Backblaze Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 06:50
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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, 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.
Overview
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 artificial intelligence ("AI") workflows, help ensure the cyber-resilience of their organizations, streamline their media workflows, and enable a variety of other data-focused application and information technology ("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 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 5 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 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.
We focus on specialized storage and an open cloud ecosystem that integrates smoothly with a broad range of partners. Ongoing investment in our technology platform and related features has driven 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 with total contract values over $1.0 million each and revenue growth for B2 Cloud Storage of 28% for the current quarter compared to the same period in the prior year.
To support our up-market expansion and evolving customer needs, we recently launched B2 Overdrive, our premium-priced, ultra high-throughput performance cloud storage solution, designed to meet the demands of data-intensive workloads including AI and machine-learning training, large-scale analytics, high-performance computing, and media processing. We also introduced a suite of enterprise cyber security features including AI-powered anomaly alerts, mandatory multifactor authentication, bucket access logging, and Enterprise Web Console which streamlines role-based administrative control in complex environments to help with cybersecurity and account management. These launches
expand our addressable market among enterprise and AI-driven customers and lay the groundwork for further innovation to drive differentiated value for these customers.
In November 2025, we initiated certain transformation and restructuring actions designed primarily to improve efficiency and enhance the performance of our sales and marketing functions, including the reallocation of resources to deepen marketing and sales capabilities, and other corporate actions (the "2025 Restructuring Plan"). As part of the 2025 Restructuring Plan, we expect to incur total charges of approximately $4.4 million to $6.0 million, primarily in the fourth quarter of 2025. These charges include an estimated impairment of approximately $0.9 million to $1.2 million related to the reduction of our footprint at our office facilities, as well as employee termination expenses and other business transformation costs.
Factors Affecting Our Performance
We believe that the future growth and performance of our business will depend on several factors, including the following:
Scale Sales Efforts
We are optimizing our direct sales organization to focus on larger enterprise customers and strategic accounts. In addition, our sales team works closely with our channel, alliance, and managed service provider partners to promote adoption of our Storage Cloud solutions. We continue to strengthen relationships with these partners, which are intended to help us reach new and existing markets and broaden our customer base.
Enhance Marketing and Demand Generation
We are investing in targeted marketing initiatives designed to increase brand awareness, generate demand, and convert new customers. Our acquisition efforts are supported by our blog content, case studies, social sharing, earned media, and self-serve sign-up model. We also attend and sponsor industry events and are launching digital advertising campaigns to further extend our reach.
We are focused on improving the efficiency of these efforts by optimizing the conversion rate of visitors to customers. Our refined acquisition mix emphasizes account-based marketing strategies to prioritize high-value prospects and reduce reliance on promotional or lower-margin license types. This disciplined approach is designed not only to acquire new customers efficiently but also to cultivate long-term relationships that turn customers into brand advocates, partners, and sources of referrals.
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 are focused on expanding revenue within our current customer base through the introduction of new features and use cases, the continued enhancement of our Customer Success programs, and the natural growth of customer data stored on our platform.
We have developed a range of add-on services, such as enterprise controls and multi-region selection, that provide additional functionality and generate incremental revenue beyond our core offerings. Customers are also broadening their use of Backblaze for complementary workloads, including media storage, hybrid cloud support, and analytics repositories.
To support this expansion, we are strengtheningour Customer Success organization with new leadership and targeted initiatives designed to help customers realize the full value of our platform. We believe these initiatives will help promote higher engagement, stronger retention, and greater data utilization over time. As customers continue to generate, store, and analyze growing volumes of data, our platform naturally becomes more embedded in their operations, creating sustained opportunities for revenue expansion.
Continued Platform Investment and New Product Launches
We are committed to continued investment in capital and research and development activities to meet the performance requirements of modern enterprise and AI workloads. In April 2025, we launched B2 Overdrive, a premium priced high-performance cloud storage solution for data-intensive workloads such as AI and machine-learning training, high-performance computing, large-scale analytics, and media processing. In May 2025, we introduced the Enterprise Web
Console for B2 Cloud Storage, which streamlines role-based administration in complex enterprise environments. These launches represent ongoing steps in our up-market, go-to-market transformation and are expected to broaden our addressable market, deepen cross-sell and upsell potential, and position us to capture incremental growth in enterprise and AI-driven customers. We expect capital expenditures to fluctuate in the near term, with an increase anticipated in early 2026 to support ongoing platform development, future product launches, and our up-market strategy.
