Q4 2021 Backblaze Inc Earnings Call
Ladies and gentlemen, please standby your conference call will begin momentarily once again. Please standby your conference call will begin momentarily. Thank you for your patience and please continue to hold.
[music].
Thank you for standing by and welcome to the back please fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded and now I'd like to introduce your host for today's program.
James gives me Vice President of Investor Relations. Please go ahead Sir.
Thank you and good afternoon, and welcome to <unk> fourth quarter and fiscal year 2021 earnings call.
On the call with me today are glib Butman co founder CEO and chair person of the board.
Patrick <unk> Chief Financial Officer.
Today back ways will discuss the financial results that were distributed earlier this afternoon.
Joining us on this call include forward looking statements that include but are not limited to our future financial results use of our IPO proceeds and investments in our business our ability to compete effectively acquire new customers and retain and expand our business with existing customers.
Hiring and retaining key personnel.
And effectively manage our growth.
These statements are subject to risks and uncertainties that could cause actual results to differ materially.
In particular, there was a.
Described in our risk factors that will be included in our Form 10-K for the year ended December 31, 2021, and our other financial filings.
You should not rely on our forward looking statements as predictions of future events.
All forward looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation to update them, except as required by law.
Our discussion today will include non-GAAP financial measures.
These non-GAAP measures should be considered in addition to.
And not as a substitute for our GAAP results.
Reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our form 8-K filed today with the SEC.
You can also find the slide presentation related to your comments on the webcast.
You will also be posted to our Investor relations page after the call.
Before I turn the call over to Glenn I would also like to mention that in the latter portion of our call. We will be addressing questions. We had gathered from non institutional or retail investors.
We're very excited to be able to engage more broadly with retail investors and look forward to a robust dialogue with all of our investors.
I would now like to turn the call over to Glenn.
Glib.
Thank you James and thanks to all of you for joining us.
Given that we have a number of investors new to the <unk> story I want to briefly review what <unk> does.
<unk> is building the leading independent cloud for data storage we.
We provide too easy and affordable cloud storage services on our purpose built storage cloud.
Our <unk> cloud storage service provides developers and people a public cloud storage service that is dramatically easier and.
One fifth the price of Amazon Web services, <unk> and others.
Barclays can scale to any size, but we are optimized for the underserved mid market.
Which we define as companies with less than 1000 employees.
We also offer our computer backup service that provides unlimited cloud backup for laptops and desktops for companies and individuals.
This service is especially beneficial as remote work accelerates.
Now to the business highlights we.
We had a strong Q4 to finish off a great year and grew overall revenue, 28% year on year to $18 $7 million with continued robust growth of 56% for our BT cloud storage business and 16% growth in our computer backup business.
<unk> for the company reached $75 million and our high growth <unk> cloud storage crossed over one third of the entire business reaching.
Approximately $27 million.
Fortunately, we achieved these results with essentially no benefit from investment of our IPO proceeds.
The <unk> team continues to work towards being the leading independent cloud for data storage. Our strong Q4 results support our plan to increase our investments at a faster rate than we previously planned just a few months ago.
Frank will offer more detail, but broadly we intend to increase our sales and marketing investments by over 100% in 2022 or about $10 million more than our prior internal plans.
I'll now share detail on four ways, we're scaling the business in 2022 and beyond.
First.
Outbound sales.
We began last year with no outbound sales team. We believed we could grow back plays by reaching out to businesses that would benefit from our cloud services and we started a small initiatives.
As the program showed signs of success, we started scaling the team.
By the end of Q3 2021, we had increased the number of outbound sales reps to five today, we are at 13, and we intend to continue scaling up that team.
Second paid advertising before.
<unk> going public we focused on optimizing our significant organic inbound traffic.
With proceeds we are investing to raise brand awareness among our key go forward markets, namely developers and it augments.
We launched our believes it.
Advertising campaign, which is reaching millions of video viewers.
While the campaign is still ongoing initial data suggests the brand awareness is a significant opportunity area for us to drive new interest in our offerings.
Third partnerships, our partners represent tremendous and efficient growth opportunities for <unk>.
Regularly announced new partners and a recent example is the expansion of our beam partnership to include their kasten offering.
<unk> is a leader in kubernetes data protection for those muffler coupon that is a leading open source platform that developers use to build and deploy applications.
Catherine customers can designate <unk> as their storage destination to protect their kubernetes environments from loss of ransomware attacks, while also supporting regulatory compliance.
Providing storage for Kubernetes data is just another way we are carrying out our strategy to be the independent provider of storage for developers.
We're also excited to announce that we'll be accelerating our partner driven revenue through the launch of a new partner marketing team.
We believe the creation of a dedicated partner marketing team will bring the focus necessary to better build both our existing partner relationships.
We bring new partners on board.
As part of this effort, we've already hired a great leader for that team.
Fourth developers developers are strategically important group for back please and our efforts on this front are bearing fruit.
Btu cloud storage AAR from developer accounts roughly doubled in the past year and this customer group boasts an NR of nearly 150%.
And so in 2022, we are increasingly focusing our go to market and engineering efforts on engaging and growing with developer customers.
To support our momentum we recently established an evangelism team and recruited key members from the developer community.
We believe we are well positioned to become the cloud storage of choice for the developer community aided by our strong relationships with developer partners, such as cloud flare Fastly and Hashi Corp, and as well as our commitment to ease of use interoperability and straightforward value.
I'll highlight a developer customer that demonstrates several aspects of the strength of our platform and marketing efforts for developers.
Can stock photo is one of the earliest stock image and video sites.
They provide royalty free images photos digital illustrations clip art and videos to their customers.
They have roughly 70 million photos alone and 106000 contributors add roughly 30000, new files every day.
Campfire photo was an early adopter of Amazon ask three when it launched in 2006, while Amazon has three worked for them at first it became increasingly expensive.
