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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-41026
___________________________________
BACKBLAZE, INC.
___________________________________
(Exact name of registrant as specified in its charter)
Delaware
20-8893125
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
201 Baldwin Ave.
San Mateo, CA
94401
(Address of principal executive offices)
(Zip Code)
(650) 352-3738
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per shareBLZEThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
o
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes ☐ No 
As of April 30, 2024, 41.5 million shares of the registrant’s Class A common stock were outstanding.


Table of Contents
Page





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
our ability to sell our platform to new customers;
our ability to retain and expand use of our platform by our existing customers;
our ability to effectively manage our growth;
our ability to successfully obtain timely returns on our investments in initiatives relating to sales and marketing, research and development, and other areas;
our ability to maintain our competitive advantages;
our ability to maintain and expand our partner ecosystem;
our ability to maintain the security of our platform and the security and privacy of customer data;
our ability to successfully expand in our existing markets and into new markets;
the attraction and retention of qualified employees and key personnel;
our ability to successfully defend litigation brought against us;
the impact of pandemics, inflation, war, other hostilities and other disruptive events on our business or that of our customers, partners, and supply chain or on the global economy;
our ability to successfully remediate and prevent material weaknesses in internal controls over financial reporting; and
the expenses associated with being a public company.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BACKBLAZE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
March 31,
2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents$6,319 $12,502 
Short-term investments, net21,841 16,799 
Accounts receivable, net1,621 800 
Prepaid expenses and other current assets8,938 8,413 
Total current assets
38,719 38,514 
Restricted cash, non-current4,682 4,128 
Property and equipment, net42,585 45,600 
Operating lease right-of-use assets9,470 9,980 
Capitalized internal-use software, net35,467 32,521 
Other assets
963 944 
Total assets
$131,886 $131,687 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$1,441 $1,973 
Accrued expenses and other current liabilities (Note 9)
6,373 8,768 
Finance lease liabilities and lease financing obligations, current17,352 18,492 
Operating lease liabilities, current1,808 1,878 
Deferred revenue, current28,684 25,976 
Total current liabilities
55,658 57,087 
Debt facility, non-current4,682 4,128 
Deferred revenue, non-current4,540 4,073 
Finance lease liabilities and lease financing obligations, non-current11,598 13,310 
Operating lease liabilities, non-current7,954 8,151 
Total liabilities
$84,432 $86,749 
Commitments and contingencies (Note 11)
Stockholders’ Equity
Class A common stock, $0.0001 par value; 113,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 41,469,779 and 39,150,610 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
4 4 
Additional paid-in capital
205,957 192,388 
Accumulated deficit
(158,507)(147,454)
Total stockholders’ equity
47,454 44,938 
Total liabilities and stockholders’ equity
$131,886 $131,687 

See accompanying notes, which are an integral part of these condensed consolidated financial statements.
1

BACKBLAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended March 31,
20242023
Revenue$29,968 $23,394 
Cost of revenue14,157 12,425 
Gross profit15,811 10,969 
Operating expenses:
Research and development9,746 10,533 
Sales and marketing10,022 10,559 
General and administrative6,553 6,677 
Total operating expenses26,321 27,769 
Loss from operations(10,510)(16,800)
Investment income 384 610 
Interest expense(921)(923)
Loss before provision for income taxes(11,047)(17,113)
Income tax provision6  
Net loss$(11,053)$(17,113)
Net loss per share, basic and diluted$(0.27)$(0.50)
Weighted average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted(1)
40,225,239 33,922,683 
(1) On July 6, 2023, all shares of the Company’s then outstanding Class B common stock were automatically converted into the same number of Class A common stock, pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 15 for further details.

See accompanying notes, which are an integral part of these condensed consolidated financial statements.
2

BACKBLAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Three Months Ended March 31, 2024
Class A Common Stock(1)
Additional
Paid-in
Capital
Accumulated
Deficit
Total
SharesAmount
Balance as of December 31, 202339,150,610 $4 $192,388 $(147,454)$44,938 
Net loss— — — (11,053)(11,053)
Issuance of Class A common stock upon exercise of stock options1,429,482 — 4,283 — 4,283 
Issuance of Class A common stock under the 2021 Plan593,239 — — — — 
Issuance of restricted stock units related to the 2023 Bonus Plan (See Note 14)296,448 — 3,507 — 3,507 
Stock-based compensation— — 5,779 — 5,779 
Balance as of March 31, 202441,469,779 $4 $205,957 $(158,507)$47,454 
Three Months Ended March 31, 2023
Class A and Class B Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
SharesAmount
Balance as of December 31, 202233,393,737 $4 $156,485 $(87,741)$68,748 
Net loss— — — (17,113)(17,113)
Issuance of Class A common stock upon exercise of stock options496,905 — 840 — 840 
Issuance of Class A common stock under 2021 Plan338,864 — — — — 
Issuance of restricted stock units related to the 2022 Bonus Plan (See Note 14)287,908 — 1,848 — 1,848 
Stock-based compensation— — 6,246 — 6,246 
Balance as of March 31, 202334,517,414 $4 $165,419 $(104,854)$60,569 
(1) On July 6, 2023, all shares of the Company’s then outstanding Class B common stock were automatically converted into the same number of Class A common stock, pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 15 for further details.