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 29% and 28% of our total revenue originating outside of the United States for the three and nine months ended September 30, 2025, respectively. 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.
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.
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| B2 Cloud Storage | |||||||||||
| Net revenue retention rate | 110 | % | 128 | % | |||||||
| Gross customer retention rate | 89 | % | 89 | % | |||||||
| Annual recurring revenue (in millions) | $ | 81.8 | $ | 64.9 | |||||||
| Computer Backup | |||||||||||
| Net revenue retention rate | 101 | % | 109 | % | |||||||
| Gross customer retention rate | 90 | % | 90 | % | |||||||
| Annual recurring revenue (in millions) | $ | 65.4 | $ | 65.6 | |||||||
| Total Company | |||||||||||
| Net revenue retention rate | 106 | % | 118 | % | |||||||
| Gross customer retention rate | 91 | % | 90 | % | |||||||
| Annual recurring revenue (in millions) | $ | 147.2 | $ | 130.5 | |||||||
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. Our continued focus on our customers is driving significant revenue retention, as evidenced by our overall net revenue retention rates ("NRRs") of 106% and 118%as of September 30, 2025and September 30, 2024, respectively. The enhancement of our B2 Cloud Storage offerings is a key contributor to this success, resulting in NRRs of 110% and 128%for the same periods. The decrease in the NRR for B2 Cloud Storage 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.
To calculate the NRR for a specific quarter, we determine the revenue recognized in that quarter from customers who generated revenue during the last month of the same quarter of the previous year. This revenue is then divided by the revenue generated from those same customers in the prior year quarter. Our overall NRR rate is calculated as the average of these quarterly rates over the past four quarters to provide a comprehensive view of revenue trends.
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 have maintained gross customer retention rates of approximately 90% across our revenue products as of both September 30, 2025and September 30, 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.
Annual Recurring Revenue
We define 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 for the last month of a period by 12. Our annual recurring revenue for each of B2 Cloud Storage and Computer Backupis calculated in the same manner as our overall ARR based on the revenue from our B2 Cloud Storage and Computer Backup 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.
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 substantially all of our revenue as recurring in nature for the periods presented. As noted above, our gross customer retention rate has been consistent over the periods presented at approximately 90%. Although B2 Cloud Storage is generally consumption-based and 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 110% as of September 30, 2025. 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 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.
Changes to recurring revenue may result from the expansion of our offerings to our existing customers, as well as new customer acquisition and the timing of customer renewals. Our ARR increased by $16.9 million for B2 Cloud Storage as of September 30, 2025compared to September 30, 2024, representing 26% growth. ARR for Computer Backup experienced a slight decline of $0.2 million compared to the prior year, but continues to serve as a stable source of recurring revenue, supported by multi-year subscription commitments and increased demand from business environments.
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 customers primarily through two pricing models: a consumption- or committed-contract basis for B2 Cloud Storage, and a subscription-based arrangement for Computer Backup. Our subscription arrangements generally range in duration from one month to five years, for which we bill our customers up front for the entire period.
Consumption-based revenue is recognized based on fees charged for customer usage of our platform, with fees recorded 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.
Cost of Revenue and Gross Margin
Cost of revenue consists of our expenses in providing our platform and cloud services to our customers. These expenses include operating our multi-storage data centers and our co-location data center spaces (collectively, "data center spaces"), network and bandwidth costs, and depreciation of our equipment and finance leased equipment in data center spaces. 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 plan to continue investing in our infrastructure to support the growth of our business. These investments include the purchase and expansion of infrastructure equipment (and related depreciation) as well as software development activities and associated amortization. Because these costs are often incurred ahead of revenue generation, delays in realizing anticipated revenue or fluctuations in the timing of revenue could adversely affect our gross margin from period to period.
As discussed above, during the second quarter of 2025, we completed a study on the useful lives of our property and equipment, resulting in an extension of the useful life of our infrastructure equipment. This update resulted in a reduction in depreciation expense of approximately $1.7 million and $4.1 million for the three and nine months ended September 30, 2025, respectively, and is anticipated to result in further reduction of approximately $1.1 million for the remainder of the year ending December 31, 2025.
