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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 the 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, 2025 included in the Annual Report on Form 10-K for the year ended December 31, 2025 (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 Regarding 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 high-performance cloud storage platform that serves as a backbone for data-intensive use cases in artificial intelligence (“AI”) as well as across a broad range of other modern cloud workloads. Our platform is designed to help customers address complex storage needs by providing web-scale Infrastructure-as-a-Service (“IaaS”) that can grow with the largest workloads without sacrificing performance, interoperability, or economics.
Our mission is to make customers successful by solving their toughest data storage challenges. We aim to achieve this mission through purpose-built software and operational expertise that together enable a cloud storage solution optimized for price-to-performance at scale. By substantially reducing the cost, complexity and frustration of storing, using, and protecting data, we empower customers to focus on their core business operations. Customers use us to support AI workflows, help ensure the cyber-resilience of their organizations, streamline media workflows, and enable a variety of other data-focused application and information technology needs. More recently, some companies, especially neoclouds, have integrated Backblaze to offer or enhance cloud storage for their customers. They chose Backblaze for our software and operational experience that together provide a capacity tier of storage that can scale with business' growth without sacrificing performance or economics. Through these companies, Backblaze is supporting the storage needs of the global data center and compute infrastructure buildout the industry is experiencing today.
Backblaze has multiple go-to-market motions. 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 self-serve customer acquisition model have allowed us to attract over 500,000 customers as of June 30, 2026. Our direct sales activities have also supported our efforts to acquire larger customers, including leading neocloud platforms. As we continue expanding and accelerating our movement up-market, we expect our direct sales activities to increasingly contribute to the acquisition of customers like these. Customers use the Backblaze Storage Cloud platform across more than 175 countries to store and protect their data with an aggregate of more than 5 billion gigabytes of data storage under management.
Our Backblaze Storage Cloud provides a platform that is the foundation for our B2 Cloud Storage IaaS offering and our Computer Backup Software-as-a-Service (“SaaS”) offering, which automatically backs up data from laptops and desktops for businesses and individuals and offers easily understood primarily flat-rate pricing to continuously back up a virtually unlimited amount of data. Building on B2 Cloud Storage, we offer B2 Overdrive, our high-performance offering; Powered by Backblaze, our embedded white-label cloud storage program, and B2 Neo, our white-label offering for neocloud platforms.
B2 Cloud Storage enables customers to store data, AI platform providers to deliver new services, 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, on a pay-as-you-go basis or can be paid for on a capacity or committed contract basis for greater predictability. B2 Overdrive, B2 Neo, and Powered by Backblaze are all built on the foundation of B2 Cloud Storage. B2 Overdrive enables AI and data-driven workloads with up to 1Tbps throughput, unlimited free egress, and private networking support.
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Powered by Backblaze enables platforms to bolster existing products or expand their product offerings with cloud storage via the Backblaze Partner API and custom domains technology.
To continue expanding and accelerating our movement up-market and aligning to emerging AI-related opportunities, we have introduced a set of product, developer, and go-to-market initiatives designed to position Backblaze across the AI data lifecycle. B2 Neo is our white-label cloud object storage solution designed for neocloud platforms. B2 Neo enables neoclouds to provide native, branded storage, without diverting engineering resources from their core GPU and compute roadmaps. Flamethrower is our founder-first startup program designed for the next generation of AI developers, builders, and entrepreneurs. The program offers up to $100,000 in storage credits coupled with direct support from the Backblaze team and a community of peers to help startup companies build economically sound businesses at a critical time in their lifecycle. Together, these launches reflect our dual motion of capturing large, AI supply-side platform relationships at the enterprise level while seeding a developer-led growth pipeline through our self-serve motion.
In June 2026, we entered into a multi-year Master Strategic Agreement with CoreWeave, Inc. (“CoreWeave”), a leading AI cloud platform provider, under which we will provide committed B2 Cloud Storage capacity and managed storage services on CoreWeave’s infrastructure (the “CoreWeave Agreement”). The two initial order forms under the agreement have terms of five and seven years, respectively, and an aggregate estimated total contract value of approximately $335.1 million, less approximately $21.7 million attributable to the fair value of warrants issued to the customer. We view this agreement as a significant example of the value Backblaze provides to neoclouds and in the AI infrastructure ecosystem.
May 2026 Price Increase
Effective May 1, 2026, we implemented changes to the pricing of our B2 Cloud Storage offering, including an increase in the pay-as-you-go storage rate from $6.00 to $6.95 per terabyte per month and the elimination of API transaction fees.