To minimize cost can stock started to use Amazon as three glacier, but the retrieval delays and complicated pricing tiers increasingly frustrated to cancer team.
As their business grew they also worried about vendor lock in.
Cause of Amazon's egregious egress fees, if they ever wanted to leave the cost to switch providers would only grow steeper overtime.
In the case of <unk>, the CEO happen to use back ways computer backup to protect his personal computer and as Dev ops staff. We're fans of the popular drive stats series on our blog.
If you aren't familiar with our block it is much loved and read by about 3 million people per year.
If youre interested in learning about storage for our company I recommend you visit <unk> Dot com Slash block.
While <unk> stock wanted to switch to back place they worried about the complexity of leaving Amazon.
But with our migration service, we make a point and click easy for customers to unshackle themselves from a major a diversified cloud vendors and.
And we cover our customers' costs to egress or data out of those providers.
The CEO of <unk> said that it was literally like flipping a light switch it was that easy.
Finally, while storage is at the core of businesses like can stock. They also use other cloud services to run their infrastructure.
Our partnerships enabled can start to move the rest of their cloud infrastructure out of AWS as well.
By freeing them from the walled garden of AWS, we enabled cancer to dramatically decrease the cost and complexity of their cloud infrastructure.
While getting the benefits of best of breed independent cloud services.
Obviously this is just one customer example.
But we believe it epitomize, how our marketing efforts and product offering work synergistically to attract developers and other customers.
As we outlined during our IPO.
See a large market and the opportunity to become the leading independent cloud for data storage. We are executing on the strategy, we laid out by investing significantly in our sales and marketing efforts, including scaling up our outbound sales.
Advertising partnerships and developer focus.
And we continue to invest in the products and platform.
One example is our cloud replication feature which we are on track to make available by the end of the first half of 2022.
We do this to ensure we provide our customers an incredibly easy to use affordable.
<unk> storage platform for all their data needs.
I will now turn the call over to Frank Patchell, who can review the financial results of the quarter in more detail.
Frank.
Thank you Glenn and thanks, everyone for joining us today.
Turning to our Q4 financial results unless otherwise noted I'll be referring to non-GAAP metrics and growth rates mentioned are year on year.
We remain focused on two key metrics revenue growth and adjusted EBITA adjusted.
Adjusted EBITDA is defined as earnings before interest depreciation amortization stock based compensation expense and other expenses or benefits that are noncash or that we deem nonrecurring.
Q4 revenue totaled $18 7 million.
An increase of 28% year on year.
<unk> contributed sales of $6 6 million, reflecting 56% growth computer backup revenue totaled $11 9 million, reflecting 16% growth.
In Q4, <unk> cloud storage represented 35% of total revenue continuing its upward trend.
Computer backup benefited from the first full quarter of the price increase we implemented in the last month of quarter three.
Because since most backup customers are on an annual or two year subscription this increase which was from approximately $6 per month to $7 per month, we will continue to phase in as they renew across the next two years at the higher price.
Our retention metrics remain strong.
Paul We track two key metrics net revenue retention.
And gross customer retention.
These metrics are defined in more detail in our earnings release and filings.
But basically NR is the growth of the recurring revenue for a set of customers, while gross customer retention measures retention of customers.
Both metrics, our trailing four quarter averages.
The total company NR was 110% with be two at 130% and computer back up at 102%.
<unk> customer retention was 91% overall with the 89% for <unk> and 91% for computer backup.
These NR and gross customer retention metrics were within one point to the values for Q3 2021.
Now this quarter, we made a slight refinement to our methodology for calculating at our and gross customer retention.
<unk> had no impact on our reported financials or our overall company metrics and only a very minor impact on these metrics for our two separate product lines.
As part of our year end numbers, we've also disclosed customer count and annual average revenue per customer as of December 31, 2021, we plan to share these metrics once per year.
Our paid customers increased to 499000 from 466000 in Q4 2020.
A number of customers for <unk> grew to 74000 from 59001 year ago.
Number of customers for computer backup totaled 439000.
Up from 419000 in Q4 of 2020.
Now turning to annual average revenue per customer or <unk> for the entire company it increased to $147 versus 124 in Q4 2020.
<unk> cloud storage ARPA grew to $348 versus 290 to one a year ago.
And computer backup <unk> was $108 up from 97 in Q4 of 2020.
Working down the P&L adjusted gross margin, which excludes noncash expenses of depreciation amortization and stock based compensation was 75% improving from 74% last quarter and in line with our expectations.
Adjusted EBITDA was a loss of $1 3 million or negative 7% of revenue down from positive $2 million or 14% in Q4 of 2020.
This reflects the expenses from higher investments in both sales and marketing and R&D as we continue to increase investments pursuing the large market potential for <unk> as well as increased G&A expenses chiefly related to public company costs.
Turning to the balance sheet cash and cash equivalents were approximately $105 million as of December 31, 2021, which includes the proceeds from our November initial public offering.
Now I'd like to provide our outlook for both quarter, one and full year 2022.
For the first quarter, we expect revenue to be in the range of 19% to $19 5 million.
We expect Q1 adjusted EBITDA margin.
<unk> negative 20% to negative 16%.
We expect our Q1 2022 basic share count of approximately 35 to 31 million shares.
Turning to the full year 2022 outlook, we expect revenue to be in the range of $83 million to $86 million.
While we are increasing our spend in 2022, we are not currently anticipating a significant benefit to revenue from this spend until late 2022 or 2023.
Turning to the 2022 EBITDA margin guidance, we expect our full year 2022, adjusted EBITDA margin of negative 18% to negative 14% as we increase our investments and addressed our significant market opportunity and aim to accelerate our growth.
I will now turn the call back to James James.
Thank you operator, we're now ready to take questions from analysts.
Certainly ladies and gentlemen.
At this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
Our first question comes from the line of it take could run from Oppenheimer. Your question. Please.
Thanks, Hey, guys solid quarter.
Thanks for the review on the four items, where youre investing a lot that's very helpful.