Operating Expenses
The most significant components of our operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation. We expect our operating expenses, excluding depreciation, amortization and stock-based compensation expenses, to remain relatively flat in 2025 compared to the prior year, as efficiencies from our restructuring activities in 2024 offset increased investments in research and development and other growth-related costs. However, sales and marketing expenses may increase in absolute dollars as we expand our workforce and invest in marketing initiatives to support business growth.
Research and Development
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.
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, further enhancing 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 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, sales commissions paid to our employees, and an allocation of our general overhead expenses.
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.
General and Administrative
General and administrative expenses consist primarily of personnel costs for our accounting, finance, legal, 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. While we expect general and administrative expenses to increase in absolute dollars as the business scales, we anticipate that these costs will decline as a percentage of revenue over time.
Investment Income
Investment income consists primarily of interest earned on our cash, cash equivalents and investments in marketable securities.
Interest Expense
Interest expense consists primarily of interest related to our finance lease agreements, interest on the outstanding balance of our debt facility, and the amortization of debt issuance costs.
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 and comprehensive loss data for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||
|
(dollars in thousands)
|
|||||||||||||||||||||||||||||||||||
| Revenue | $ | 37,162 | 100 | % | $ | 32,589 | 100 | % | $ | 108,073 | 100 | % | $ | 93,842 | 100 | % | |||||||||||||||||||
|
Cost of revenue(1)
|
14,091 | 38 | % | 14,789 | 45 | % | 42,705 | 40 | % | 43,002 | 46 | % | |||||||||||||||||||||||
| Gross profit | 23,071 | 62 | % | 17,800 | 55 | % | 65,368 | 60 | % | 50,840 | 54 | % | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
|
Research and development(1)
|
11,235 | 30 | % | 10,734 | 33 | % | 34,968 | 32 | % | 30,069 | 32 | % | |||||||||||||||||||||||
|
Sales and marketing(1)
|
8,996 | 24 | % | 11,723 | 36 | % | 28,431 | 26 | % | 32,736 | 35 | % | |||||||||||||||||||||||
|
General and administrative(1)
|
6,161 | 17 | % | 7,541 | 23 | % | 20,927 | 19 | % | 20,552 | 22 | % | |||||||||||||||||||||||
| Total operating expenses | 26,392 | 71 | % | 29,998 | 92 | % | 84,326 | 78 | % | 83,357 | 89 | % | |||||||||||||||||||||||
| Loss from operations | (3,321) | (9) | % | (12,198) | (37) | % | (18,958) | (18) | % | (32,517) | (35) | % | |||||||||||||||||||||||
| Investment income | 477 | 1 | % | 313 | 1 | % | 1,510 | 1 | % | 1,059 | 1 | % | |||||||||||||||||||||||
| Interest expense | (934) | (3) | % | (868) | (3) | % | (2,667) | (2) | % | (2,690) | (3) | % | |||||||||||||||||||||||
| Loss before provision for income taxes | (3,778) | (10) | % | (12,753) | (39) | % | (20,115) | (19) | % | (34,148) | (36) | % | |||||||||||||||||||||||
| Income tax provision | - | - | % | - | - | % | 84 | - | % | 6 | - | % | |||||||||||||||||||||||
| Net loss and comprehensive loss | $ | (3,778) | (10) | % | $ | (12,753) | (39) | % | $ | (20,199) | (19) | % | $ | (34,154) | (36) | % | |||||||||||||||||||
________________
(1)Includes stock-based compensation expense as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
|
Cost of revenue
|
$ | 318 | $ | 478 | $ | 1,170 | $ | 1,218 | |||||||||||||||
|
Research and development
|
2,564 | 3,097 | 9,303 | 7,455 | |||||||||||||||||||
|
Sales and marketing
|
1,230 | 2,908 | 4,908 | 6,492 | |||||||||||||||||||
|
General and administrative
|
1,333 | 1,955 | 4,727 | 4,330 | |||||||||||||||||||
|
Total stock-based compensation expense
|
$ | 5,445 | $ | 8,438 | $ | 20,108 | $ | 19,495 | |||||||||||||||
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
Revenue
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
|
B2 Cloud Storage revenue
|
$ | 20,699 | $ | 16,182 | $ | 4,517 | 28 | % | $ | 58,588 | $ | 46,219 | $ | 12,369 | 27 | % | |||||||||||||||||||||||||||||||
|
Computer Backup revenue
|
16,463 | 16,407 | 56 | - | % | 49,485 | 47,623 | 1,862 | 4 | % | |||||||||||||||||||||||||||||||||||||
|
Total revenue(1)
|
$ | 37,162 | $ | 32,589 | $ | 4,573 | 14 | % | $ | 108,073 | $ | 93,842 | $ | 14,231 | 15 | % | |||||||||||||||||||||||||||||||
________________
(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.