2025 Restructuring and Transformation Plan
In November 2025, we initiated a restructuring and transformation plan designed primarily to improve the effectiveness and efficiency of our sales and marketing functions and enhance the pace of product innovation in support of our go-to-market objectives (the “2025 Restructuring and Transformation Plan”). The 2025 Restructuring and Transformation Plan includes the redesign and implementation of new strategies and processes, organizational realignment and reallocation of resources, and other corporate actions. From inception to date, we have incurred charges of approximately $6.1 million, including employee termination expenses, an impairment charge related to our exit from our corporate headquarters facility, and other transformation costs. For the three and six months ended June 30, 2026, we have incurred charges of approximately $1.3 million and $3.5 million, respectively, primarily related to employee termination expenses and other transformation costs.
We expect to incur additional charges of approximately $2.4 million to $3.7 million through the first quarter of 2027, at which time the 2025 Restructuring and Transformation Plan is expected to be completed. These charges include estimated employee termination expenses of approximately $1.0 million to $1.1 million, 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:
Execution of Our Go-to-Market Transformation
In the second half of 2025, we initiated a multi-faceted go-to-market transformation designed to scale our business more efficiently and further accelerate our movement up-market. This includes scaling our direct sales organization, enhancing our marketing and demand generation capabilities, and driving expansion within our existing customer base.
We are continuing to optimize our direct sales organization to focus on larger customer opportunities and strategic accounts, while continuing to grow business in traditional segments. Our refined go-to-market motion is designed to improve sales productivity while preserving the cost-efficient self-serve model that has historically supported our customer acquisition. We believe effective execution of this transformation will continue to improve customer acquisition efficiency, increase average contract values, and to drive long-term revenue growth.
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Additionally, we are investing in targeted marketing initiatives including account-based marketing, digital advertising, industry events, and content programs anchored by our blog, case studies, and earned media, to increase brand awareness and perceived relevance in modern architectures, improve conversion rates, and pursue higher-value prospects.
Finally, we are focused on expanding revenue within our current customer base by introducing new features and addressing new use cases, continuing enhancement of our Customer Success programs under new leadership, and benefitting from natural growth of customer data stored on our platform. Customers continue to broaden their use of Backblaze for complementary workloads within their organizations, including AI training data storage, media storage, hybrid cloud support, and analytics repositories.
Expansion into AI and Neocloud Ecosystems
We believe the AI era is reshaping the cloud storage landscape and creating opportunities to establish Backblaze in emerging ecosystems where the scale, economics, and openness of our platform are differentiated. We are making targeted investments to position the Company in AI-related ecosystems where we see meaningful market potential, including neocloud platform providers and AI-native developers and startups.
Neocloud platforms
B2 Neo, our white-label, cloud object storage solution, is designed to serve neocloud platforms, which deliver GPU and other compute capacity to their end users. B2 Neo enables these platforms to offer native, branded object-storage as a new service to their end customers. The neocloud market is projected to grow from $35 billion this year to over $236 billion by 2031, driven almost entirely by demand for AI compute. As enterprise customers increasingly seek full-stack cloud platforms rather than raw GPU capacity alone, object storage is a critical data foundation these enterprise customers require. While some neoclouds have some level of object storage offering today, B2 Neo provides neoclouds with a scalable capacity storage tier, where data from a flash tier (the low latency tier that GPUs require to function at optimal levels) can be moved when it’s not being utilized in an active model training run. What differentiates B2 Neo in the space is its ability to scale without sacrificing performance or economics. The value this provides these companies includes more functional capacity in the flash tier, better margins for their storage products, and a solution that can be operationalized now, rather than spending years developing those capabilities in-house.
AI-native developers and startups
Where Neoclouds operate at one end of the AI ecosystem, startups and AI developers make up the vast majority of users and practitioners building the next generation of technology and businesses. Through the Backblaze Flamethrower program, our founder-first startup initiative, we are working to engage these AI developers, builders, and entrepreneurs at the beginning of their journey. We view Flamethrower as a seeding investment in a developer-led growth pipeline that complements our self-serve motion.
Beyond these developers and startups new and evolving businesses are establishing themselves in the multimodal generative AI space, including video and audio applications, and selecting B2 Cloud Storage as their object storage tier. These companies gather data for their own use or for sale; process and prepare the data to train their own or third-party models; develop or enhance proprietary models, and provide their models to companies that use them to generate additional data. At every stage, these companies need scalable, high-performance object storage with predictable economics. We have engaged companies like these through our traditional go-to-market activities, but we increasingly see their decision-makers bypass traditional sales and acquisition channels and opt to evaluate our technology directly before engaging with our team.
This trend also informs our strategy for serving and attracting the next generation of developers. Our new AI developer team, which comprises AI-native engineers and product leaders within our Research and Development organization, is focused on incorporating B2 Cloud Storage into the tooling, documentation, and sample applications that AI developers use to evaluate and deploy new solutions, particularly generative AI applications. Developers increasingly use AI coding agents to assist in building applications that rely on foundational services, including storage. By integrating B2 Cloud Storage with open-source projects, our AI developer team is working to position our platform as a default selection for generative AI projects.