Maybe touching on that perhaps trying to grow a little bit.
Deeper you've now been a few months into this.
<unk> cycle, so two questions one.
What have you learned so far how about the investment in these four areas.
Some insights on what you've learned through this process would be interesting to hear and then second from.
From an ROI standpoint, there has been a way for you and I know, it's early because you have yet to see material upside from this is I think you mentioned later this year is where we see the benefit but.
Perhaps.
Letting you got.
Kind of call the shot here a little bit.
How do you feel about ROI here, what areas do you feel you're going to get better ROI versus less.
As expected these investment areas.
Hi.
Good to hear your voice.
And thanks for the questions.
So.
On the outbound sales side of things that's a program that we kicked off at the beginning of last year.
A very small scale and then we've been scaling it up.
Part of the reason that we've been investing and scaling it up more rapidly in this last little bit is because we're seeing a good return from that especially on the on the opportunity potential side and so it's an area that I'm, particularly excited about.
As I said, we've scaled it from one to 3% to 5% to 13, and we're continuing to scale that up.
So thats definitely one.
We're investing behind it because we're seeing good opportunity there and.
We track metrics similar to other.
Companies, we track opportunity potential we track conversion rates, we track time to close and we're enthused by what we're seeing on that front. So the upfront sales of exciting on the on the partnership side, we've been doing partnerships for a long time.
We've been successful with with those partnerships.
And so one of the things that we talked about as part of the IPO process.
With our partnerships we had.
Responsibility for bringing the partners and making them successful with part of the broader marketing and sales effort.
The thing that I'm excited about is that we're now focusing on it with a dedicated partner marketing team, which will help us bring more partners on board and also get them more successful.
On the.
On the paid advertising side that one of the more nascent motion for us.
But we've seen the believes it campaign that we launched is something that has that resonates with people. So the actual campaign itself is well received and the.
The early the early results that we've seen in terms of getting.
Viewership from from the investments has been positive and were tracking carefully to see what we see on the returns and finally on the developer side developers or just a very strategic audience for us. It's something that is very important for for <unk> overall, and we think the product market fit.
The Btu platform for developers is excellent and as.
As we mentioned on the call.
Our metrics are very positive with developers and the early signs in terms of our doubling of the ASR.
Coming from our developer accounts is also very positive. So we're excited to invest further behind that with the evangelism team and into the product and platform.
Well.
Okay. That's very helpful. Maybe as a follow up when you touched on the MLR.
It is down in both product categories on a year over year basis. So help me think about.
The path forward here on this metric, especially from your investments coming along and maybe also if.
If you could tie it into pricing clearly on the computer back up you have some pricing mechanisms that still need to work in your favor over the next year or two but perhaps on <unk>.
Anything on the competitive front, how do we think about how pricing is holding up in that category. Thanks.
Yes on the MLR side, it's certainly a metric that we track and care about the I think if you look on the Btu and <unk>.
Pretty consistent to what it's been.
Still best in class at around 130%.
We don't guide.
And <unk>.
I will say that cloud application is something that.
We expect to have some impact on helping in our.
Pricing.
As it flows through on the computer backup side, we expect to have.
Some impact in helping NR as well.
Very good thanks, guys.
Sure.
Thank you. Our next question comes from the line of Jason Ader from William Blair. Your question. Please.
Yeah, Thanks, Hey, guys.
Yes.
Wanted to follow up on <unk> question on the on the investment posture.
Posture here definitely from an EBIT margin outlook standpoint is lower than what we were than what we were modeling and what we had in our model for 2022, and I guess just wanted to understand a little bit better the calculus, there at the board level the management level.
Is the kind of back and forth.
Around.
You should invest in.
From a timing perspective and from just an overall opportunity perspective, just any more kind of color in terms of how that process played out.
Yes, it's a good question, Jason because obviously as we said its an increase over our prior plans I think one of the things that we looked at was as the programs that we're seeing we're starting to look successful we wanted to put dollars behind those so.
Some of the programs that we kicked off earlier in the year.
Earlier in 2021, we didn't have data internally to <unk>.
Support accelerating them.
We do have some of that data internally now and so we've made some of those decisions.
I think one of the things we talked about was we didn't want to fundamentally drastically change the way we run back please but we do want to invest for growth and so.
So.
So finding that healthy balance between.
Investing behind things that that we feel good about.
And without getting without getting ahead of our skis. So let me let me see if Frank wants to add anything to that.
I really think that covers it but I think what we're really doing is.
We're sacrificing EBITDA in the short term for really accelerating the growth.
And asking to how we got there it was a careful and methodical approach as you would expect we looked at increasing it at the rate that we had first projected and we felt that.
Seeing some good results from quarter, four but really would make us believe that we should be accelerating further.
<unk> said that the investments are in every quarter. So and we are measuring them. So we have the opportunity as the quarters progressed to see where we should accelerate further or where we should cut back in any of the areas.
Okay helpful. Thank you and then.
Glenn just.
As you scan the market for opportunities for <unk> are there any other verticals or segments of the market where.
Sort of things have popped up and.
You said to your team we got we got to go more aggressively there I mean, we know about developers.
Kind of a smaller organizations, but any other geographies verticals market segments, where you see some some some green shoots in some opportunities.
So one of the things that's been interesting is our outbound team one of the things that they do is they test icp's.
Basically our ideal target customers ideal customer profiles.
And so as they go along.
Pick.
A target profile.
And then to the extent that it looks promising then they'll start scaling that up and they've done that in a couple of verticals over the course of the last year I don't want go too much into what those specific verticals are but for competitive reasons, but the but in general.
The approach is similar with those which is the team goes out.
They reach out to a number of potential prospects they see whether the our core value proposition resonates and then if so then they scale up the efforts on the outbound in that in that ICP and so we've seen a few verticals that we've been focusing on developers I almost put in a somewhat different.