See accompanying notes, which are an integral part of these condensed consolidated financial statements.
3

BACKBLAZE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$(11,053)$(17,113)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net accretion of discount on investment securities and net realized investment gains(21)(540)
Noncash lease expense on operating leases510 647 
Depreciation and amortization
6,912 5,733 
Stock-based compensation
5,529 5,828 
Loss on disposal of assets15  
Changes in operating assets and liabilities:
Accounts receivable
(821)67 
Prepaid expenses and other current assets
(568)474 
Other assets
(19)22 
Accounts payable
(457)(48)
Accrued expenses and other current liabilities
481 (565)
Deferred revenue
3,175 957 
Operating lease liabilities(267)(653)
Net cash provided by (used in) operating activities
3,416 (5,191)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities(14,778)(9,734)
Maturities of marketable securities9,758 23,500 
Proceeds from disposal of property and equipment
(15) 
Purchases of property and equipment
(423)(3,023)
Capitalized internal-use software costs
(3,323)(3,434)
Net cash (used in) provided by investing activities
(8,781)7,309 
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on finance leases and lease financing obligations
(4,802)(5,112)
Proceeds from debt facility554 2,996 
Principal payments on insurance premium financing(293)(509)
Proceeds from exercises of stock options4,277 859 
Net cash used in financing activities
(264)(1,766)
Net (decrease) increase in cash and restricted cash, non-current
(5,629)352 
Cash, cash equivalents, restricted cash, current and restricted cash, non-current at beginning of period
16,630 11,165 
Cash, restricted cash, current and restricted cash, non-current at end of period
$11,001 $11,517 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest
$944 $918 
Cash paid for income taxes$2 $2 
Cash paid for operating lease liabilities$621 $724 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Stock-based compensation included in capitalized internal-use software
$1,049 $1,008 
Accrued bonus settled in restricted stock units$3,507 $1,848 
2023 Bonus Plan expense classified as stock-based compensation$473 $590 
2024 Bonus Plan accrual classified as stock-based compensation$327 $ 
Equipment acquired through finance lease and lease financing obligations
$2,216 $3,023 
Accruals related to purchases of property and equipment
$29 $886 
Assets obtained in exchange for operating lease obligations$ $183 
Receivable recorded due to stock option exercises pending settlement
$23 $154 
RECONCILIATION OF CASH AND RESTRICTED CASH
Cash and cash equivalents
$6,319 $4,047 
Restricted cash - included in prepaid expenses and other current assets$— $169 
Restricted cash, non-current$4,682 $7,301 
Total cash and restricted cash$11,001 $11,517 
See accompanying notes, which are an integral part of these condensed consolidated financial statements.
4

BACKBLAZE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization and Description of Business
Description of Business
Backblaze, Inc. and its subsidiaries (collectively, “Backblaze” or the “Company”) is a storage cloud platform, providing businesses and consumers with solutions to store and use their data. Backblaze provides these cloud services through purpose-built, web-scale software built on commodity hardware. Backblaze was incorporated in the state of Delaware on April 20, 2007 and is headquartered in San Mateo, California.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated. The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 1, 2024. In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as its annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2024, results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders' equity for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Reclassifications
Certain reclassifications have been made to prior periods to confirm with current year presentation.
Emerging Growth Company
The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The Company expects to use the extended transition period for any other new or revised accounting standards during the period in which it remains an EGC.
Segment Information
The Company has a single operating and reportable segment. In reaching this conclusion, management considers the definition of the chief operating decision maker (“CODM”), how the business is defined by the CODM, the nature of the information provided to the CODM and how that information is used to make operating decisions, allocate resources, and assess performance. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on an aggregated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
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Significant accounting policies
The Company’s significant accounting policies are disclosed in the Company’s audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 1, 2024.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Such estimates and assumptions include the costs to be capitalized as internal-use software, which include determining whether projects will result in new or additional functionality, the useful lives of other long-lived assets, impairment considerations for long-lived assets, the incremental borrowing rate for lease agreements, lease and non-lease component allocation, estimates related to variable consideration, valuation of the Company’s Employee Stock Purchase Plan (“ESPP”) expense, and accounting for income taxes, including estimates for deferred tax assets, valuation allowance, and uncertain tax positions. The Company bases its estimates on historical experience and on assumptions that management considers reasonable. Future actual results could differ materially from these estimates.
Foreign Currency
The reporting currency of the Company is the United States dollar (“USD”). The functional currency of the Company and its subsidiaries is USD. Transaction gains and losses that arise from exchange rate fluctuations on monetary transactions denominated in a currency other than the functional currency are included in general and administrative on the condensed consolidated statements of operations when realized.
Concentrations and Risks and Uncertainties

Liquidity. The Company believes that its existing cash, cash equivalents and short-term investments together with cash provided by operations, will be sufficient to support its working capital and capital expenditure requirements for at least the next 12 months. However, to achieve its continued growth and objectives, the Company may need to obtain additional sources of financing which may include entering into lease agreements, sale-leaseback arrangements, credit facilities, other debt financing arrangements for the purpose of acquiring infrastructure equipment and to fund its operations, or pursue equity financing. In the event that the Company requires additional financing, it may not be able to raise such financing on terms acceptable to us or at all. If the Company is unable to obtain additional sources of financing, raise additional capital or generate cash flows necessary to expand its operations and invest in continued innovation, it may not be able to compete successfully, which would harm its business, results of operations and financial condition.

Credit risk. Financial instruments that potentially subject the Company to credit risk primarily consist of cash, cash equivalents, accounts receivable, short-term investments, and unbilled accounts receivable. The Company maintains its cash, restricted cash, and short-term investments with high-quality financial institutions with investment-grade ratings. In the event of a failure of any financial institutions where the Company maintains deposits, it may lose timely access to its funds at such institutions and incur significant losses to the extent its funds exceed the $250,000 limit insured by the Federal Deposit Insurance Corporation. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amount recorded on the condensed consolidated balance sheets. While the Company and its bank has not been directly affected by the failures of certain banks, the banking industry overall has experienced disruption and uncertainty, which could put additional pressures on the Company’s bank and other banks, and may negatively impact the availability and costs for various banking and investment offerings. The Company does not have separate collateral requirements to support financial instruments subject to credit risk.

Vendors. The Company acquires infrastructure equipment from third-party vendors. Vendors may have limited sources of equipment and supplies, which may expose the Company to potential supply and service disruptions that could harm the Company’s business.

6

Three Months Ended March 31,
20242023
Cash disbursement concentration
Number of vendors22
Total cash disbursements represented by vendors listed above24%22%
March 31,
2024
December 31,
2023
Accounts payable concentration
Number of vendors22
Total accounts payable balance represented by vendors listed above25%30%
Accounts receivable concentration
Number of customers22
Total accounts receivable balance represented by customers listed above39%36%

Revenue. The Company derives substantially all of its revenue from the services operating on its Backblaze Storage Cloud platform: its Backblaze B2 Cloud Storage (“Backblaze B2”) and Backblaze Computer Backup (“Computer Backup”) offerings. The potential for severe impact to the Company’s business could result if the Company was unable to operate its platform or serve customers through its platform for an extended period of time.
Investments, net

The Company holds all investments on a held-to-maturity basis, and they are reported at amortized cost with realized gains or losses reported in earnings. The Company determines the appropriate classification of its investment in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date.