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Continued Investment in Our Platform
We remain committed to continued investment in our technology platform to meet the performance, durability, security, compliance, and integration requirements of modern enterprise and AI workloads. This includes continued development of our core B2 Cloud Storage platform, B2 Overdrive, B2 Neo, partner APIs, custom domains technology, private networking support, managed storage capabilities, and other platform features designed to support data-intensive use cases. We believe this continued focus on enhancing our core platform is critical to supporting existing customers, driving increased usage over time, and enabling larger strategic relationships.
Operating More Efficiently
As we execute our growth initiatives, we are focused on improving operational efficiency across the organization. This includes integrating talent added through our transformation initiatives and driving productivity across functions. We also continue to evaluate operating models intended to enhance efficiency, including the expanded use of offshore talent and the application of AI across our business functions. These efforts are designed to help optimize our cost structure and support the reallocation of resources toward strategic growth initiatives.
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 28% of our total revenue originating outside of the United States for each of the six months ended June 30, 2026 and 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.
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 key metrics discussed below are calculated using the same methodology for B2 Cloud Storage, Computer Backup, and total Company. The below metrics may differ from other similarly titled metrics used by other companies, securities analysts or investors.
June 30,
2026 2025
B2 Cloud Storage
Net revenue retention rate(1) 113 % 114 %
Gross customer retention rate 89 % 89 %
Annual recurring revenue(2) (in millions) $ 113.3 $ 81.8
Computer Backup
Net revenue retention rate(1) 94 % 99 %
Gross customer retention rate 91 % 90 %
Annual recurring revenue(2) (in millions) $ 64.0 $ 65.3
Total Company
Net revenue retention rate(1) 103 % 106 %
Gross customer retention rate 91 % 90 %
Annual recurring revenue(2) (in millions) $ 177.3 $ 147.1
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(1) Beginning in the first quarter of 2026, we are presenting the net revenue retention rate (“NRR”) using a single-quarter calculation, comparing current quarter revenue to the corresponding prior year quarter, rather than an average of quarterly rates over the prior four quarters, in order to provide a more current measure of customer retention. Prior period NRR amounts have been recast to conform to the current period presentation.
(2) Beginning in the first quarter of 2026, to improve comparability between periods, we revised our methodology for calculating annual recurring revenue (“ARR”) for our consumption-based arrangements to use a daily revenue rate during the last month of the period rather than a monthly rate. Prior period ARR amounts presented have been recast to conform to the current period presentation.
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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. The enhancement of our B2 Cloud Storage offerings is driving significant revenue retention, resulting in NRRs of 113% and 114% as of June 30, 2026 and June 30, 2025, respectively. The decrease in the NRR for Computer Backup reflects the prior-year period benefit from the phased impact of earlier price increases on renewing subscriptions, whereas pricing was stabilized in the NRR beginning in 2026.
To calculate 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.
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. As of June 30, 2026 and 2025, gross customer retention rates across our revenue products were approximately 91% and 90%, equivalent to approximately ten years of customer retention. 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
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. For subscription-based arrangements, ARR is calculated by multiplying the monthly revenue for the last month of a period by 12. For consumption-based arrangements, ARR is calculated by multiplying average daily revenue for the last month of a period by 365. Total Company ARR represents the annualized value of all B2 Cloud Storage consumption- and subscription-based arrangements and Computer Backup subscription-based arrangements as of the end of a period. 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 NRR rate of 113% as of June 30, 2026. 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 support the recurring nature 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.
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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 $31.5 million for B2 Cloud Storage as of June 30, 2026 compared to June 30, 2025, representing 39% growth. The increase in B2 Cloud Storage ARR was primarily driven by the May 2026 price increase, as well as revenue recognized from a new enterprise customer engagement. ARR for Computer Backup experienced a slight decline of $1.3 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 arrangements are generally 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.
Effective May 1, 2026, we implemented changes to our B2 Cloud Storage pricing, including an increase in pay-as-you-go storage pricing and the elimination of API transaction fees. We expect these changes to impact the mix and level of revenue recognized from consumption-based arrangements in future periods. The overall effect on revenue will depend on customer usage patterns and adoption of our platform, including by customers with more data-intensive workloads.
We expect our go-to-market transformation and recently entered customer contracts to support continued growth in B2 Cloud Storage revenue over time. The pace and magnitude of this growth will depend on the execution of our go-to-market initiatives, customer deployment schedules and usage levels, and the commencement of contracted services.
We recently began offering committed storage capacity and managed storage services. Under committed-capacity arrangements, the provision of reserved storage capacity over the contractual term represents a single performance obligation that is satisfied over time as the capacity is made available to the customer. Revenue is recognized under these arrangements using an output method based on the proportion of contracted storage capacity made available, which reflects the transfer of services to the customer. Under managed storage arrangements, the related managed storage services generally represent a single performance obligation that is satisfied over time, with revenue recognition commencing when the applicable storage capacity is deployed and the related services become available to the customer.