<unk> developers as a big strategic focus area for us, it's an area, where broadly we're investing behind the products and the platform and the approach.
Of it.
On the on the vertical side of it we can.
Can be a little more tactical about going after one vertical after another.
As a as a targeted focus.
Great and then one final quick one just as you think about the ICP.
Is it somebody that's got a lot of data that's price sensitive.
What can you tell us about like the.
Whats, what's resonating with your from a value proposition standpoint, with with those specific customer profiles.
One of the areas that we've been seeing in general interest is and a lot of the ransomware needs until a lot of the customer are ones that are.
Interested and concerned about ransomware and protecting from that and so.
Some of them have been cyclical.
In terms of their timing.
So we've seen school districts, where there depending on the time of year, when they can purchase and deploy new new things.
Seen some of it has been somewhat regional based on areas of the country that have been hit by various natural disasters and they've cared about backup and archive.
It has become top of mind, so different areas, but.
But in general those are some of the types of things.
<unk> have been resonating with our offering with the customers.
Thanks, and good luck.
Thank you.
Thank you. Our next question comes from the line of Eric Martin <unk> from Lake Street. Your question. Please.
Yes, I wanted to focus on.
The cash impact of the decision to accelerate the investments so if.
We start with $105 million at the end of December 2021, where are we willing to.
The end of December .
2022, and I would like you to address it from.
I'm thinking given the guidance for 2022, if we start with the $13 $5 million adjusted EBITDA loss at the mid point and then we throw capex against it capitalized software against it and then the <unk>.
Hard disk drive principal payments against it.
Coming up with around $67 million.
Those are my numbers not yours, but can you tell me if I'm in the ballpark there.
Projected cash balance ended the year.
Hi, Eric It's frankly now you are too high and the reason is remember that for our capital are you, adding $67 million at the end of the year is that what you said or the usage of <unk> 7 million yes.
At the end of the year.
$2 million for Capex, and $4 million for capitalized software and $19 million for harvest.
Right. So the only thing I would say to that is that we do lease our hard drive so.
It's not an immediate.
Capital expenditure for us in that regard.
<unk> is over a three year period.
So, but the rest of the numbers that youre, indicating a rye youre working right down our.
Our EBITDA, so I think it's correct.
Okay Alright.
Alright, and then just.
Sure.
As I look at the head count.
This investment to this incremental $10 million.
Help me understand what that translates into and I think the best way to ask the question is what was head count at year end 'twenty. One and then what are you. What are you planning for head count come the end of 'twenty two.
We had 270.
Employees at the end of 'twenty, one and we're expecting to add approximately 180.
To give us approximately 450 head count at the end of 'twenty two.
I do want to caveat that a little bit because it's very difficult in these times to hire the quality that we want last year, we fell little bit short in our hiring goals, we pushed it over into 'twenty, two but it's Joe.
Situation were to succeed for us means adding a lot of very good people.
Understand.
It's going to keep the HR department busy good luck with that and thanks for taking my question.
Sure.
Thank you. Our next question comes from the line of Erik <unk> from JMP. Your question. Please.
Yes.
Yes, thanks for taking the question good sea.
This growth on the on the beat to there.
Talk a little bit about what the impact of the incremental spend will be on the B two service.
Do you think that will enable you to accelerate growth from the current 50% range as we get into 'twenty two or.
What do you think this will do in terms of a return.
Well you have to remember that it takes time for us from the time, we are making these initial investments for their prices to see significant results.
What I mean by that is we are adding the head counts, especially in sales and marketing, but oil across the business.
Those head counts are being added now and we're pleased at the pace that we're adding them. These associates new associates will be trained and they'll start contributing.
And then to get it really meaningful number of new accounts will take time. So that's why we attributed the additional revenue growth out into <unk>.
<unk> fourth quarter and into 2023.
Yeah.
Okay then.
Curious if you've seen any further.
Changes that AWS since they had.
We announced some some adjustments to their pricing for their egress fees.
Has there been any change from a competitive perspective or from a pricing perspective from from AWS.
We haven't seen anything material come from that.
The egress change on their front was so tiny and immaterial I think it was.
Yeah.
It didn't affect customers or the market specifically it was just.
A nod I guess in the direction of of admitting that.
What we've been saying about them being egregious in what they're charging.
As has been seen by customers, but we haven't seen any any actual impact from the changes.
Okay.
Any change competitively from any anybody.
I wouldn't say any any material change in the market since the since the last earnings call. We continue to focus on being dramatically easier than other products out there we're still once if the price for.
For competitive offerings, with Amazon and Google and Azure.
So.
I can't think of anything too material in the market has shifted in the last quarter.
Very good thank you.
Thank you.
Thank you. Our next question comes from the line of Simon Leopold from Raymond James Your question. Please.
Thanks for taking the question.
Just first wanted to clarify two things pretty straightforward and then my question I think upfront glad you said that the sales and marketing line.
It would be 10 million higher in 'twenty, two so roughly 28 ish million I just want to confirm if that's what you said.
No just it's $10 million higher than what we had previously planned in our earlier planning.
In in kind of the Q3 last year timeframe for 2022. So back then we had planned on increasing spend we're accelerating that spend by an additional $10 million.
So are you what are you thinking at this point, so that means roughly $35 million ish.
Approximately.
Okay, great and I'm glad I clarified that and the other one was in answering one of the earlier questions.
You used the phrase <unk> $5 13, I think you were making a reference to the number of <unk>.
<unk> hired for sales of CIT and I just wanted to make sure I had that down if that's what you're referring to.
Yes, Youre exactly right. It was not some sort of had been Archie sequence or anything. It was it was the we started the outbound sales team with one person at the beginning of 2021.
When we started seeing some early signs of success, we scaled that up.
We had.
We went to three people to find people and today, we have 13 people on that outbound sales team.
And where do you see that at the end of the year with this hiring push.
So we're not.
We're not.
Guiding that number specifically, but I will say that we continue to intend to scale that up. So this is not the end point for us.