The Company will recognize an allowance for estimated credit losses on its held-to-maturity securities, using a forward-looking expected loss model, which reflects losses that are expected to be incurred over the life of the financial instrument. The Company uses a roll-rate method to determine the estimated credit losses using factors including historical global average default rates and expected recovery rates on similar credit quality, bond maturity and duration, along with historical experience, current conditions, and forecasts of future economic conditions, if available. The Company monitors the credit profile of its held-to-maturity securities on a periodic basis, using third party data to assess their credit ratings as well as any adverse conditions specifically related to the security. The allowance for credit losses is less than $1.0 thousand as of March 31, 2024 and December 31, 2023.

The Company’s short-term investments include investment grade commercial paper and U.S. treasury securities with original maturities of 365 days or less at the date of purchase. Short-term investments are recorded at amortized cost on the balance sheet.

Restricted Cash

The Company had $4.7 million and $4.1 million in restricted cash as of March 31, 2024 and December 31, 2023, respectively, related to the line of credit agreement with City National Bank. See Note 12 for further details.
Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. The Company is currently evaluating the impact of the adoption of this standard.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. These disclosures are
7

required quarterly and also applies to public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted. It is required to be adopted retrospectively for all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its disclosures.
Note 3. Revenues
Deferred Contract Costs
The following tables presents the Company’s deferred contract costs and amortization of deferred contract costs (in thousands):
March 31,
2024
December 31,
2023
Deferred contract costs
$543 $489 
Three Months Ended March 31,
20242023
Amortization of deferred contract costs
$281 $261 
Deferred Revenue

The following table presents information regarding the Company’s deferred revenue (in thousands):
March 31,
2024
December 31,
2023
Deferred revenue
$33,224 $30,049 
Three Months Ended March 31,
20242023
Total revenue recognized, included in each deferred revenue balance at the beginning of each respective period
$10,453 $9,269 

The Company’s deferred revenue as stated on its condensed consolidated balance sheets presented approximates its contract liability balance as of March 31, 2024 and December 31, 2023. The Company’s total deferred revenue balance as of March 31, 2024, approximates the aggregate amount of the transaction price allocated to remaining performance obligations (“RPOs”) as of that date. As of March 31, 2024, the Company's RPOs were $35.9 million. This amount includes deferred revenue arising from consideration invoiced for which the related performance obligations have not been satisfied, as well as future committed revenue for periods within current contracts with customers. As of March 31, 2024, the Company expects to recognize approximately 84% of its RPOs over the next 12 months, and substantially all of its RPOs over the next 24 months.
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Disaggregation of Total Revenue
The following table presents the Company’s total revenue disaggregated by product (in thousands):
Three Months Ended March 31,
20242023
B2 Cloud Storage
$14,622 $9,977 
Computer Backup
15,346 13,417 
Total revenue(1)
$29,968 $23,394 
________________
(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.

The following table presents the Company’s total revenue disaggregated by timing of revenue recognition (in thousands):
Three Months Ended March 31,
20242023
Consumption-based arrangements
$14,278 $9,905 
Subscription-based arrangements
15,567 13,339 
Physical Media (point in time)
123 150 
Total revenue
$29,968 $23,394 
Total revenue by geographic area, based on the location of the Company’s customers, was as follows (in thousands):
Three Months Ended March 31,
20242023
United States$21,927 $16,716 
United Kingdom1,628 1,250 
Canada1,398 1,218 
Other5,015 4,210 
Total revenue$29,968 $23,394 

Note 4. Investments
Fair Values and Gross Unrealized Gains and Losses on Investments
The following table summarizes adjusted cost, gross unrealized losses, and fair value by significant investment category. The Company’s U.S. treasury securities and commercial paper investments with original maturities greater than 90 days are classified as held-to-maturity investments and commercial paper investments with original maturities of 90 days or less are classified as cash equivalents on its condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively.
9

Amortized CostGross UnrealizedFair ValueNet Carrying Value
GainsLosses
As of March 31, 2024(In Thousands)
Investments
U.S. treasury securities$5,012 $ $(2)$5,010 $5,012 
Commercial paper16,829 $ (19)16,810 16,829 
Total investments$21,841 $ $(21)$21,820 $21,841 
Amortized CostGross UnrealizedFair ValueNet Carrying Value
GainsLosses
As of December 31, 2023(In Thousands)
Cash equivalents
Commercial paper$4,976 $10 $ $4,986 $4,976 
Total cash equivalents$4,976 $10 $ $4,986 $4,976 
Investments
Commercial Paper$16,799 $ $(10)$16,789 $16,799 
Total investments$16,799 $ $(10)$16,789 $16,799 
Scheduled Maturities
The amortized cost and fair value of held-to-maturity securities as of March 31, 2024 and December 31, 2023, by contractual maturity, are shown below.
As of March 31, 2024Amortized CostFair Value
(In Thousands)
Within one year$21,841 $21,820 
After one year through five years  
After 5 years through 10 years  
After 10 years  
Total investments$21,841 $21,820 
As of December 31, 2023Amortized CostFair Value
(In Thousands)
Within one year$16,799 $16,789 
After one year through five years  
After 5 years through 10 years  
After 10 years  
Total investments$16,799 $16,789 
Aging of Unrealized Losses
For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows:

10

Less than 12 MonthsTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of March 31, 2024(Dollars In Thousands)
Investments
U.S. treasury securities1 $5,010 $(2)1 $5,010 $(2)
Commercial paper4 16,810 (19)4 16,810 (19)
Total5 $21,820 $(21)5 $21,820 $(21)
Less than 12 MonthsTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of December 31, 2023(Dollars In Thousands)
Investments
Commercial paper4 $16,789 $(10)4 $16,789 $(10)
Total4 $16,789 $(10)4 $16,789 $(10)
Note 5. Fair Value Measurements
The Company classifies its U.S. treasury securities within Level 1 of the fair value hierarchy because the fair value of these securities are priced based on quoted markets in active markets for identical assets. The Company classifies its commercial paper within Level 2 of the fair value hierarchy because the fair value of these securities are priced by using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for underlying securities which may not be actively traded.