Revenue recognition under these arrangements is expected to begin during the third quarter of 2026. Therefore, no related revenue was recognized during the three and six months ended June 30, 2026.
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 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. These investments may also be affected by higher equipment prices and supply chain constraints, which could adversely affect our gross margin. 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.
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During the second quarter of 2025, we completed a study that resulted in an extension of the useful lives of certain infrastructure equipment. The change in estimate reduced depreciation expense by approximately $0.9 million for the six months ended June 30, 2026 compared with the prior-year period, reflecting the benefit recognized in the first quarter of 2026.
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, restructuring charges, and stock-based compensation expenses, to remain relatively flat in 2026 compared to 2025, as efficiencies from our restructuring activities in 2025 offset increased investments in research and development and other growth-related costs. However, sales and marketing expenses may increase in absolute dollars as we invest in marketing initiatives to support business growth.
Research and Development
Research and development expenses consist primarily of our investments in personnel, infrastructure engineering, technology tooling and computational resources (including AI), as well as 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 investments in research and development to increase in absolute dollars for the foreseeable future as we continue to add new features to our platform, integrate advanced technologies such as AI into our development lifecycle, further enhancing our cloud service offerings, and increase 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, nature, 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 program investments related to advertising, demand generation, brand awareness activities, sales commissions paid to our employees, and an allocation of our general overhead expenses.
Sales and marketing expenses also reflect ongoing investments in sales initiatives, including supplementing our self-serve model with a direct sales approach, expanding our partner ecosystem, building our lead generation and brand awareness, and sponsoring marketing events.
In addition, as part of our ongoing go-to-market transformation, we expect sales and marketing expenses to increase as we continue to invest in key initiatives, including a programmatic overhaul of our developer experience focused specifically on the tooling and documentation that serves developers using or building with AI, the launch of Flamethrower, a startup program designed to provide early-stage companies with product credits, technical support, and ecosystem partnerships to drive early adoption and long-term customer growth, and the introduction of B2 Neo, a white-label cloud storage solution designed to expand our reach through enterprise platform partners.
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 our 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.
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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.
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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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
$ % $ % $ % $ %
(dollars in thousands)
Revenue $ 42,713 100 % $ 36,298 100 % $ 81,379 100 % $70,911 100 %
Cost of revenue 15,879 37 % 13,257 37 % 31,016 38 % 28,614 40 %
Gross profit 26,834 63 % 23,041 63 % 50,363 62 % 42,297 60 %
Operating expenses:
Research and development 11,002 26 % 11,878 33 % 22,288 27 % 23,733 33 %
Sales and marketing 10,215 24 % 10,172 28 % 20,499 25 % 19,435 27 %
General and administrative 9,791 23 % 7,231 20 % 17,103 21 % 14,140 20 %
Total operating expenses 31,008 73 % 29,281 81 % 59,890 74 % 57,308 81 %
Loss from operations (4,174) (10) % (6,240) (17) % (9,527) (12) % (15,011) (21) %
Investment income 381 1 % 500 1 % 785 1 % 1,033 1 %
Interest expense (1,263) (3) % (880) (2) % (2,472) (3) % (1,733) (2) %
Other income (expense), net 7 — % (477) (1) % 46 — % (626) (1) %
Loss before provision for income taxes (5,049) (12) % (7,097) (20) % (11,168) (14) % (16,337) (23) %
Income tax provision 40 — % — — % 68 — % 84 — %
Net loss and comprehensive loss $ (5,089) (12) % $ (7,097) (20) % $ (11,236) (14) % $ (16,421) (23) %
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The following table includes stock-based compensation, depreciation and amortization, and restructuring charges as they are included in the results of operations:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in thousands)
Stock-based compensation(1)(2)
Cost of revenue $ 531 $ 432 $ 989 $ 852
Research and development 3,426 3,272 6,307 6,739
Sales and marketing 2,051 1,881 3,628 3,678
General and administrative 2,751 1,719 4,547 3,394
Total stock-based compensation $ 8,759 $ 7,304 $ 15,471 $ 14,663
Depreciation and amortization
Cost of revenue(3) $ 6,799 $ 5,384 $ 13,312 $ 13,028
Research and development 46 41 86 99
Sales and marketing 28 30 52 70
General and administrative 19 19 35 41
Total depreciation and amortization $ 6,892 $ 5,474 $ 13,485 $ 13,238
Restructuring charges
Cost of revenue $ 135 $ (13) $ 372 $ (13)
Research and development 12 (34) 167 (34)
Sales and marketing 355 (64) 1,756 (64)
General and administrative 819 45 1,217 45
Total restructuring charges $ 1,321 $ (66) $ 3,512 $ (66)
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(1) $0.4 million and $0.6 million of stock-based compensation expense incurred during the three and six months ended June 30, 2026, respectively, are classified as restructuring charges in the table above, including an immaterial amount and $0.1 million, respectively, related to sales and marketing costs, and $0.4 million and $0.5 million, respectively, related to general and administrative costs. For further information on our restructuring plans, see Note 14 to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
(2) To conform to current period presentation, a nominal amount of restructuring charges that was previously included in stock-based compensation expense is presented in "Restructuring costs" in the table above for the three and six months ended June 30, 2025.
