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This caught me by surprise as well because I am pretty sure they have stated before that they were profitable.

mkr-hn 5y ago
They apparently build 500+ of their pods at close to $9k each (as of the older version--can't find cost on the latest) every year in 2016. That could represent the cost of growth in free trials through 2020 with people getting their home offices set up. A few hundred thousand people added over 2020 not paying for 15 days, and possibly not paying at all if they cancel, would be expensive.
- qeternity 5y ago
  They were unprofitable in 2019 as well… And the cost of the pods will be capitalized and depreciated so a large surge in buildings won’t necessarily lead to bad financials.
  - mbesto 5y ago
    > And the cost of the pods will be capitalized and depreciated so a large surge in buildings won’t necessarily lead to bad financials. I was curious about this as well: Cost of revenue consists of expenses for providing our platform and cloud services to our customers. These expenses include operating in co-location facilities, network and bandwidth costs, and depreciation of our equipment and capital lease equipment in co-location facilities. Personnel-related costs associated with customer support and maintaining service availability, including salaries, benefits, bonuses, and stock-based compensation are also included. Cost of revenue also includes credit card processing fees, amortization of capitalized internal-use software development costs, and allocated overhead costs. 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. Sounds like this is captured in their cost of revenue. 50% gross profit is not great compared to a SaaS company, but still not terrible compared to <insert literally any other company that isn't enabled by tech>. They also generate ~$12M in net cash from operating activities. So "profitable" is a weird one here. They'll have to continually invest in data centers and hardware, but generally speaking they are turning cash pretty well.
gruez 5y ago
Yeah, what gives? I remember they prided themselves on being profitable, self-funded and not beholden to VCs. Sure enough, I was able to confirm that with a quick search: https://news.ycombinator.com/item?id=15074289 https://news.ycombinator.com/item?id=15074289 >Finally, Backblaze is profoundly different than CrashPlan in that we never really raised any bank financing or VC financing. We're 90% employee owned, and there are no deep pockets. CrashPlan raised something like $150 million which comes with "pressure to grow fast or die". Backblaze is free of any such pressure, we own our own fate. https://news.ycombinator.com/item?id=21006216 https://news.ycombinator.com/item?id=21006216 > Yev here -> we HAVE to be cash-flow positive since we're not VC-funded. When we started the company it was bootstrapped, so "making enough money to survive" has always been a part of the equation! That last comment was from 2019, yet according to the S-1, they were actually unprofitable. What's going on here? Were they profitable before, then suddenly taking on a massive loss? Their loss in 2020 was huge compared to the one in 2019.
- Mxs2000 5y ago
  If you examine the financial statements you will see that they were Cash Flow positive in 2019 (but not in 2020). It’s also important to note that being cash flow positive is not the same as being GAAP/IFRS profitable (Net Income).
- jonas21 5y ago
  They didn't say they were profitable - they said they were cash-flow positive. And if you look at the cash flow statement in the S-1, they were indeed cash-flow positive in 2019. It looks like much of the difference comes down to stock-based compensation. This doesn't cost the company any cash, but under GAAP, it has to be recorded as an expense. (IANAA, so take what I say with a grain of salt).
  - qeternity 5y ago
    Backblaze was tweeting about being profitable as late as 2020: https://twitter.com/backblaze/status/1242481625004273665 https://twitter.com/backblaze/status/1242481625004273665

They apparently build 500+ of their pods at close to $9k each (as of the older version--can't find cost on the latest) every year in 2016. That could represent the cost of growth in free trials through 2020 with people getting their home offices set up. A few hundred thousand people added over 2020 not paying for 15 days, and possibly not paying at all if they cancel, would be expensive.

qeternity 5y ago
They were unprofitable in 2019 as well… And the cost of the pods will be capitalized and depreciated so a large surge in buildings won’t necessarily lead to bad financials.
- mbesto 5y ago
  > And the cost of the pods will be capitalized and depreciated so a large surge in buildings won’t necessarily lead to bad financials. I was curious about this as well: Cost of revenue consists of expenses for providing our platform and cloud services to our customers. These expenses include operating in co-location facilities, network and bandwidth costs, and depreciation of our equipment and capital lease equipment in co-location facilities. Personnel-related costs associated with customer support and maintaining service availability, including salaries, benefits, bonuses, and stock-based compensation are also included. Cost of revenue also includes credit card processing fees, amortization of capitalized internal-use software development costs, and allocated overhead costs. 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. Sounds like this is captured in their cost of revenue. 50% gross profit is not great compared to a SaaS company, but still not terrible compared to <insert literally any other company that isn't enabled by tech>. They also generate ~$12M in net cash from operating activities. So "profitable" is a weird one here. They'll have to continually invest in data centers and hardware, but generally speaking they are turning cash pretty well.

gruez 5y ago

Yeah, what gives? I remember they prided themselves on being profitable, self-funded and not beholden to VCs. Sure enough, I was able to confirm that with a quick search: https://news.ycombinator.com/item?id=15074289 https://news.ycombinator.com/item?id=15074289 >Finally, Backblaze is profoundly different than CrashPlan in that we never really raised any bank financing or VC financing. We're 90% employee owned, and there are no deep pockets. CrashPlan raised something like $150 million which comes with "pressure to grow fast or die". Backblaze is free of any such pressure, we own our own fate. https://news.ycombinator.com/item?id=21006216 https://news.ycombinator.com/item?id=21006216 > Yev here -> we HAVE to be cash-flow positive since we're not VC-funded. When we started the company it was bootstrapped, so "making enough money to survive" has always been a part of the equation! That last comment was from 2019, yet according to the S-1, they were actually unprofitable. What's going on here? Were they profitable before, then suddenly taking on a massive loss? Their loss in 2020 was huge compared to the one in 2019.

Mxs2000 5y ago
If you examine the financial statements you will see that they were Cash Flow positive in 2019 (but not in 2020). It’s also important to note that being cash flow positive is not the same as being GAAP/IFRS profitable (Net Income).
jonas21 5y ago
They didn't say they were profitable - they said they were cash-flow positive. And if you look at the cash flow statement in the S-1, they were indeed cash-flow positive in 2019. It looks like much of the difference comes down to stock-based compensation. This doesn't cost the company any cash, but under GAAP, it has to be recorded as an expense. (IANAA, so take what I say with a grain of salt).
- qeternity 5y ago
  Backblaze was tweeting about being profitable as late as 2020: https://twitter.com/backblaze/status/1242481625004273665 https://twitter.com/backblaze/status/1242481625004273665