The following table presents the level within the fair value hierarchy at which the Company’s held-to-maturity investments are measured (in thousands):
As of March 31, 2024Level 1Level 2Total
Investments
U.S. treasury securities$5,010 $ $5,010 
Commercial paper 16,810 16,810 
Total $5,010 $16,810 $21,820 
As of December 31, 2023Level 1Level 2Total
Investments
Commercial paper$ $16,789 $16,789 
Total$ $16,789 $16,789 
There were no transfers between levels of the fair value hierarchy for the three months ended March 31, 2024 and 2023, respectively. The Company held no assets or liabilities that were measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, respectively.
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Note 6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Unbilled accounts receivable, net$2,461 $2,375 
Prepaid expenses3,015 2,313 
Receivable from payment processor1,242 1,276 
Financed prepaid insurance701 1,001 
Other1,519 1,448 
Total prepaid expenses and other current assets
$8,938 $8,413 
Note 7. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Data center equipment
$39,167 $37,245 
Leased and financed data center equipment
69,021 68,757 
Machinery and equipment
14,322 14,004 
Computer equipment
2,405 2,472 
Leasehold improvements
1,114 1,114 
Construction-in-progress
1,246 1,371 
Total property and equipment
127,275 124,963 
Less: accumulated depreciation and amortization
(84,690)(79,363)
Total property and equipment, net
$42,585 $45,600 
Depreciation expense was $5.5 million and $5.0 million for the three months ended March 31, 2024 and 2023, respectively. For the Company’s equipment under finance leases and lease financing obligations, accumulated depreciation was $34.3 million and $31.6 million as of March 31, 2024 and December 31, 2023, respectively. The carrying value of the Company’s equipment under finance lease agreements and lease financing obligations was $34.7 million and $37.1 million as of March 31, 2024 and December 31, 2023, respectively.

The Company had long-lived assets, comprising of property and equipment, net and operating lease right-of-use assets consisting of the following (in thousands):

March 31, 2024December 31, 2023
United States$46,929 $50,746 
The Netherlands5,126 4,834 
Total property and equipment, net and operating lease right-of-use assets$52,055 $55,580 

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Note 8. Capitalized Internal-Use Software, Net
Capitalized internal-use software, net consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Developed software
$47,528 $43,156 
General and administrative software
144 144 
Total capitalized internal-use software
47,672 43,300 
Less: accumulated amortization
(12,205)(10,779)
Total capitalized internal-use software, net
$35,467 $32,521 
Amortization expense of capitalized internal-use software was $1.4 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of developed software and software purchased for internal use are included in cost of revenue and general and administrative expense, respectively, in the Company’s condensed consolidated statements of operations.
As of March 31, 2024, future amortization expense is expected to be as follows (in thousands):
Year Ending December 31,
Remainder of 2024$5,330 
20258,179 
20267,725 
20277,005 
20285,255 
Thereafter1,973 
Total$35,467 
Note 9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
March 31,
2024
December 31,
2023
Accrued compensation$1,246 $4,105 
ESPP withholding1,281 426 
Accrued expenses1,349 1,284 
Accrued value-added tax ("VAT") liability1,126 1,266 
Financed insurance premiums (see Note 12)601 893 
Other(1)
770 794 
Accrued expenses and other current liabilities
$6,373 $8,768 
(1) As of March 31, 2024, the company reclassified certain current liabilities from accounts payable to accrued expenses and other current liabilities. The prior period amount of $0.3 million as of December 31, 2023 has been reclassified to conform with current presentation.
Note 10. Finance Leases and Lease Financing Obligations

Finance Leases and Lease Financing Obligations
The Company enters into finance lease arrangements to obtain hard drives and related equipment for its data center operations. The term of these agreements primarily range from three to four years and certain of these arrangements have optional renewals to extend the term of the lease generally at a fixed price. Contingent rental payments are generally not included in the Company’s finance lease agreements. Finance leases are generally secured by the underlying leased
13

equipment. The Company's finance leases have original lease periods expiring between 2024 and 2027. Finance leases are included in property and equipment, net on the Company’s condensed consolidated balance sheets.
As of March 31, 2024, the weighted average remaining lease term for finance lease and lease financing obligation agreements was 1.6 years and the weighted average discount rate for finance leases was 11.4%. As of December 31, 2023 , the weighted average remaining lease term for finance lease and lease financing obligation agreements was 1.7 years and the weighted average discount rate for finance leases was approximately 11.0%.

The following table presents information regarding assets acquired through finance lease and lease financing obligation agreements, which are related to sale-leaseback agreements (in thousands):

Three Months Ended March 31,
20242023
Depreciation expense
$4,231 $3,566 
Total finance lease costs $4,157 $4,044 
Total interest expense included in finance lease costs$593 $738 
Total lease financing obligation costs $879 $333 
Total interest expense included in lease financing obligation costs$212 $73 
Cash paid on interest on finance lease and lease financing obligations$805 $811 

Depreciation expense on assets acquired through the Company’s finance leases and lease financing obligations is included in cost of revenue in its condensed consolidated statements of operations.

The future minimum commitments for these finance leases and lease financing obligations as of March 31, 2024 were as follows (in thousands):

Year Ending December 31,Finance leasesLease financing obligationsTotal
Remainder of 2024$12,894 $2,849 $15,743 
20259,319 2,914 12,233 
20263,597  3,597 
2027353  353 
2028   
Thereafter   
Total future minimum lease and financing commitments26,163 5,763 31,926 
Less imputed interest(2,301)(675)(2,976)
Total finance lease and lease financing obligation liabilities$23,862 $5,088 $28,950 
Note 11. Commitments and Contingencies
Operating Leases
The Company leases its facilities for data centers and office space under non-cancelable operating leases with various expiration dates. Certain lease agreements include renewal options to extend the lease term at a price to be determined upon exercise. These options are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments. Contingent rental payments are generally not included in the Company’s lease agreements. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company's leases have original lease periods expiring between 2024 and 2031. The Company did not have any short-term leases as of March 31, 2024.
As of March 31, 2024, the weighted average remaining lease term for operating leases was approximately 5.4 years and the weighted average discount rate for operating leases was approximately 7.2%. As of December 31, 2023, the weighted average remaining lease term for operating leases was 5.5 years and the weighted average discount rate for operating leases was approximately 7.1%. There have been no material changes to the Company’s operating lease commitments, which
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excludes amounts allocated to services under operating lease agreements that are considered non-lease components during the three months ended March 31, 2024.