It is it is.
A ramp that we intend to continue hiring for and it is part of our hiring plans.
Okay, and just the last one.
I'm glad you gave us these comments I think Frank that we are only going to get the the customer numbers once per year.
Hopefully, you'll give us the <unk> numbers on a regular basis.
I'm just wondering how to think about your expectations of your goals for the <unk> metric by year end.
It's been trending up I think the mix shift helps that.
I'm just trying to get a sense of the range of how to think about the growth in ARPA.
Well, we're not really prepared to guide or two but you can see and youll see in our filings the trending that we have there, which we're very pleased with.
And the.
Areas that are going to benefit <unk> are ones that you said, so we really see that continuing.
Thank you for taking the questions.
Thank you.
Our next question comes from the line of Zach Cummins from B Riley Securities. Your question. Please.
Yes, hi, good afternoon. Thanks for taking my questions a lot of the ones I wanted to ask have already kind of been alluded to but.
Yes in terms of just your initial 2020 to annual guidance can you dig down a little bit about what's really baked into that.
It seems like Youre, not really assuming much for any of these investments or anything from new products like cloud replication really impacting much. So this year. So I'm just kind of curious of what's really baked into that initial range you guys gave us.
That's correct on cloud replication, its a mid year being leased and it takes a lot of even though it doubles the revenue for the any b to customary that.
<unk> said it you need a meaningful amount to really move the needle so we're not forecasting.
A lot of revenue there in 2022, but beyond that it's a very exciting product with a big need in the market. So we have good expectations going forward.
On our overall revenue $83 million to $86 million. So we really look at how we've been trending and.
We know that 99% of our revenue is recurring so then when you look at what is going on with.
Additions to our client base. In addition to our data in <unk> for our customers and how subscriptions are being added into our computer backup and those are the areas that we have a beat on and where we're forecasting in.
Understood that's helpful and glib in reference to the partner marketing team that Youre building out.
What are kind of the key areas of focus for them is it really kind of out of the gate just trying to sign up more partners or is it really focusing on some of the bigger partners you have right now in the near term and really expanding those out kind of what the example that you gave with beam.
Yes, it's a good question. So the part of our marketing team is more focused on doing activities.
With partners. So we have a.
We havent partnership team that has been responsible for bringing partners on board and the partner marketing team one of the things that we've found as partners come on board and many of them.
Hey, Hey, we want to do X y and Z with U S.
And the marketing team is.
I'm responsible for making more of those activities happen. So we do joint Webinars joined activities joint events.
Joint materials for that.
<unk> sales.
Training.
So those kind of things are what the partner marketing team.
As initially responsible for it.
Understood well, thanks for taking my questions and best.
Like here in the coming quarters.
Thank you.
Thank you.
Thanks for all those great questions from the sell side analyst community I would now like to read questions that come from our non institutional investors, while a handful looks like they have already been answered we're going to just a handful of the popular questions that were submitted.
The first one is for glib.
Glib.
Where do you see topline revenue coming from over the next five years.
Thanks, Dave.
First before I answer I want to thank all the investors who submitted questions. We've always aimed to be transparent with our customers partners and employees and we aim to extend that approach to how we operate as a public company.
We have a community of about 3 million blog readers and half a million customers in there.
Were critical.
Of our success to date and we're excited to take the same approach and engage with our retail investors is a key community and stakeholders in our journey.
So back to the question on growth over the next five years, we expect the primary driver of our growth will be from B to cloud storage as it becomes a greater portion of our business.
We expect that that will be the case with both from new customers.
And also in spend by existing customers. So the sales and marketing activities that we've been talking about driving a lot of the activities to drive more new and somewhat larger customers still in the mid market and then also driving at <unk>, which is the net revenue retention from our existing customers and the.
Product and platform investments that we're making to support those those customers with.
With things such as cloud application that we talked briefly about.
Okay glad to have another one for you are.
Are there any plans to expand the data centers to more regions and allows selection of our data is toward like with Amazon.
Today, we have multiple data centers, we have them around the U S and in Europe and customers can choose to keep their data in the U S in Europe or both.
And while we aren't going to pre announce the plans for competitive reasons. We do continue to regularly evaluate whether to add additional regions and whether that would be valuable for our customers and we'll continue to do that.
Next one is for Frank.
When do you anticipate the company will turn a profit or post positive adjusted EBITA margins.
Well, we need to remember that we have positive adjusted EBITDA in 2021.
We're conscious of the fact that many of the new public companies do.
Do not but we've had a history of that but.
But right now what we're doing is we're really prioritizing growth.
And that and investing in that growth, which is causing a downward pressure on earnings. So we expect that to happen and that's why our guidance is for our the negative EBITDA.
Alright and next one.
What's the company's next big move.
As we discussed earlier, it's not really one single big move.
Series of multiple moves.
All focused on growing beat to cloud storage rapidly.
Those big moves include the scaling up of activities that we're seeing successful in sales and marketing.
And investing in the product and platform with things like cloud application and focusing on those key target audiences. So the.
<unk> per community.
Yeah.
Community and.
Helping more and more of those customers find out about it.
Okay next one.
What's the.
The company's next big move.
I'm, sorry, I just asked that one.
What do you see being the biggest opportunities in markets for security to storage and is it more commercial residential.
The biggest opportunities so we believe that.
Commercial market more broadly the small and medium enterprise market, where were most of it is where we see the biggest growth opportunities for us.
IDC estimates.
Medium enterprise market is about 60% of the entire storage as a service market and we believe it's the most under served part of that Margaret So while we are thrilled to continue to support.
Businesses and individuals the.
The biggest growth opportunity, we see for us is in that <unk>.
Marshall area and more specifically in the small and medium enterprises that's underserved.
Okay last one when we're back please released a cloud cellphone backup.
I'm not sure if thats coming from an investor or a customer but.
Something that's currently on our roadmap.