Total revenue increasedby $4.6 million, or 14%, for the three months ended September 30, 2025 compared to the same period in 2024.
Primary factors influencing the $4.5 millionincrease in B2 Cloud Storage revenue include the following:
•a $2.3 million increase driven by higher storage usage as a result of upselling and organic data growth by existing customers; and
•a $2.2 million increase in B2 sales to new customers.
Primary factors influencing the $0.1 million increase in Computer Backup revenue include the following:
•a $0.7 million increase due to price increases that went into effect in October 2023;
•a $0.2 million increase driven by increased utilization by existing customers; and
•a $0.9 million decrease from a decline in license counts.
Total revenue increased by $14.2 million, or 15%, for the nine months ended September 30, 2025 compared to the same period in 2024.
Primary factors influencing the $12.4 millionincrease in B2 Cloud Storage revenue include the following:
•a $4.7 million increase driven by higher storage usage as a result of upselling and organic growth by existing customers; and
•a $7.6 million increase in sales to new customers.
Primary factors influencing the $1.9 million increase in Computer Backup revenue include the following:
•a $4.1 million increase due to price increases that went into effect in October 2023;
•a $0.6 million increase driven by increased utilization by existing customers; and
•a $2.7 million decrease from a decline in license counts.
Cost of Revenue and Gross Margin
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
(in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Cost of revenue
|
$ | 14,091 | $ | 14,789 | $ | (698) | (5) | % | $ | 42,705 | $ | 43,002 | $ | (297) | (1) | % | |||||||||||||||||||||||||||||||
|
Gross margin
|
62 | % | 55 | % | 60 | % | 54 | % | |||||||||||||||||||||||||||||||||||||||
Cost of Revenue
Primary factors influencing the $0.7 million, or 5%, decrease in cost ofrevenue for the three months ended September 30, 2025 compared to the same period in 2024 include the following:
•a $2.1 million decrease in depreciation expense primarily due to the extension of the useful life of our infrastructure equipment;
•a $0.3 million decrease in personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives;
•a $0.9 million increase in amortization expense related to capitalized investments in platform enhancements and new software features; and
•a $0.9 million increase primarily reflecting incremental rent and facility costs associated with expanding our data center footprint to support increased storage capacity.
Primary factors influencing the $0.3 million, or 1%, decrease in cost of revenue for the nine months ended September 30, 2025 compared to the same period in 2024 include the following:
•a $4.7 million decrease in depreciation expense primarily due to the extension of the useful life of our infrastructure equipment;
•a $0.8 million decrease in personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives;
•a $2.8 million increase in amortization expense related to capitalized investments in platform enhancements and new software features; and
•a $2.3 million increase primarily reflecting incremental rent and facility costs associated with expanding our data center footprint to support increased storage capacity.
Gross Margin
Grossmargin was 62% and 60% for the three and nine months ended September 30, 2025, respectively, compared to 55% and 54% for the same period in 2024, respectively. The growth in our gross margin for both periods is primarily driven by the decrease in depreciation expense due the extension of the useful life of our infrastructure equipment, effective April 1, 2025, which resulted in increases of 5% and 4% for the three and nine months ended September 30, 2025, respectively, as well as improved benefits of scale relative to the cost of personnel to support our cost of sales, and partially offset by increases related to the expansion of our data center spaces.