Non-lease components included in the Company’s colocation lease agreements are related to non-tangible utilities and services used in its data center operations, which are not recorded on the Company’s condensed consolidated balance sheets. The Company used judgment and third-party data in determining the stand-alone price for allocating consideration to lease and non-lease components under these colocation lease agreements, such as, the price of utilities as compared to its tangible data center footprint within each colocation facility. There have been no material changes to the Company’s non-cancellable contractual obligations for non-lease components during the three months ended March 31, 2024.

The following table presents information regarding the Company’s operating leases (in thousands). Total operating lease cost does not include costs related to services.

Three Months Ended March 31,
20242023
Rental expense for both lease and non-lease components$1,983 $1,986 
Rental expense for both lease and non-lease components included in cost of revenue$1,690 $1,490 
Rental expense related to lease components$691 $919 
Total operating lease cost$2,983 $2,749 
Other Contractual Commitments
Other non-cancellable commitments relate mainly to service agreements used to facilitate the Company’s infrastructure operations. As of March 31, 2024, the Company had non-cancelable purchase commitments of $0.8 million and $0.5 million payable during the remainder of the year ending December 31, 2024 and the year ending December 31, 2025, respectively.

During the three months ended March 31, 2024, the Company made payments of $0.1 million to a related party, Meaningful Works, for marketing services per terms of an agreement. An executive officer of Meaningful Works is an immediate family member of the Company’s CEO. As of March 31, 2024, the scope of services has not been completed per terms of the agreement.
401(k) Plan
The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company contributed $0.5 million to the 401(k) plan during each of the three months ended March 31, 2024 and 2023, respectively.
Legal Matters
The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that there are not any current legal proceedings that are likely to have a material adverse effect on its financial position, results of operations or cash flows. However, the results of legal proceedings are inherently unpredictable and litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
Accrued VAT Liability

The Company has calculated a liability for uncollected and unpaid VAT, which is generally assessed by various taxing authorities on services the Company provides to its customers. The Company accrues an amount that it considers probable to be collected and can be reasonably estimated. Based on the Company’s analysis, its total accrual for VAT payable was $1.1 million and $1.3 million as of March 31, 2024 and December 31, 2023, respectively.
Indemnification
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The Company enters into indemnification provisions under agreements with other parties from time to time in the ordinary course of business. The Company has agreed in certain circumstances to indemnify and defend the indemnified party for claims and related losses suffered or incurred by the indemnified party from third-party claims due to the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. No losses have been recorded in the condensed consolidated statements of operations in connection with the indemnification provisions.
Note 12. Debt
Debt Facility
In December 2023, the Company entered into a fourth amendment related to the revolving credit agreement (as amended, the “RCA”) with City National Bank (“Lender”). Under this amendment, the maximum borrowing available was reduced from $30 million to $20 million. Furthermore, advances on the line of credit will bear monthly interest at a variable rate equal to, at the Company’s discretion, (a) the average Secured Overnight Financing Rate (“SOFR”) plus 2.75%, or (b) the base rate. The base rate under the RCA is a rate equal to the greater (i) of 3.00% or (ii) the prime rate most recently announced by the Lender. The RCA has an unused line fee equal to 0.3% of the difference between the maximum balance available under the RCA and the average daily balance outstanding during the quarter, payable within ten days of the last day of each quarter. The RCA provides for an annual commitment fee equal to 0.5% on the amount available to be borrowed, payable annually on December 29th. In connection with the RCA, the Company incurred an additional $32 thousand of additional debt issuance costs which, together with $0.1 million of commitment fees and $0.1 million of the then unamortized debt issuance costs, will be amortized over the remaining term of the facility.

As of March 31, 2024, the interest rate associated with the outstanding balance under the RCA was 8.1%, which is a per annum rate. Interest payments on outstanding borrowing are due on the last day of each monthly interest period and payments for the commitment fee are due at the end of each calendar quarter. Total interest expense and amortization of debt issuance costs related to the RCA was $0.1 million for each of three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the Company had an outstanding balance of $4.7 million and the total amount available to the Company to be borrowed was $15.3 million. Under the RCA, the outstanding balance of $4.7 million as of March 31, 2024 was collateralized by cash held by the Company. As such, the Company held $4.7 million in cash that it deemed to be restricted and is included in restricted cash, non-current on the Company’s condensed consolidated balance sheet as of March 31, 2024. Furthermore, as of March 31, 2024 and December 31, 2023, the carrying value of the Company's debt facility obligations approximates fair value.