At this time, we believe much better use of our capital is to invest more in growing the <unk> cloud storage business, where we believe we have.
Strong competitive differentiation, great product market fit and it's a very large and fast growing market.
Thanks to both of you for those answers before handing back to glib I, just think I mentioned that we will be conducting virtual investor meetings next week hosted by Raymond James in February 2024th we will also be attending the JMP Securities Urology Conference March $6 10 to San Francisco and the Weird Virtual Tech summit on March 15th.
Yes.
I'll now turn the call back to Glenn for closing comments.
Thanks, James and Thanks again to all of you for your interest your participation and we look forward to updating you again on our progress in just a few short months.
Operator, you May now end the call. Thank you.
Thank you and thank you ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
Okay.
[music].
Sure.
[music].
[music].
[music].
Thank you for standing by and welcome to the <unk> fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program may be recorded and now I would like to introduce your host for.
Today's program James gives me Vice President of Investor Relations. Please go ahead Sir.
Thank you and good afternoon, and welcome to <unk> fourth quarter and fiscal year 2021 earnings call.
On the call with me today are glib Butman co founder CEO and chair person of the board and Frank <unk> Chief Financial Officer.
Today back ways will discuss the financial results that were distributed earlier this afternoon.
Things on this call include forward looking statements that include but are not limited to our future financial results use of our IPO proceeds and investments in our business our ability to compete effectively.
<unk>, new customers and retain and expand their business with existing customers.
Higher and retain key personnel.
And effectively manage our growth.
These statements are subject to risks and uncertainties that could cause actual results to differ materially in.
In particular.
As described in our risk factors that'll be included in our Form 10-K for the year ended December 31, 2021, and our other financial filings.
You should not rely on our forward looking statements as predictions of future events.
All forward looking statements that we make on this call are based on assumptions and beliefs as of today.
Take no obligation to update them, except as required by law.
Our discussion today will include non-GAAP financial measures.
These non-GAAP measures should be considered in addition to and.
And not as a substitute for our GAAP results.
Reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our form 8-K filed today with the SEC.
You can also find a slide presentation related to our comments on the webcast, which will also be posted to our investor relations page after the call.
Before I turn the call over to Glenn.
I'd also like to mention that in the latter portion of our call. We will be addressing questions. We had gathered from non institutional or retail investors.
We're very excited to be able to engage more broadly with regional investors and look forward to a robust dialogue with all of our investors.
I would now like to turn the call over to Glenn.
Gladly.
Thank you James and thanks to all of you for joining us.
Given that we have a number of investors new to the Backboard story I want to briefly review what <unk> does.
<unk> is building the leading independent cloud for data storage.
We provide too easy and affordable cloud storage services on our purpose built storage cloud.
Our <unk> cloud storage service provides developers and people a public cloud storage service that is dramatically easier.
And one fifth of the price of Amazon Web services, <unk> and others.
Barclays can scale to any size, but we are optimized for the underserved mid market, which we define as companies with less than 1000 employees.
We also offer our computer backup service that provides unlimited cloud backup for laptops and desktops for companies and individuals.
This service is especially beneficial as remote work accelerates.
Now to the business highlights.
A strong Q4 to finish off a great year and grew overall revenue, 28% year on year to $18 $7 million with continued robust growth of 56% for our beat to cloud storage business and 16% growth in our computer backup business.
<unk> for the company reached $75 million and our high growth <unk> cloud storage crossed over one third of the entire business, reaching <unk> of approximately $27 million.
Fortunately, we achieved these results with essentially no benefit from investment of our IPO proceeds.
The back please team continues to work towards being the leading independent cloud for data storage.
Our strong Q4 results support our plan to increase our investments at a faster rate than we previously planned just a few months ago.
Frank will offer more detail, but broadly we intend to increase our sales and marketing investments by over 100% in 2022 or about $10 million more than our prior internal plans.
I'll now share detail on four ways, we're scaling the business in 2022 and beyond.
First.
Outbound sales.
We began last year with no outbound sales team. We believed we could grow back plays by reaching out to businesses that would benefit from our cloud services and we started a small initiatives.
As the program showed signs of success, we started scaling the team by the end of Q3 2021, we had increased the number of outbound sales reps to five today, we are at 13, and we intend to continue scaling up that team.
Second paid advertising before going public we focused on optimizing our significant organic inbound traffic.
With proceeds we are investing to raise brand awareness among our key go forward markets, namely developers and it admins.
We launched our believes it.
Advertising campaign, which is reaching millions of video viewers.
While the campaign is still ongoing initial data suggests the brand awareness of the significant opportunity area for us to drive new interest in our offerings.
Third partnerships, our partners represent tremendous and efficient growth opportunities for back please.
Regularly announced new partners and a recent example is the expansion of our beam partnership to include their kasten offering.
<unk> is a leader in kubernetes data protection.
For those not familiar Cooper and that is a leading open source platform that developers use to build and deploy applications.
Some customers can designate back please be too as their storage destination to protect their kubernetes environments from loss of ransomware attacks, while also supporting regulatory compliance.
Providing storage for Kubernetes data is just another way we are carrying out our strategy to be the independent provider of storage for developers.
We're also excited to announce that we'll be accelerating our partner driven revenue through the launch of a new partner marketing team.
We believe the creation of a dedicated partner marketing team will bring the focus necessary to better build both our existing partner relationships and.
Bring new partners on board.
As part of this effort, we've already hired a great leader for that team.
Fourth developers developers are strategically important group for back place and our efforts on this front are bearing fruit.
Btu cloud storage AAR from developer accounts roughly doubled in the past year and this customer group boasts an NR of nearly a 150%.
And so in 2022, we are increasingly focusing our go to market and engineering efforts on engaging and growing with developer customers.
To support our momentum we recently established an evangelism team and recruited key members from the developer community.
We believe we are well positioned to become the cloud storage of choice for the developer community aided.
<unk> aided by our strong relationships with developer partners, such as cloud flare Fastly and Hashi Corp.