(3) $0.1 million and $0.3 million of depreciation and amortization expense recorded to cost of revenue for the three and six months ended June 30, 2026, respectively, are classified as restructuring charges in the table above.
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Comparison of the Three and Six Months Ended June 30, 2026 and 2025
Revenue
Three Months Ended June 30, Change Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
(dollars in thousands) (dollars in thousands)
B2 Cloud Storage revenue $ 26,578 $ 19,841 $ 6,737 34 % $49,006 $37,889 $ 11,117 29 %
Computer Backup revenue 16,135 16,457 (322) (2) % 32,373 33,022 (649) (2) %
Total revenue $ 42,713 $ 36,298 $ 6,415 18 % $81,379 $70,911 $ 10,468 15 %
Total revenue increased by $6.4 million, or 18%, for the three months ended June 30, 2026 compared to the same period in 2025.
Primary factors influencing the $6.7 million increase in B2 Cloud Storage revenue include the following:
•a $4.5 million increase in sales to new customers;
•a $1.5 million increase due to the price increase effective May 2026; and
•a $0.7 million increase driven by higher storage usage as a result of upselling and organic growth by existing customers.
Primary factors influencing the $0.3 million decrease in Computer Backup revenue include the following:
•a $0.7 million decrease from a decline in license counts;
•a $0.3 million increase driven by increased utilization by existing customers; and
•a $0.1 million increase from the phased impact of earlier price increases on renewing subscriptions.
Total revenue increased by $10.5 million, or 15%, for the six months ended June 30, 2026 compared to the same period in 2025.
Primary factors influencing the $11.1 million increase in B2 Cloud Storage revenue include the following:
•a $7.2 million increase in sales to new customers;
•a $2.4 million increase driven by higher storage usage as a result of upselling and organic growth by existing customers; and
•a $1.5 million increase due to the price increase effective May 2026.
Primary factors influencing the $0.6 million decrease in Computer Backup revenue include the following:
•a $1.6 million decrease from a decline in license counts;
•a $0.6 million increase driven by increased utilization by existing customers; and
•a $0.4 million increase from the phased impact of earlier price increases on renewing subscriptions.
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Cost of Revenue and Gross Margin
Three Months Ended June 30, Change Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
(dollars in thousands) (dollars in thousands)
Cost of revenue $ 15,879 $ 13,257 $ 2,622 20 % $ 31,016 $ 28,614 $ 2,402 8 %
Gross margin 63 % 63 % 62 % 60 %
Cost of Revenue
Primary factors influencing the $2.6 million, or 20%, increase in cost of revenue for the three months ended June 30, 2026 compared to the same period in 2025 include the following:
•a $1.0 million increase in depreciation expense associated with infrastructure equipment placed in service to support increased storage capacity;
•a $0.9 million increase primarily reflecting incremental rent and facility costs associated with expanding our data center footprint to support increased storage capacity;
•a $0.5 million increase in amortization expense, including $0.4 million related to capitalized investments in platform enhancements and new software features and $0.1 million related to our restructuring activities; and
•a $0.2 million increase in baseline operating spend.
Primary factors influencing the $2.4 million, or 8%, increase in cost of revenue for the six months ended June 30, 2026 compared to the same period in 2025 include the following:
•a $1.5 million increase primarily reflecting incremental rent and facility costs associated with expanding our data center footprint to support increased storage capacity;
•a $0.8 million increase in amortization expense related to capitalized investments in platform enhancements and new software features;
•increases of $0.4 million in amortization and workforce reduction costs related to our restructuring activities;
•a $0.3 million increase in baseline operating spend;
•a $0.5 million net decrease in depreciation expense, which includes a $1.5 million decrease primarily due to the extension of the useful life of our infrastructure equipment, partially offset by a $1.0 million increase associated with infrastructure equipment placed in service to support increased storage capacity; and
•a $0.2 million decrease in personnel-related costs resulting from lower headcount following our recent restructuring and ongoing efficiency initiatives.
Gross Margin
Gross margin was 63% for each of the three months ended June 30, 2026 and 2025. Gross margin remained relatively consistent as the benefit of higher revenue and personnel-related costs declining as a percentage of revenue was offset by higher depreciation and amortization expense and higher rent and facility costs associated with the expansion of our data center footprint.