Operating Expenses
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Research and development
|
$ | 11,235 | $ | 10,734 | $ | 501 | 5 | % | $ | 34,968 | $ | 30,069 | $ | 4,899 | 16 | % | |||||||||||||||||||||||||||||||
|
Sales and marketing
|
$ | 8,996 | $ | 11,723 | $ | (2,727) | (23) | % | $ | 28,431 | $ | 32,736 | $ | (4,305) | (13) | % | |||||||||||||||||||||||||||||||
|
General and administrative
|
$ | 6,161 | $ | 7,541 | $ | (1,380) | (18) | % | $ | 20,927 | $ | 20,552 | $ | 375 | 2 | % | |||||||||||||||||||||||||||||||
Primary factors influencing the change in operating expenses for the three months ended September 30, 2025 compared to the same period in 2024 include the following:
Research and Development
•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 infrastructure; and
•a decrease of $0.5 million in stock-based compensation expense related to the timing of award grants.
Sales and Marketing
•a decrease of $1.7 million due to stock-based compensation expense related to the timing of award grants; and
•a decrease of $1.2 million related to personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives.
General and Administrative
•a decrease of $0.6 million in stock-based compensation expense related to the timing of award grants;
•a decrease of $0.4 million related to foreign exchange expense related to leases denominated in foreign currencies; and
•a decrease of $0.4 million related to personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives.
Primary factors influencing the change in operating expenses for the nine months ended September 30, 2025 compared to the same period in 2024 include the following:
Research and Development
•an increase of $3.0 million related to personnel-related expenses, net of capitalization for internal-use software, to support our storage cloud features and infrastructure; and
•an increase of $1.8 million in stock-based compensation expense related to the timing of award grants.
Sales and Marketing
•a decrease of $2.2 million due to compensation expense related to a reduction in headcount;
•a decrease of $1.6 million due to stock-based compensation expense related to the timing of award grants; and
•a decrease of $0.7 million due to advertising and other sales and marketing expenses due to enhanced efficiency and customer segment targeting through more focused and effective sales and marketing efforts.
General and Administrative
•an increase of $0.6 million in legal and professional fees related to ongoing corporate and governance activities;
•an increase of related to $0.4 million stock-based compensation expense related to the timing of award grants; and
•a decrease of $0.5 million related to personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives.
Investment Income
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Investment income
|
$ | 477 | $ | 313 | $ | 164 | 52 | % | $ | 1,510 | $ | 1,059 | $ | 451 | 43 | % | |||||||||||||||||||||||||||||||
Investment income increased for the three and nine months ended September 30, 2025 compared to the same periods in 2024 primarily due to the investment of additional cash raised in the November 2024 offering.
Interest Expense
|
Three Months Ended September 30, |
Change |
Nine Months Ended September 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (934) | $ | (868) | $ | (66) | (8) | % | $ | (2,667) | $ | (2,690) | $ | 23 | 1 | % | |||||||||||||||||||||||||||||||
Interest expense remained relatively flat for the three and nine months ended September 30, 2025compared to the same periods in 2024.
Income Tax Provision
Our provision for income taxes was immaterial for the three and nine months ended September 30, 2025and 2024.
Non-GAAP Financial Measures
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 earnings before interest, taxes, depreciation and amortization ("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.
Adjusted Gross Profit and Margin
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.
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.
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:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Gross profit
|
$ | 23,071 | $ | 17,800 | $ | 65,368 | $ | 50,840 | |||||||||||||||
|
Adjustments:
|
|||||||||||||||||||||||
|
Stock-based compensation
|
318 | 478 | 1,170 | 1,218 | |||||||||||||||||||
|
Depreciation and amortization
|
5,970 | 7,191 | 18,998 | 20,844 | |||||||||||||||||||
| Workforce reduction and related severance charges | - | - | (13) | - | |||||||||||||||||||
|
Adjusted gross profit
|
$ | 29,359 | $ | 25,469 | $ | 85,523 | $ | 72,902 | |||||||||||||||
|
Gross margin
|
62 | % | 55 | % | 60 | % | 54 | % | |||||||||||||||
|
Adjusted gross margin
|
79 | % | 78 | % | 79 | % | 78 | % | |||||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin
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.