And as well as our commitment to ease of use interoperability and straightforward value.
I'll highlight a developer customer that demonstrates several aspects of the strength of our platform and marketing efforts for developers.
Can stock photo is one of the earliest stock image and video sites.
They provide royalty free images photos digital illustrations clip art and videos to their customers.
They have roughly 70 million photos alone and there are 106000 contributors add roughly 30000, new files every day.
Can't <expletive> photo was an early adopter of Amazon as three when it launched in 2006, while Amazon are three worked for them at first it became increasingly expensive.
To minimize cost can stock started to use Amazon as three glacier.
The retrieval delays and complicated pricing tiers increasingly frustrated they can't stock team.
As their business grew they also worried about vendor lock in.
Cause of Amazon's egregious egress fees, if they ever wanted to leave the cost to switch providers would only grow steeper overtime.
In the case of <unk>, the CEO of happened to us backwards computer backup to protect his personal computer and Dev ops staff. We're fans of the popular drive stats series on our block.
If you aren't familiar with our block it is much loved and read by about 3 million people per year, if youre interested in learning about storage or our company I recommend you visit <unk> Dot com slash block.
While Ken stock wanted to switch to back place they worried about the complexity of leaving Amazon, but with our migration service, we make it a point and click easy for customers to unshackle themselves from a major diversified cloud vendors.
And we cover our customers' costs to egress their data out of those providers.
The CEO of Comstock said that it was literally like flipping on a light switch it was that easy.
Finally, while storage is at the core of businesses like can't stock. They also use other cloud services to run their infrastructure.
Our partnerships enabled can start to move the rest of their cloud infrastructure out of AWS as well.
By freeing them from the walled garden of AWS, we enabled cancer to dramatically decrease the cost and complexity of their cloud infrastructure.
Getting the benefits of best of breed independent cloud services.
Obviously this is just one customer example.
But we believe it epitomize, how our marketing efforts and product offering work synergistically to attract developers and other customers.
As we outlined during our IPO.
See a large market and the opportunity to become the leading independent cloud for data storage. We are executing on the strategy, we laid out by investing significantly in our sales and marketing efforts, including scaling up our outbound sales paid advertising partnerships and developer focus.
And we continue to invest in the products and platform. One example is our cloud replication feature which we are on track to make available by the end of the first half of 2022.
We do this to ensure we provide our customers an incredibly easy to use.
Portable trusted storage platform for all their data needs.
I will now turn the call over to Frank Patchell, who can review the financial results of the quarter in more detail.
Thanks.
Thank you Glenn and thanks to everyone for joining us today.
Turning to our Q4 financial results unless otherwise noted I'll be referring to non-GAAP metrics and the growth rates mentioned are year on year.
We remain focused on two key metrics revenue growth and adjusted EBITDA.
Adjusted EBITDA is defined as earnings before interest depreciation amortization stock based compensation expense and other expenses or benefits that are noncash or that we deem nonrecurring.
Q4 revenue totaled $18 7 million, an increase of 28% year on year.
<unk> contributed sales of $6 6 million, reflecting 56% growth.
Peter backup revenue totaled $11 9 million, reflecting 16% growth.
In Q4, <unk> cloud storage represented 35% of total revenue.
<unk> its upward trend.
Peter backup benefited from the first full quarter of the price increase we implemented in the last month of quarter three.
Because since most backup customers are on an annual or two year subscription this increase which was from approximately $6 per month to $7 per month, we will continue to phase in as they renew across the next two years at the higher price.
Our retention metrics remain strong.
Recall, we track two key metrics net revenue retention at RR and gross customer retention. These.
These metrics are defined in more detail in our earnings release and filings, but basically NR is the growth of the recurring revenue.
Or a set of customers.
Gross customer retention measures retention of customers.
Both metrics, our trailing four quarter averages.
The total company NR was 110% with be two at 130% and computer back up at 102%.
<unk> customer retention was 91% overall with 89% for <unk> and 91% for computer backup.
These <unk> and gross customer retention metrics are within one point to the values for Q3 2021.
Note this quarter, we made a slight refinement to our methodology for calculating at our and gross customer retention.
Had no impact on our reported financials or our overall company metrics and only a very minor impact on these metrics for our two separate product lines.
As part of our year end numbers, we've also disclosed customer count and annual average revenue per customer as of December 31, 2021, we plan to share these metrics once per year.
Our paid customers increased to 499000.
From 466000 in Q4 2020.
The number of customers for <unk> grew to 74000 from 59, one year ago.
The number of customers for a computer backup totaled 439000 up from 419000 in Q4 2020.
Now turning to annual average revenue per customer or <unk> for the entire company it increased to $147 versus 124 in Q4 2020.
<unk> cloud storage ARPA grew to $348 versus 290 to one a year ago and.
And computer backup <unk> was $108 up from 97 in Q4 of 2020.
Working down the P&L adjusted gross margin, which excludes non cash expenses of depreciation amortization and stock based compensation was 75% improving from 74% last quarter and in line with our expectations.
Adjusted EBITDA was a loss of $1 3 million or a negative 7% of revenue down from positive $2 million or 14% in Q4 of 2020.
This reflects the expenses from higher investments in both sales and marketing and R&D as we continue to increase investments pursuing the large market potential for <unk> as well as increased G&A expenses chiefly related to public company costs.
Turning to the balance sheet cash and cash equivalents were approximately $105 million as of December 31, 2021, which includes the proceeds from our November initial public offering.
Now I'd like to provide our outlook for both quarter, one and full year 2022.
The first quarter, we expect revenue to be in the range of 19% to $19 5 million.
We expect Q1 adjusted EBITDA margin.
Negative 20% to negative 16%.
We expect our Q1 2022 basic share count of approximately 35 to 31 million shares.
Turning to the full year of 2022 outlook, we expect revenue to be in the range of $83 million to $86 million.