Gross margin increased to 62% for the six months ended June 30, 2026 from 60% for the same period in 2025. The increase in our gross margin was primarily driven by higher revenue and lower fixed costs, including reduced depreciation expense resulting from the extension of the useful life of our infrastructure equipment, as well as reduced personnel-related costs, following our restructuring and ongoing efficiency initiatives. These benefits were partially offset by higher variable and facility costs associated with the expansion of our data center spaces.
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Operating Expenses
Three Months Ended June 30, Change Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
(dollars in thousands) (dollars in thousands)
Research and development $ 11,002 $ 11,878 $ (876) (7) % $ 22,288 $ 23,733 $ (1,445) (6) %
Sales and marketing $ 10,215 $ 10,172 $ 43 — % $ 20,499 $ 19,435 $ 1,064 5 %
General and administrative $ 9,791 $ 7,231 $ 2,560 35 % $ 17,103 $ 14,140 $ 2,963 21 %
Primary factors influencing the change in operating expenses for the three months ended June 30, 2026 compared to the same period in 2025 include the following:
Research and Development
•a decrease of $1.0 million in personnel-related costs due higher capitalization of internally developed software costs reflecting the timing and level of qualifying development activities; and
•an increase of $0.2 million in stock-based compensation expense, including an increase of $1.5 million related to our 2026 bonus plan, offset by a decrease of $0.6 million due to higher capitalization of personnel costs related to internally developed software, and a decrease of $0.8 million primarily related to the timing of award grants and a reduction in headcount.
Sales and Marketing
•decreases of $1.0 million and $0.3 million in personnel-related expenses and stock-based compensation expense, respectively, primarily related to a reduction in headcount following our recent restructuring and ongoing efficiency initiatives;
•an increase of $0.5 million in workforce reduction costs related to our restructuring activities;
•an increase of $0.4 million in advertising and marketing costs primarily associated with trade show and partner marketing activities; and
•an increase of $0.4 million in stock-based compensation related to our 2026 bonus plan.
General and Administrative
•an increase of $1.0 million in stock-based compensation expense, including $0.6 million related to our 2026 bonus plan and $0.4 million primarily related to performance-based restricted stock units awarded during the period;
•an increase of $0.8 million in restructuring costs, including $0.6 million in workforce reduction costs and $0.2 million to support our go-to-market transformation initiatives;
•an increase of $0.5 million in professional fees related to ongoing corporate activities; and
•an increase of $0.3 million associated with the expansion of our international headcount.
Primary factors influencing the change in operating expenses for the six months ended June 30, 2026 compared to the same period in 2025 include the following:
Research and Development
•a decrease of $1.0 million in personnel-related costs, including a decrease of $1.2 million due to higher capitalization of internally developed software costs reflecting the timing and level of qualifying development activities, partially offset by an increase of $0.2 million in workforce reduction costs related to our restructuring activities; and
•a decrease of $0.5 million in stock-based compensation expense, including a decrease of $1.8 million primarily related to the timing of award grants and a reduction in headcount; an increase of $2.1 million related to our 2026 bonus plan, offset by a decrease of $0.8 million due to higher capitalization of personnel costs related to internally developed software.
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Sales and Marketing
•an increase of $1.9 million in restructuring costs, including $1.2 million to support our go-to-market transformation initiatives and $0.7 million in workforce reduction costs;
•an increase of $0.7 million in advertising and marketing costs primarily associated with trade show and partner marketing activities;
•an increase of $0.5 million in stock-based compensation related to our 2026 bonus plan; and
•decreases of $1.6 million and $0.6 million in personnel-related expenses and stock-based compensation, respectively, primarily related to a reduction in headcount following our recent restructuring and ongoing efficiency initiatives.
General and Administrative
•an increase of $1.2 million in restructuring costs, including $0.7 million in workforce reduction costs and $0.5 million to support our go-to-market transformation initiatives;
•an increase of $1.2 million in stock-based compensation expense, including $0.8 million related to our 2026 bonus plan and $0.4 million primarily related to performance-based restricted stock units awarded during the period; and
•an increase of $0.5 million in professional fees related to ongoing corporate activities.
Investment Income
Three Months Ended June 30, Change Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
(dollars in thousands) (dollars in thousands)
Investment income $ 381 $ 500 $ (119) (24) % $ 785 $ 1,033 $ (248) (24) %
Investment income decreased for the three and six months ended June 30, 2026 compared to the same period in 2025 primarily due to lower interest rates on marketable securities.
Interest Expense
Three Months Ended June 30, Change Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
(dollars in thousands) (dollars in thousands)
Interest expense $ (1,263) $ (880) $ (383) (44) % $ (2,472) $ (1,733) $ (739) (43) %
Interest expense increased for the three and six months ended June 30, 2026 compared to the same period in 2025 primarily due to a higher volume of finance leases, reflecting continued investment in data center infrastructure.
Other Income (Expense), Net
The change in other income (expense), net was attributable to foreign currency transaction gains and losses, which fluctuate based on changes in exchange rates between the U.S. dollar and foreign currencies.