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.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Net loss and comprehensive loss
|
$ | (3,778) | $ | (12,753) | $ | (20,199) | $ | (34,154) | |||||||||||||||
|
Adjustments:
|
|||||||||||||||||||||||
|
Depreciation and amortization
|
6,044 | 7,331 | 19,282 | 21,268 | |||||||||||||||||||
|
Stock-based compensation
|
5,445 | 8,438 | 20,108 | 19,495 | |||||||||||||||||||
|
Interest expense and investment income, net
|
457 | 555 | 1,157 | 1,631 | |||||||||||||||||||
|
Income tax provision
|
- | - | 84 | 6 | |||||||||||||||||||
|
Foreign exchange (gain) loss(1)
|
(189) | 178 | 437 | 159 | |||||||||||||||||||
|
Litigation settlement payments
|
150 | - | 288 | - | |||||||||||||||||||
|
Restructuring charges
|
- | - | (66) | - | |||||||||||||||||||
| Impairment of long-lived assets | 258 | - | 258 | - | |||||||||||||||||||
|
Adjusted EBITDA
|
$ | 8,387 | $ | 3,749 | $ | 21,349 | $ | 8,405 | |||||||||||||||
|
Net loss and comprehensive loss margin
|
(10 | %) | (39 | %) | (19 | %) | (36 | %) | |||||||||||||||
| Adjusted EBITDA Margin | 23 | % | 12 | % | 20 | % | 9 | % | |||||||||||||||
________________
(1) We began including foreign exchange (gain) lossin 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.
Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin
We believe that Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin are useful metrics for assessing liquidity that provide information to management and investors about the cash generated from our core operations that can be reinvested in the business. However, these measures should not replace cash flows from operations as a liquidity benchmark. One limitation of these metrics is that they do not reflect our future contractual commitments, nor do they capture the overall changes in our cash balance during a specific period. Nonetheless, we believe that Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin are key metrics providing insight on our financial trajectory that helps us make informed decisions as we work towards sustainable positive cash flow.
We believe that Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin provide a reliable measure for assessing our historical financial results, which in turn supports our planning for future growth and our efforts to achieve positive cash flow.
We define adjusted free cash flow as net cash provided by operating activities less purchases of property and equipment, capitalized internal-use software costs, principal payments on finance leases and lease financing obligations, as reflected in our condensed consolidated statements of cash flows, and excluding payments on restructuring charges, legal settlement payments, and payments on other non-recurring charges. Adjusted free cash flow margin is calculated as adjusted free cash flow divided by revenue.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure stated in accordance with GAAP, to Adjusted Free Cash Flow for each of the periods presented.
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (dollars in thousands) | |||||||||||
|
Net cash provided by operating activities
|
$ | 14,231 | $ | 10,272 | |||||||
|
Capital expenditures(1)
|
(10,319) | (11,120) | |||||||||
| Principal payments on finance leases and lease financing obligations | (13,898) | (14,755) | |||||||||
|
Litigation settlement payments
|
271 | - | |||||||||
| Payment of workforce reduction and related severance charges | 230 | - | |||||||||
| Adjusted Free Cash Flow | $ | (9,485) | $ | (15,603) | |||||||
| Adjusted Free Cash Flow Margin | (9) | % | (17) | % | |||||||
________________
(1) Capital expenditures are defined as cash used for purchases of property and equipment and capitalized internal-use software costs.
Liquidity and Capital Resources
General
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 September 30, 2025 and December 31, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities of $50.3 million and $54.9 million, respectively.
We believe that our existing cash, cash equivalents, and marketable securities, together with cash provided by operations and our revolving credit 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 credit 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 center spaces, 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. To support our up-market transformation, we expect to increase our capital expenditures, continue leveraging finance lease agreements for infrastructure investments and, when strategic opportunities arise, we may supplement our revolving credit facility with additional equity or debt funding to accelerate enterprise-focused growth. 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.
We maintain cash deposits in the United States, in Federal Deposit Insurance Corporation insured banks. 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.
Debt
On June 4, 2025, we entered into a credit agreement (the "Credit Agreement") with Citizens Bank, N.A. (the "Lender"), establishing a senior secured revolving credit facility with a total capacity of $20.0 million (the "Revolving Credit
Facility") to be used for general corporate purposes and working capital needs. The Revolving Credit Facility allows for borrowings, repayments, and reborrowings up to the total capacity, subject to compliance with the terms of the Credit Agreement. The Revolving Credit Facility includes a sub-limit of up to $3.0 million for the issuance of letters of credit. The Credit Agreement is scheduled to mature on June 4, 2027, at which point all obligations become due. The Credit Agreement includes an option that allows us to extend the maturity date by one year, subject to certain conditions.
