Backblaze, Inc.BLZE
Backblaze, Inc. Leases Disclosure
Leases
Finance Leases
The Company generally enters into finance lease arrangements to obtain hard drives and other infrastructure equipment for its data center operations. The term of these agreements primarily range from to five years and certain of these arrangements have optional renewals to extend the term of the lease generally at a fixed price. Finance leases are generally secured by the underlying leased equipment. The Company’s finance leases have original lease periods expiring between 2026 and 2030. Finance lease right-of-use assets are included in property and equipment, net on the Company’s consolidated balance sheets.
Operating Leases
The Company leases data center spaces and office space under non-cancelable operating leases with various expiration dates. Certain lease agreements include renewal options to extend the lease term at a price to be determined upon exercise. These options are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments. Contingent rental payments are generally not included in the Company’s lease agreements. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company's leases have original lease periods expiring between 2026 and 2033.
Summary of Lease Information
The weighted average remaining lease terms and discount rates as of December 31, 2025 and 2024 were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Operating leases | Finance Leases(1) | Operating leases | Finance Leases(1) | ||||||||||||||||||||
| Remaining lease term | 5.4 years | 2.5 years | 4.4 years | 1.9 years | |||||||||||||||||||
| Discount rate | 6.9 | % | 12.6 | % | 7.2 | % | 11.9 | % | |||||||||||||||
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(1) Includes lease financing obligation costs.
The following table presents the components of lease expense (in thousands):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024(1) | 2023(1) | |||||||||||||||
| Finance lease costs | |||||||||||||||||
Depreciation expense(2) | $ | 9,131 | $ | 12,674 | $ | 14,059 | |||||||||||
| Interest expense | $ | 3,407 | $ | 2,444 | $ | 2,827 | |||||||||||
| Lease financing obligation costs | |||||||||||||||||
Depreciation expense(2) | $ | 1,307 | $ | 2,664 | $ | 1,366 | |||||||||||
| Interest expense | $ | 229 | $ | 675 | $ | 409 | |||||||||||
| Operating lease costs | |||||||||||||||||
| Rental expense related to lease components | $ | 5,920 | $ | 3,397 | $ | 3,128 | |||||||||||
Rental expense related to non-lease components(3) | 4,340 | 5,010 | 4,999 | ||||||||||||||
| Variable lease costs | 4,358 | 4,086 | 1,798 | ||||||||||||||
| Short term lease costs | — | — | 716 | ||||||||||||||
| Total operating lease costs | $ | 14,618 | $ | 12,493 | $ | 10,641 | |||||||||||
| Total included in cost of revenue | $ | 13,879 | $ | 11,384 | $ | 9,063 | |||||||||||
| Total included in general and administrative | $ | 739 | $ | 1,109 | $ | 1,578 | |||||||||||
________________
(1) The presentation of prior period data has been revised to conform to current year presentation. There have been no changes to the reported amounts, rather certain amounts have been disaggregated to further improve clarity and transparency.
(2) Substantially all of the depreciation expense on assets acquired through the Company’s finance leases and lease financing obligations is included in cost of revenue in its consolidated statements of operations and comprehensive loss.
(3) Non-lease components are related to non-tangible utilities and services used in the Company’s co-location lease agreements, which are not recorded on the Company’s consolidated balance sheets. The Company used judgment and third-party data in determining the stand-alone price for allocating consideration to lease and non-lease components under these lease agreements, such as the price of utilities as compared to its tangible data center footprint within each facility.
The following table presents supplemental cash flow information relating to the Company’s leases (in thousands):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating cash flows | |||||||||||||||||
| Cash paid for interest on finance lease and lease financing obligations | $ | 3,734 | $ | 3,119 | $ | 3,236 | |||||||||||
| Cash paid for operating lease liabilities | $ | 5,636 | $ | 4,012 | $ | 2,801 | |||||||||||
| Non-cash items | |||||||||||||||||
| Equipment acquired through finance leases | $ | 24,864 | $ | 17,105 | $ | 13,094 | |||||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 12,674 | $ | 9,206 | $ | 5,448 | |||||||||||
During the year ended December 31, 2023, the Company entered into two sale-leaseback arrangements with vendors to provide an aggregate of $4.5 million in cash proceeds for previously purchased hard drives and related equipment. The Company concluded the related lease arrangements would be classified as a lease financing obligation as the Company was reasonably certain to exercise the purchase option within the arrangement. Therefore, the transaction was deemed a failed sale-leaseback and was accounted for as a financing arrangement. The assets continue to be depreciated over their useful lives, and payments are allocated between interest expense and repayment of the financing liability. The Company did not enter into any sale-leaseback arrangements during the years ended December 31, 2025 and 2024.
The future minimum commitments for finance leases and lease financing obligations as of December 31, 2025 were as follows (in thousands):
Year Ending December 31, | Lease financing obligations | Total | ||||||||||||||||||
| 2026 | $ | 17,986 | $ | 487 | $ | 18,473 | ||||||||||||||
| 2027 | 13,672 | — | 13,672 | |||||||||||||||||
| 2028 | 5,856 | — | 5,856 | |||||||||||||||||
| 2029 | 4,997 | — | 4,997 | |||||||||||||||||
| 2030 | 84 | — | 84 | |||||||||||||||||
| Total future minimum commitments | 42,595 | 487 | 43,082 | |||||||||||||||||
| Less imputed interest | (6,893) | (24) | (6,917) | |||||||||||||||||
| Total | $ | 35,702 | $ | 463 | $ | 36,165 | ||||||||||||||
As of December 31, 2025, the Company's future minimum obligations for operating leases and non-cancellable contractual commitments related to non-lease components were as follows (in thousands):
Year Ending December 31, | Operating leases | Non-lease components | Total | ||||||||||||||
| 2026 | $ | 6,780 | $ | 3,886 | $ | 10,666 | |||||||||||
| 2027 | 5,604 | 3,075 | 8,679 | ||||||||||||||
| 2028 | 5,265 | 3,081 | 8,346 | ||||||||||||||
| 2029 | 4,162 | 2,559 | 6,721 | ||||||||||||||
| 2030 | 3,163 | 1,352 | 4,515 | ||||||||||||||
| Thereafter | 5,525 | 109 | 5,634 | ||||||||||||||
| Total future minimum commitments | 30,499 | $ | 14,062 | $ | 44,561 | ||||||||||||
| Less imputed interest | (5,080) | ||||||||||||||||
| Total | $ | 25,419 | |||||||||||||||
In June 2025, the Company 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 7 years. The original lease term was also extended to align with this period.
The Company concluded that the multi-storage data center space represents a separate asset class from the Company’s existing co-location data center space. As a result, the lease and non-lease components related to this expanded space are combined in accordance with the Company’s established lease accounting policy.
The Company accounted for the lease amendment as a modification under ASC 842. The amendment consists of two components: (i) an extension of the original lease term, which was remeasured as of the modification date, and (ii) a lease for additional, distinct space, which will be accounted for as a separate lease component and measured at its commencement date in the second quarter of 2026. The Company applied an incremental borrowing rate (“IBR”) of 6.8% to remeasure the lease liability. The IBR was estimated based on current market rates for secured borrowings with similar terms and adjusted for the Company’s credit profile. As of December 31, 2025, the Company had approximately $17.5 million of future minimum undiscounted lease payments related to the expanded lease space, which has not yet commenced and, accordingly, is not included in the operating lease commitments table above.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.