Income Tax Provision
Our provision for income taxes was immaterial for the three and six months ended June 30, 2026 and 2025.
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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 (“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, 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 Adjusted Gross 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 these items as 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.
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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
(dollars in thousands)
Gross profit $ 26,834 $ 23,041 $ 50,363 $ 42,297
Adjustments:
Stock-based compensation 531 432 989 852
Depreciation and amortization(1) 6,799 5,384 13,312 13,028
Restructuring charges 135 (13) 372 (13)
Adjusted gross profit $ 34,299 $ 28,844 $ 65,036 $ 56,164
Gross margin 63 % 63 % 62 % 60 %
Adjusted gross margin 80 % 79 % 80 % 79 %
________________
(1) $0.1 million and $0.3 million of amortization expense for the three and six months ended June 30, 2026, respectively, are classified as restructuring charges in the table above.
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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, and certain non-recurring and infrequent items, including impairment of long-lived assets, restructuring charges, legal settlement costs, and other similar 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 June 30, Six Months Ended June 30,
2026 2025 2026 2025
(dollars in thousands)
Net loss and comprehensive loss $ (5,089) $ (7,097) $ (11,236) $ (16,421)
Adjustments:
Depreciation and amortization(1) 6,892 5,474 13,485 13,238
Stock-based compensation(2) 8,759 7,304 15,471 14,663
Interest expense and investment income, net 882 380 1,687 700
Income tax provision 40 — 68 84
Foreign exchange (gain) loss (7) 477 (46) 626
Litigation settlement costs — 138 — 138
Restructuring charges 1,321 (66) 3,512 (66)
Adjusted EBITDA $ 12,798 $ 6,610 $ 22,941 $ 12,962
Net loss and comprehensive loss margin (12 %) (20 %) (14 %) (23 %)
Adjusted EBITDA Margin 30 % 18 % 28 % 18 %
________________
(1) $0.1 million and $0.3 million of amortization expense for the three and six months ended June 30, 2026, respectively, are classified as restructuring charges in the table above.
(2) $0.4 million and $0.6 million of stock-based compensation expense for the three and six months ended June 30, 2026, respectively, are classified as restructuring charges in the table above.
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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 June 30, 2026 and December 31, 2025, our principal sources of liquidity were cash, cash equivalents and marketable securities of $49.9 million and $51.4 million, respectively.
We believe that our existing cash, cash equivalents, and marketable securities, together with cash provided by operations, leasing capacity available under our existing lease agreements, 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 revenue growth and increased demand for B2 Cloud Storage and our focus on larger enterprise and neocloud customers, we expect to require additional data center capacity and infrastructure equipment. We expect to satisfy these requirements through a combination of capital expenditures and operating and finance lease arrangements and, when strategic opportunities arise, 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
We have a credit agreement (the “Credit Agreement”) with Citizens Bank, N.A. (the “Lender”), which includes a senior secured revolving credit facility with a total borrowing capacity of up to $20.0 million (the “Revolving Credit Facility”) for general corporate purposes and working capital needs. The Revolving Credit Facility includes a sub-limit of up to $3.0 million for the issuance of letters of credit. As of June 30, 2026, we had no outstanding borrowings and no letters of credit under the Revolving Credit Facility and $20.0 million remained available for borrowing.
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, repurchase shares up to $15.0 million in any given year, and engage in other specified transactions. 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 EBITDA 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 June 30, 2026, we were in compliance with the covenants under the Credit Agreement.
On April 30, 2026, we entered into an amendment to the Credit Agreement. The amendment, among other things, (i) extends the maturity date from June 4, 2027 to June 4, 2028, (ii) resets the option that allows us to extend the maturity date by one year, subject to certain conditions, and (iii) modifies certain negative covenants, including increasing the limit on
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share repurchases from up to $10.0 million to up to $15.0 million per fiscal year and increasing the limit on permitted acquisitions to up to $20.0 million of cash consideration.
On June 30, 2026, we entered into an amendment to the Credit Agreement that modified a negative covenant to increase the permitted indebtedness for capital leases to $150.0 million outstanding.
Commitments
Finance Leases
We generally enter into finance lease arrangements to obtain hard drives and other infrastructure 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 12.9% as of June 30, 2026.
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 7.0% as of June 30, 2026. 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 non-cancellable commitments that relate primarily to service agreements to support our operations. As of June 30, 2026, we had $1.5 million, $3.6 million, $2.2 million, and $1.0 million payable for these commitments during the remainder of the year ending December 31, 2026 and the years ending December 31, 2027, 2028, and 2029, respectively.
Warrants
In connection with the CoreWeave Agreement, we issued CoreWeave two common stock purchase warrants to purchase an aggregate of 4,194,876 shares of our Class A common stock, consisting of an initial warrant to purchase 3,053,314 shares (the “Initial Warrant”) and an additional warrant to purchase 1,141,562 shares (the “Additional Warrant”). Each warrant has an exercise price of $7.60 per share, subject to customary adjustments, and may be exercised for cash or on a cashless basis.