Borrowings under the facility bear interest at a variable rate, at our discretion, equal to either (a) the average Secured Overnight Financing Rate plus 3.25% or (b) a base rate, as defined in the Credit Agreement, plus 2.25%. Additionally, the Credit Agreement requires the payment of a commitment fee of 0.35% on the unused portion of the Revolving Credit Facility, and a letter of credit availability fee of 0.125% on outstanding letters of credit.
Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness or to make necessary capital expenditures.
As of September 30, 2025, we had $2.5 million outstanding under the Revolving Credit Facility. The interest rate in effect under the Revolving Credit Facility as of September 30, 2025 was 7.51%. As of September 30, 2025, no letters of credit were outstanding and $17.5 million was available for borrowing under the Revolving Credit Facility.
In October 2025, the Company repaid in full the outstanding balance of $2.5 million under its Revolving Credit Facility.
Debt Covenants under the Credit Agreement
The Credit Agreement contains customary restrictive financial and operating covenants, including limitations on our ability to incur additional indebtedness, pay dividends, make certain investments, sell assets, and engage in other specified transactions. In August 2025, in connection with the establishment of a new share repurchase program (see Note 11 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q), we amended the Credit Agreement to permit share repurchases of up to $10.0 million, thereby excluding such repurchases from the covenant restrictions. The Credit Agreement also requires us to comply with the following financial covenants on a quarterly basis: (i) a minimum liquidity of $10.0 million held on deposit with the Lender, over which we retain control and consider as cash and cash equivalents, (ii) a minimum consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") (as defined below) threshold, and (iii) a maximum total leverage ratio of 2.75 to 1.00, which is calculated based on consolidated EBITDA.
The Credit Agreement defines consolidated EBITDA on a trailing four fiscal quarter basis and includes specified adjustments and exclusions. As a result, EBITDA as defined under the Credit Agreement may differ materially from Adjusted EBITDA as presented elsewhere in this report. For example, the calculation of EBITDA under the Credit Agreement includes exceptions and caps related to adjustments for (i) restructuring and other strategic initiatives, (ii) legal settlements, (iii) completed acquisitions, and (iv) all other non-cash and non-specified non-recurring charges. As of September 30, 2025, we were in compliance with the covenants under the Credit Agreement. Failure to comply with these covenants could limit the Company's ability to access additional borrowings under the Revolving Credit Facility or could result in the acceleration of repayments of amounts outstanding under the facility.
Commitments
Finance Leases
We enter into finance lease arrangements to obtain hard drives and related equipment for our data center operations. See Note 8 to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for our future minimum commitments related to our finance leases. The weighted average discount rate for finance leases was 12.3% as of September 30, 2025.
Operating Leases
We lease data center spaces and office space under non-cancelable operating leases with various expiration dates. The weighted average discount rate for operating leases was 6.9% as of September 30, 2025.
In June 2025, we amended an existing lease for a data center facility to (i) extend the non-cancellable term of the original lease and (ii) expand into additional infrastructure designed to support multiple-storage offerings. This expansion is expected to commence in the second quarter of 2026 and includes a non-cancellable lease term of approximately seven years. The original lease term was also extended to align with this period.
See Note 8 to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for our future minimum commitments related to our operating leases.
Purchase Commitments
In addition, we have purchase commitments that relate mainly to infrastructure agreements used to facilitate our operations. As of September 30, 2025, the Company had $0.5 million, $2.8 million, $2.2 million, and $0.9 million payable for these commitments during the remainder of the year ending December 31, 2025 and the years ending December 31, 2026, 2027, and 2028, respectively.
Share Repurchase Program
In August 2025, the Company's Board of Directors approved a share repurchase program authorizing us to repurchase up to $10.0 million of our common stock through August 1, 2026. The program is intended to offset dilution resulting from stock-based compensation. Repurchases are to be funded from the proceeds of employee stock option exercises and employee contributions under the 2021 Employee Stock Purchase Plan.
Repurchases may be made from time to time in open market transactions, pursuant to Rule 10b5-1 trading plans, or through other means, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The timing, number of shares repurchased, and prices paid for the shares under this program will depend on general business and market conditions as well as corporate and regulatory limitations, prevailing stock prices, and other considerations. The share repurchase program may be suspended, modified, or discontinued at any time and does not obligate us to acquire any amount of common stock.