Advances under the RCA are due in full in December 2025. As the RCA is a multi-year revolving credit agreement, the Company classifies the facility as long-term debt on its condensed consolidated balance sheets as it has the intent and ability to maintain the facility outstanding for longer than 12 months. The Company classified the facility as a debt facility, non-current on its condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.
Insurance Premium Financing Agreement
In November 2022, the Company entered into an insurance policy with annual premiums totaling $2.1 million. The Company executed a finance agreement with AFCO Premium Credit LLC over a term of twelve months, with an annual interest rate and weighted average interest rate for the periods presented of 4.5%, that finances the payment of the total premiums owed. The finance agreement required a $0.5 million down payment, with the remaining $1.5 million plus interest paid over three quarterly installments. These quarterly payments started on February 10, 2023. As of December 31, 2023, the balance of this finance agreement was fully paid. Total interest expense related to this agreement was $14 thousand for the three months ended March 31, 2023.
In November 2023, the Company entered into an insurance policy with annual premiums totaling $1.2 million. The Company executed a finance agreement with AFCO Premium Credit LLC over a term of twelve months, with an annual interest rate and weighted average interest rate for the periods presented of 7%, that finances the payment of the total premiums owed. The finance agreement required a $0.3 million down payment, with the remaining $0.9 million plus interest paid over three quarterly installments. These quarterly payments started on February 10, 2024. As of March 31, 2024, the unpaid balance is $0.6 million, reported as a component of accrued expenses and other current liabilities on the
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condensed consolidated balance sheets. Total interest expense related to this agreement was $12 thousand for the three months ended March 31, 2024.
Note 13. Stockholders’ Equity
The Company had reserved shares of common stock for future issuance as follows:
 March 31,
2024
December 31,
2023
2011 Equity Incentive Plan (“2011 Plan”)
Options outstanding
6,509,133 7,988,657 
2021 Equity Incentive Plan (“2021 Plan”)
Options outstanding1,271,055 1,318,485 
Restricted stock units outstanding4,688,348 5,256,833 
Shares available for future grants
9,133,980 7,400,180 
2021 Employee Stock Purchase Plan
Shares available for future purchases1,745,972 962,960 
Total
23,348,488 22,927,115 
Note 14. Stock-Based Compensation
Equity Incentive Plan
Share Reserve. As of March 31, 2024, the number of shares of common stock available for issuance under the 2021 Plan equaled the sum of 14,662,500 shares, plus up to approximately 13,719,000 shares subject to awards granted under the 2011 Plan that expire, forfeit or are repurchased following the effective date of the 2021 Plan. In addition, the 2021 Plan includes an evergreen provision from which the number of shares reserved for issuance under the 2021 Plan will be increased automatically on the first business day of each of the Company’s fiscal years and ending on January 1, 2031, by a number equal to the lowest of (i) 4,784,100 shares, (ii) 5% of the shares of Class A common stock outstanding on the last business day of the prior fiscal year; or (iii) the number of shares determined by the Board of Directors. Pursuant to this evergreen provision, the Company increased the number of shares reserved under the 2021 Plan by 1,957,530 and 809,916 shares of Class A common stock during three months ended March 31, 2024 and the year ended December 31, 2023, respectively. In July 2023, the Company increased the number of shares reserved under the 2021 Plan by 8,292,158 shares of Class A common stock pursuant to the amendment and restatement of the 2021 Plan adopted by the Company’s board of directors and approved by the stockholders.
In general, to the extent that any awards under the 2021 Plan are forfeited, terminate, expire or lapse without the issuance of shares, or if the Company reacquires the shares subject to awards granted under the 2021 Plan, those shares will again become available for issuance under the 2021 Plan, as will shares applied to pay the exercise or purchase price of an award or to satisfy tax withholding obligations related to any award.
Restricted Stock Units
Restricted stock units (“RSUs”) granted under the 2021 Plan generally vest based on continued service up to a four-year period for employees, and over a one year period for non-employee directors.
RSU activity for the three months ended March 31, 2024 was as follows:

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SharesWeighted-average grant date fair value per share
Unvested balance as of December 31, 2023
5,256,833$5.63 
Granted
455,028$10.71 
Vested
(889,687)$7.76 
Forfeited
(133,826)$5.45 
Unvested balance as of March 31, 2024
4,688,348$5.72 

The weighted-average grant-date fair value of 989,283 RSUs granted during the three months ended March 31, 2023 was $5.97. The fair value as of the respective vesting dates of RSUs was $10.5 million and $3.8 million during the three months ended March 31, 2024 and 2023, respectively.

A summary of equity award activity under the Company’s equity plans and related information is as follows (in thousands, except share, price and year data):
 Shares
available for
grant
Outstanding
stock
options
Weighted-
average
exercise
Price
Weighted-
average
remaining
contractual
life (years)
Aggregate
intrinsic
value
Balance as of December 31, 2023
7,400,180 9,307,142 $6.41 5.57$31,250 
Shares authorized1,957,530 
Options granted   
Options exercised (1,429,482)3.00 
Options canceled
97,472 (97,472)13.88 
RSU awards granted, net of forfeitures
(321,202)— 
Balance as of March 31, 2024
9,133,980 7,780,188 $6.94 5.70$40,146 
Vested and exercisable as of March 31, 2024
6,597,145 $5.86 5.42$37,793 
The intrinsic value of options exercised for the three months ended March 31, 2024 and 2023 was $9.9 million and $2.1 million, respectively. Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock at the time of exercise. The aggregate grant-date fair value of options vested was $1.8 million and $2.3 million during the three months ended March 31, 2024 and 2023, respectively.
ESPP
As of December 31, 2022, the ESPP reserved and authorized the issuance of up to a total of 1,564,496 shares of Class A common stock to participating employees. Pursuant to its evergreen provision, the Company increased the number of shares reserved under the ESPP by 783,012 and 667,874 during the three months ended March 31, 2024 and 2023, respectively.

The Company recorded stock-based compensation expense under this plan of $0.3 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively, of which the Company capitalized $0.2 million for each of the three months ended March 31, 2024 and 2023, respectively, of stock-based compensation expense under this plan for the development of internal-use software.

As of March 31, 2024, the total unrecognized stock-based compensation expense related to the ESPP was $1.2 million and is expected to be recognized over a weighted average period of one year, of which $0.5 million is related to incremental modification expense. As of March 31, 2024, $1.3 million had been withheld on behalf of employees, respectively.

The Company did not grant stock purchase rights under the ESPP during the three months ended March 31, 2024 and 2023, respectively.