Share Repurchase Program
In August 2025, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $10.0 million of our Class A common stock through August 1, 2026, on which date the plan terminated. The program was intended to offset dilution resulting from stock-based compensation. Repurchases were funded from the proceeds of employee stock option exercises and from employee contributions under the 2021 Employee Stock Purchase Plan (the “2021 ESPP”).
During the six months ended June 30, 2026, we repurchased a total of 314,265 shares of our Class A common stock for $1.4 million. As of June 30, 2026, approximately $6.6 million remained available for repurchases under the program.
Cash Flows
The following table shows a summary of our cash flows for the periods presented:
Six Months Ended June 30,
2026 2025
(in thousands, unaudited)
Net cash provided by operating activities $ 13,787 $ 8,488
Net cash used in investing activities $ (1,822) $ (14,689)
Net cash used in financing activities $ (8,719) $ (7,388)
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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 six months ended June 30, 2026, cash provided by operating activities was $13.8 million, which resulted from a net loss of $11.2 million, adjusted for non-cash charges of $32.8 million and net cash outflow of $7.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $16.1 million for stock-based compensation expense, $13.8 million for depreciation and amortization expense, and noncash lease expense on operating leases of $3.0 million. The net cash outflow from changes in operating assets and liabilities was primarily due to a $4.4 million increase in other assets related to employee sales commissions plan, a $2.7 million decrease in operating lease liabilities reflecting the timing of lease payments, $2.4 million increase in prepaid expenses and other current assets primarily due to the timing of prepayments, and a $1.8 million increase in accounts receivable driven by higher revenue from enterprise customers and the timing of billings and related collections, a $0.5 million decrease in deferred revenue due to revenue recognition outpacing timing of collections from our customers, partially offset by $4.0 million increase in accrued expenses and other current liabilities primarily due to the timing of accruals and payments and growth in our business.
For the six months ended June 30, 2025, cash provided by operating activities was $8.5 million, which resulted from a net loss of $16.4 million, adjusted for non-cash charges of $30.1 million and net cash outflow of $5.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $14.7 million for stock-based compensation expense, $13.2 million for depreciation and amortization expense, and noncash lease expense on operating leases of $2.0 million. The net cash outflow from changes in operating assets and liabilities was primarily the result of cash outflows related to a decrease of $2.1 million in operating lease liabilities, related to the timing of payments, as well as increases of $1.7 million and $1.4 million in other current assets and accounts receivable, respectively, each related to the timing of collections.
Investing Activities
Cash used in investing activities during the six months ended June 30, 2026 was $1.8 million, resulting primarily from the following activity:
•Proceeds of $12.7 million from the maturity of our marketable securities;
•Purchases of marketable securities of $8.0 million;
•Cash payments of $5.2 million related to the development of internal-use software for adding new features and enhanced functionality to our platform; and
•Cash payments of $1.5 million related to capital expenditures in support of infrastructure deployments to support our growing business.
Cash used in investing activities during the six months ended June 30, 2025 was $14.7 million, resulting primarily from the following activity:
•Purchases of marketable securities of $28.1 million;
•Cash payments of $4.2 million related to the development of internal-use software for adding new features and enhanced functionality to our platform;
•Cash payments of $1.3 million related to capital expenditures in support of infrastructure deployments to support our growing business; and
•Proceeds of $18.9 million from the maturity of our marketable securities.
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Financing Activities
Cash used in financing activities for the six months ended June 30, 2026 was $8.7 million, resulting primarily from the following activity:
•Principal payments on our finance lease agreements and lease financing obligations of $8.5 million related to hard drives and other infrastructure equipment used in our data center spaces;
•$2.6 million in payments on taxes for net share settlements of vested equity awards;
•$1.4 million in payments related to repurchases of our Class A common stock;
•$2.8 million in proceeds from the exercise of employee stock options; and
•$1.1 million in proceeds from our 2021 ESPP.
Cash used in financing activities for the six months ended June 30, 2025 was $7.4 million, resulting primarily from the following activity:
•Principal payments on our finance lease agreements and lease financing obligations of $9.3 million related to hard drives and other infrastructure equipment used in our data center spaces;
•$0.8 million related to payments on taxes for net share settlements of vested equity awards;
•$0.6 million related to payments of debt issuance costs;
•$1.9 million in proceeds from the exercise of employee stock options; and
•$1.4 million in proceeds from our 2021 ESPP.
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 new or revised accounting standards and, as a result, we will adopt such standards on the dates applicable to private companies until we cease to be an emerging growth company on December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of our initial public offering. Accordingly, our financial statements may not be comparable to those of public companies that comply with new or revised accounting pronouncements as of the public company effective dates.
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