations. As of March 31, 2025, the Company had $0.8 million, $1.3 million, and $0.7 million payable for these commitments during the remainder of the year ending December 31, 2025 and the years ending December 31, 2026 and December 31, 2027, respectively.

Previous wording

Cash used in operating activities primarily consists of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation, and amortization of property and equipment, net, amortization of capitalized internal-use software, net, and changes in operating assets and liabilities during each period.

Current wording

Cash flows from operating activities primarily consist of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation of property and equipment, amortization of capitalized internal-use software, net, noncash lease expense, and changes in operating assets and liabilities during each period.

Previous wording

For the nine months ended September 30, 2023, cash used in operating activities was $10.6 million, which resulted from a net loss of $47.5 million, adjusted for non-cash charges of $38.7 million and net cash outflow of $1.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $18.3 million for depreciation and amortization expense and $18.7 million for stock-based compensation expense. The net cash outflow from changes in operating assets and liabilities was primarily the result of a $2.0 million decrease of operating lease liabilities, a $1.1 million increase in accounts receivable, a $0.6 million decrease in accounts payable and a $0.4 million decrease in accrued expenses and other current liabilities, which decreased primarily due to our accrued compensation and due to timing of payment of our expenses, offset in part by a $1.7 million increase of deferred revenue, which increased due to our growing customer base and timing of collections from our customers and a $0.9 million decrease in prepaid and other current assets. Cash used in operations was relatively flat for the nine months ended September 30, 2023, as compared to the same period in 2022 as our increase in net loss was comprised of non-cash charges of stock-based compensation expense and depreciation and amortization expense, partially offset by an increase in deferred revenue.

Current wording

For the three months ended March 31, 2025, cash provided by operating activities was $4.9 million, which resulted from a net loss of $9.3 million, adjusted for non-cash charges of $16.0 million and net cash outflow of $1.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $7.8 million for depreciation and amortization expense, $7.4 million for stock-based compensation expense, and noncash lease expense on operating leases of $0.9 million. The net cash outflow from changes in operating assets and liabilities was primarily the result of cash outflows related to a decrease of $1.6 million in operating lease liabilities, as well as an increase in prepaids and other current assets of $1.1 million, each related to the timing of payments of our expenses. The cash outflows were partially offset by a cash inflow due to an increase of $0.8 million in deferred revenue, which increased due to our growing sales and to timing of collections from our customers.

Previous wording

For the nine months ended September 30, 2024, cash provided by operating activities was $10.3 million, which resulted from a net loss of $34.2 million, adjusted for non-cash charges of $42.5 million and net cash inflow of $2.0 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $21.3 million for depreciation and amortization expense, $19.5 million for stock-based compensation expense, and noncash lease expense on operating leases of $1.7 million. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $5.3 million increase of deferred revenue, which increased due to our growing sales and to timing of collections from our customers and a $0.8 million increase in accrued expenses and other current liabilities. The cash inflows were largely offset by an increase in accounts receivable of $2.0 million due to timing of collections, payments of operating lease liabilities of $1.3 million, and a $0.4 million decrease in accounts payable. Cash provided by operations increased for the nine months ended September 30, 2024, as compared to the same period in 2023 primarily due to our growing customer base, increased storage from existing customers and the price increase that began to take effect in October 2023, partially offset by increased expenditures related to managing and operating our co-location facilities, and increased spending in support of our expanded research and development and sales and marketing spending to support business growth.

Current wording

For the three months ended March 31, 2024, cash provided by operating activities was $3.4 million, which resulted from a net loss of $11.1 million, adjusted for non-cash charges of $12.9 million and net cash inflow of $1.5 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $6.9 million for depreciation and amortization expense and $5.5 million for stock-based compensation expense. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $3.2 million increase of deferred revenue, which increased due to our growing customer base and timing of collections from our customers, and a $0.5 million decrease in accrued expenses and other current liabilities, which decreased primarily due to our accrued compensation and due to timing of payment of our expenses, offset in part by a $0.8 million increase in accounts receivable, $0.6 million increase in prepaid and other current assets, $0.5 million decrease in accounts payable and $0.3 million decrease of operating lease liabilities. Cash provided by operations increased for the three months ended March 31, 2024, as compared to the same period in 2023 primarily due to our growing customer base, increased storage from existing customers and the price increase that began to take effect in October 2023 offset by increased expenditures related to managing and operating our co-location facilities, and increase spending in support of our expanded research and development and sales and marketing spending to support business growth.