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Stock-Based Compensation Expense

Stock-based compensation expense included in the condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended March 31,
20242023
Cost of revenue
$386 $416 
Research and development
2,108 2,133 
Sales and marketing
1,822 2,152 
General and administrative
1,213 1,127 
Total stock-based compensation expense
$5,529 $5,828 
During each of three months ended March 31, 2024 and 2023, the Company capitalized $1.0 million, respectively, of stock-based compensation for the development of internal-use software. As of March 31, 2024, total compensation cost related to stock options and RSUs not yet vested was $8.3 million and $24.3 million, respectively, which will be recognized over a weighted-average period of 1.2 and 2.0 years for stock options and RSUs, respectively.
Bonus Plan
During March 2022, the Company’s Compensation Committee approved a new bonus structure (“Bonus Plan”) for its employees. The Bonus Plan is contingent upon the achievement of annual corporate performance targets. In each respective calendar year, the Company accrues for the Bonus Plan. The actual payout amount is determined by the Company’s Compensation Committee based on the actual achievement with respect to the annual performance targets and paid in the subsequent year in the variable number of RSUs equal to the payout amount. These RSUs are subject to performance and service condition vesting requirements, beginning from the grant date to the payout date. Participants must remain employed with the Company through the date of payout to maintain eligibility under the Bonus Plan.
Pursuant to the Bonus Plan, during February 2023 the Company’s Compensation Committee approved the issuance of approximately 288,000 RSUs that immediately vested based on actual performance against the performance targets for 2022.
During February 2023, the Company’s Board of Directors approved 2023 corporate performance targets under its Bonus Plan for its employees. During February 2024, the Company’s Compensation Committee approved the issuance of approximately 296,000 RSUs that immediately vested based on actual performance against the performance targets for 2023.
During February 2024, the Company’s Board of Directors approved annual corporate performance targets under its Bonus Plan for 2024 for its employees. As of March 31, 2024, the accrued bonus balance is $0.3 million, reported as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheets.
Pursuant to the Bonus Plan, the Company recognized $0.8 million and $0.6 million in stock-based compensation during the three months ended March 31, 2024 and 2023, respectively, of which the Company capitalized $0.1 million of stock-based compensation expense under this plan for the development of internal-use software during both the three months ended March 31, 2024 and 2023, respectively.
Note 15. Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share for periods prior to the Conversion using the two-class method required for multiple classes of common stock and participating securities. Prior to the Conversion, shares of Class A and Class B were the only outstanding equity in the Company. The rights of the holders of the Class A common stock and Class B common stock were identical, except with respect to voting, transfer and conversion. Accordingly, the Class A common stock and Class B common stock shared equally in the Company’s net losses.
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The diluted net
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loss per share attributable to common stockholders is computed by giving effect to all potentially dilutive common stock equivalents during the period. For purposes of this calculation, the Company’s stock options, share purchase rights pursuant to the Company’s ESPP, and unvested restricted stock are considered to be potential common stock equivalents, but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive.
On July 6, 2023, all of the Company’s then-outstanding shares of Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation. No additional shares of Class B common stock will be issued following the conversion. In addition, on July 7, 2023, the Company filed a Certificate of Retirement with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the Conversion. As the liquidation and dividend rights were identical, the Company’s undistributed earnings or losses were allocated on a proportionate basis among the holders of Class A and Class B common stock. As a result, the net loss per share attributed to common stockholders was, therefore, the same for both Class A and Class B common stock on an individual or combined basis.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except share and per share data):
Three Months Ended March 31,
20242023
Numerator:
Class A
Class AClass B
Net loss attributable to common stockholders$(11,053)$(9,302)$(7,811)
Denominator for basic and diluted net loss per share:
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders – basic and diluted40,225,23918,439,15215,483,531
Net loss per share attributable to common stockholders – basic and diluted$(0.27)$(0.50)$(0.50)
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been antidilutive. The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented are as follows:
March 31,
20242023
RSUs4,688,348 3,986,997 
Stock options7,780,188 11,763,927 
Shares issuable pursuant to the ESPP315,270 295,879 
Total
12,783,806 16,046,803 
Note 16. Restructuring
In January 2023, the Company initiated measures to reduce headcount to pursue greater cost efficiency and align strategic initiatives. These measures were substantially completed by June 30, 2023, and the total cost was $3.6 million. During this period, approximately 1% and 4% of the Company’s workforce terminated employment, which were voluntary and involuntary terminations, respectively. As a result, the Company incurred employee termination expenses and other associated costs.

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A summary of the restructuring charges as reported on the condensed consolidated statements of operations for the three months ended March 31, 2023, of which $0.7 million were related to involuntary terminations, is as follows (in thousands):

Severance and other Personnel CostsThree Months Ended March 31, 2023
Research and development$1,152 
Sales and marketing1,025 
General and administrative280 
Total$2,457 

The Company has completed its remaining payments for severance and termination related liabilities as of December 31, 2023.
Note 17. Income Taxes
The Company is subject to U.S. federal and state income taxes as a corporation. The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate adjusted for the effect of discrete items arising in that quarter.
The effective tax rate for each of the three months ended March 31, 2024 and 2023 was zero as the Company has incurred continuous operating losses. The Company recorded a $6.0 thousand income tax provision during the three months ended March 31, 2024. The Company recorded no income tax provision or benefit during the three months ended March 31, 2023.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Overview
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.
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.
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.
Factors Affecting Our Performance
We believe that the future growth and performance of our business will depend on several factors, including the following:
Scale Self Service Customer Acquisition
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.
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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.
Scale Sales Efforts
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.
Expansion Within Existing Customers
Our future success will depend in part on our ability to increase usage and adoption of our solutions with existing customers. We intend to increase revenue from existing customer relationships through the development of additional features and use cases, expanding our Customer Success initiatives, and natural customer data growth. We have developed add-on services, such as Enterprise Control and multi-region selection, which customers pay for on top of existing offerings. Examples of expanding use cases include utilizing Backblaze for additional purposes such as media storage, hybrid cloud support, analytics repositories, and others. We also plan to grow our Customer Success initiatives to ensure customers avail themselves of the full benefits of our platform, thus resulting in increased adoption. As these customers continue to generate, store, and back up data, their use of our platform increases, creating natural opportunities for revenue expansion.
Continued Platform Investment and New Product Launches
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.
Investments for Continued Scaling
We are focused on our long-term revenue potential and building out our infrastructure to sustain that growth. On a routine basis, we plan to focus resources on optimizing the efficiency of our data storage. In some scenarios, we may choose to pass on potential cost savings to the customer, but in other scenarios we may choose to reinvest cost savings back into infrastructure and design.
International Expansion