During the nine months ended September 30, 2025, we repurchased a total of 142,069 shares of our common stock for $1.2 million. As of September 30, 2025, approximately $8.8 million remained available for repurchases under the program.
Cash Flows
The following table shows a summary of our cash flows for the periods presented:
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands, unaudited) | |||||||||||
| Net cash provided by operating activities | $ | 14,231 | $ | 10,272 | |||||||
| Net cash used in investing activities | $ | (22,220) | $ | (11,882) | |||||||
| Net cash used in financing activities | $ | (8,710) | $ | (7,388) | |||||||
Operating Activities
Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, infrastructure expenses, and overhead expenses.
For the nine months ended September 30, 2025, cash provided by operating activities was $14.2 million, which resulted from a net loss of $20.2 million, adjusted for non-cash charges of $42.9 million and net cash outflow of $8.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $20.1 million for stock-based compensation expense, $19.3 million for depreciation and amortization expense, and noncash lease expense on operating leases of $3.4 million. The net cash outflow from changes in operating assets and liabilities was primarily due to a $3.5 million decrease in operating lease liabilities reflecting the timing of lease payments, a $1.7 million increase in other assets related to the recently established sales commissions plan, a $1.7 million increase in other current assets primarily due to higher unbilled revenue, and a $1.5 million increase in accounts receivable driven by higher revenue from enterprise customers and the timing of billings and related collections.
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 due to our growing sales and timing of collections from our customers and a $0.5 million increase in accounts payable, 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 and payments of operating lease liabilities of $1.3 million.
Investing Activities
Cash used in investing activities during the nine months ended September 30, 2025 was $22.2 million, resulting primarily from the following activity:
•Purchases of marketable securities of $34.4 million;
•Cash payments of $5.9 million related to the development of internal-use software for adding new features and enhanced functionality to our platform;
•Cash payments of $4.4 million related to capital expenditures in support of infrastructure deployments to support our growing business; and
•Proceeds of $22.3 million from the maturity of our marketable securities.
Cash used in investing activities during the nine months ended September 30, 2024 was $11.9 million, resulting primarily from the following activity:
•Purchases of marketable securities of $32.5 million;
•Cash payments of $10.2 million related to the development of internal-use software for adding new features and enhanced functionality to our platform;
•Cash payments of $0.9 million related to capital expenditures in support of infrastructure deployments to support our growing business;
•Proceeds of $31.4 million from the maturity of our marketable securities; and
•Proceeds of $0.3 million from the disposition of certain hard drives.
Financing Activities
Cash used in financing activities for the nine months ended September 30, 2025 was $8.7 million, resulting primarily from the following activity:
•Principal payments on our finance lease agreements and lease financing obligations of $13.9 million related to hard drives and other infrastructure equipment used in our data center spaces;
•$1.6 million related to payments on taxes for net share settlements of vested equity awards, resulting in a retirement of related equity awards;
•$1.2 million related to repurchases of our common stock;
•$0.6 million related to payments of debt issuance costs;
•$4.7 million in proceeds from the exercise of employee stock options;
•$2.5 million in proceeds from borrowings under the Revolving Credit Facility; and
•$1.4 million in proceeds from our ESPP.
Cash used in financing activities for the nine months ended September 30, 2024 was $7.4 million, resulting primarily from the following activity:
•Principal payments on our finance lease agreements and lease financing obligations of $14.8 million related to hard drives and other infrastructure equipment used in our data center spaces;
•$0.9 million related to repayment of principal on financed insurance premiums;
•$6.3 million in proceeds from the exercise of employee stock options;
•$1.4 million in proceeds from our ESPP; and
•$0.6 million in proceeds from our debt facility.
Critical Accounting Estimates
Our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
There have been no material changes to our critical accounting estimates as compared to those discussed in the Annual Report.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups ("JOBS") Act. For so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation. The JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. This provision allows an emerging growth company to delay the adoption of some accounting standards unless and until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We will maintain our EGC status until December 31, 2026, which is the last day of the fiscal year following either of the following trigger events: (i) if our public float exceeds $700 million as of June 30, 2026, or (ii) the fifth anniversary of our initial public offering in November 2026. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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