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 the three months ended March 31, 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.
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Key Business Metrics
We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing investments, and assess operational efficiencies. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
March 31,
20242023
B2 Cloud Storage
Net revenue retention rate (NRR)126 %120 %
Gross customer retention rate89 %90 %
Annual recurring revenue (in millions)$59.5$41.7
Computer Backup
Net revenue retention rate (NRR)101 %106 %
Gross customer retention rate91 %90 %
Annual recurring revenue (in millions)$62.6$54.2
Total Company
Net revenue retention rate (NRR)112 %111 %
Gross customer retention rate91 %91 %
Annual recurring revenue (in millions)$122.1$95.9

Net Revenue Retention Rate
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.
Our overall net revenue retention rate is a trailing four-quarter average of the recurring revenue from a cohort of customers in a quarter as compared to the same quarter in the prior year. We calculate our overall net revenue retention rate for a quarter by dividing (i) recurring revenue in the current quarter from any accounts that were active at the end of the same quarter of the prior year by (ii) recurring revenue in the current corresponding quarter from those same accounts. Our overall net revenue retention rate includes any expansion of revenue from existing customers and is net of revenue contraction and customer attrition, and excludes revenue from new customers in the current period. Our net revenue retention rate for B2 Cloud Storage and Computer Backup is calculated in the same manner as our overall net revenue retention rate based on the revenue from our B2 Cloud Storage and Computer Backup solutions, respectively.

Our Net Revenue Retention Rate increased by 6% for B2 Cloud Storage as of March 31, 2024 compared to March 31, 2023, primarily due to the price increase and, to a lesser extent, growth from existing customers. Our Net Revenue Retention Rate decreased by 5% for Computer Backup as of March 31, 2024 compared to March 31, 2023, primarily due to customer churn.
Gross Customer Retention Rate
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.
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Our Gross Customer Retention Rate was essentially flat for both B2 Cloud Storage and Computer Backup as of March 31, 2024 compared to March 31, 2023.
Annual Recurring Revenue
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.
ARR does not have a standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and is not intended to be combined with or to replace that item. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
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 consistent over the periods presented at approximately 90%. Although 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 126% as of March 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 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.

Our ARR increased by $17.8 million, or 42.7% for B2 Cloud Storage as of March 31, 2024 compared to March 31, 2023, 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 $8.4 million or 15.5%, for Computer Backup as of March 31, 2024 compared to March 31, 2023, primarily due to the price increase and, to a lesser extent, growth from existing customers.
Key Components of Results of Operations
Revenue
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.
Consumption-based revenue is variable and is related to fees charged for our customers’ use of our platform and is recognized as revenue in the period in which the consumption occurs. For our subscription arrangements, we provide our cloud services evenly over the contractual period, for which revenue is recognized on a straight-line basis over the contract term beginning on the date that the service is made available to the customer.
In support of our platform, we also derive revenue from products offered to our customers for the ability to securely restore data using a USB drive (USB Restore) and for migrating large data sets to our platform using our proprietary Fireball
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device. Revenue from USB Restore is recognized as our products are delivered to our customers. Revenue recognized from customer rentals of our Fireball device is time-based.
Cost of Revenue and Gross Margin
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.
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.
Operating Expenses
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.
Research and Development
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.
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.
Sales and Marketing
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.
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.
General and Administrative
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.
Investment Income
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Investment income consists primarily of interest earned on our cash balances and investments.
Interest Expense
Interest expense consists primarily of interest related to our finance lease agreements and interest on the outstanding balance of our existing debt facility.
Income Tax Provision
Provision for income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance against our U.S. deferred tax assets because we have concluded that it is more likely than not that our deferred tax assets will not be realized.

Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
Three Months Ended March 31,
20242023
(in thousands, unaudited)
Revenue$29,968 $23,394 
Cost of revenue(1)
14,157 12,425 
Gross profit15,811 10,969 
Operating expenses:
Research and development(1)
9,746 10,533 
Sales and marketing(1)
10,022 10,559 
General and administrative(1)
6,553 6,677 
Total operating expenses26,321 27,769 
Loss from operations(10,510)(16,800)
Investment income 384 610 
Interest expense(921)(923)
Loss before provision for income taxes(11,047)(17,113)
Income tax provision— 
Net loss$(11,053)$(17,113)
________________
(1) Includes stock-based compensation expense as follows:

Three Months Ended March 31,
20242023
(In thousands, unaudited)
Cost of revenue
$386 $416 
Research and development
2,108 2,133 
Sales and marketing
1,822 2,152 
General and administrative
1,213 1,127 
Total stock-based compensation expense
$5,529 $5,828 
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The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

Three Months Ended March 31,
20242023
(unaudited)
Revenue100%100%
Cost of revenue
4753
Gross profit5347
Operating expenses:
Research and development
3345
Sales and marketing
3345
General and administrative
2229
Total operating expenses88119
Loss from operations(35)(72)
Investment income 13
Interest expense(3)(4)
Loss before provision for income taxes(37)(73)
Income tax provision
Net loss(37)%(73)%

Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue

Three Months Ended March 31,
20242023Change%Change
(in thousands, except percentages)
B2 Cloud Storage revenue
$14,622 $9,977 $4,645 47 %
Computer Backup revenue
15,346 13,417 1,929 14 %
Total revenue(1)
$29,968 $23,394 $6,574 28 %
________________
(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.
Total revenue increased by $6.6 million, or 28%, for the three months ended March 31, 2024 compared to the same period in 2023. B2 Cloud Storage increased by $4.6 million, approximately $2.2 million of which was due to increased storage, $2.0 million by the price increase in October 2023, and $0.4 million from sales of B2 Reserve. The remaining increase of $1.9 million was from Computer Backup, approximately $2.1 million of which was due to price increases that went into effect in September 2021 and October 2023, and partially offset by $0.2 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.
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 remainder of 2024, 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 retention as of March 31, 2024.
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Cost of Revenue and Gross Margin

Three Months Ended March 31,
20242023Change%Change
(in thousands, except percentages)
Cost of revenue
$14,157$12,425$1,732 14 %
Gross margin
53 %47 %
Cost of revenue increased by $1.7 million