While we are increasing our spend in 2022, we are not currently anticipating a significant benefit to revenue from this spend until late 2022 or 2023.
Turning to the 2022 EBITDA margin guidance, we expect our full year 2022, adjusted EBITDA margin of negative 18% to negative 14% as we increase our investments and address our significant market opportunity and aim to accelerate our growth idled.
Now ill turn the call back to James James.
Thank you operator, we're now ready to take questions from analysts.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
Our first question comes from the line of it take could run from Oppenheimer. Your question. Please.
Thanks, Hey, guys solid quarter.
Thanks for the review on the <unk>.
For items, where youre investing a lot thats very helpful.
Maybe touching on that perhaps trying to grow a little bit.
Deeper you have now been a few months into this.
<unk> cycle, so two questions one.
What have you learned so far how about the investment in these four areas.
Some insights on what you've learned through this process would be interesting to hear and then second.
From an ROI standpoint is there a way for you and I know, it's early because you have yet to see material upside from this is I think you mentioned later this year is where we see the benefit but.
Perhaps.
Letting you got.
I kind of call the shots here a little bit.
How do you feel about ROI here, what areas do you feel that you're going to get better ROI versus less perfect.
These investment areas.
Okay.
Hi.
Good to hear your voice.
Thanks for the questions.
So.
On the outbound sales side of things that's a program that we kicked off at the beginning of last year.
In a very small scale and then we've been scaling it up.
The reason that we've been investing and scaling it up more rapidly in this last little bit is because we're seeing a good return from that especially on the on the opportunity potential side and so it's an area that I'm, particularly excited about.
As I said, we've scaled that from one to three to $5 <unk> and we're continuing to scale that up.
So thats definitely one that we are.
We're investing behind it because we're seeing good opportunity there and.
We track metrics similar to other.
Companies, we track opportunity potential we track conversion rates, we track time to close and we're enthused by what we're seeing on that front. So the outbound sales of exciting on the on the partnership side, we've been doing partnerships for a long time.
We've been successful with with those partnerships.
And so one of the things that we talked about as part of the IPO process was that with our partnerships we had.
Responsibility for bringing the partners and making them successful was part of the broader marketing and sales effort. One of the things I'm excited about is that we're now focusing on it with a dedicated partner marketing team, which will help us bring more partners on board and also get them more successful.
On the.
On the paid advertising side that one of the more nascent motion for us.
We've seen that believes it campaign that we launched is something that has that resonates with people. So the actual campaign itself is well received and the.
The early the early results that we've seen in terms of getting.
Viewership from from the investments has been positive and were tracking carefully to see what we see on their trials and finally on the developer side developers or just a very strategic audience for us and something that is very important for for back ways overall, and we think the product market fit.
Of the Btu platform for developers is excellent and as we mentioned on the call.
And our our metrics are very positive with developers and the early signs in terms of our doubling of the ASR.
Coming from our developer accounts is also very positive. So we're we're excited to invest further behind that with the evangelism team and into the product and platform as well.
That's very helpful. Maybe as a follow up when you touched on the MLR.
It is down in both product categories on a year over year basis. So help me think about.
The path forward here on this metric, especially from your investments coming along and maybe also.
If you could tie it into pricing clearly on the computer back up you have some pricing mechanisms that still need to work in your favor over the next year or two but perhaps on <unk>.
Anything on the competitive front, how do you think about how pricing is holding up in that category. Thanks.
Yeah on the <unk> side, it's certainly a metric that we track and care about the.
I think if you look on the Btu and ours pretty pretty consistent to what it's been and it's it's still best in class at around 130%.
We don't guide.
And <unk>.
I will say that cloud application is something that.
We expect to have some impact on helping and are the pricing that as it flows through on the computer backup side, we expect to have some impact in helping NR as well.
Very good thanks, guys.
Okay.
Thank you. Our next question comes from the line of Jason Ader from William Blair. Your question. Please.
Yeah, Thanks, Hey, guys.
Yes, I guess I wanted to follow up on <unk> question on the on the investment.
Posture here definitely from an EBIT margin outlook standpoint is lower than what we were than what we were modeling and what we had in our model for 2022 and this just wanted to understand a little bit better the calculus. There at the board level the management level, what was the kind of back and forth.
Around how much you should invest.
From a timing perspective and from <unk>.
And overall opportunity perspective, or just any more kind of color in terms of how that process played out.
Yes, it's a good question, Jason because obviously as we said its an increase over our prior plans I think one of the things that we looked at was as the programs that we're seeing we're starting to look successful we wanted to put dollars behind those so.
Some of the programs that we kicked off earlier in the year.
Earlier in 2021, we didn't have data internally too.
Support accelerating them.
We do have some of that data internally now and so we've made some of those decisions.
One of the things we talked about was we didn't want to fundamentally drastically change the way we run back plays, but we do want to invest for growth and so.
So finding that healthy balance between <unk>.
Investing behind things that that we feel good about.
And without getting without getting ahead of our skis. So let me let me see if Frank wants to add anything to that.
I really think that covers it I think what we're really doing is.
We're sacrificing EBITDA in the short term for really accelerating the growth.
<unk> asking to how we got there it was a careful and methodical approach as you would expect we looked at increasing it at the rate that we had first projected and we felt that seeing some good results from quarter four.
We would make us believe that we should be accelerating further I'm, having said that the investments are in every quarter.
And we are measuring them. So we have the opportunity as the quarters progress to see where we should accelerate further or where we should cut back in any of the areas.
Okay helpful. Thank you and then.
Glenn just.
As you scan the market for opportunities for <unk> are there any other verticals or segments of the market where.
Sort of things have popped up and.
You said to your team we got we got to go more aggressively there I mean, we know about developers.
Kind of a smaller organizations, but any other geographies verticals market segments, where you see some some some green shoots in some opportunities.
So one of the things that's been interesting is our outbound team one of the things that they do is they test icp's.
Basically our ideal target customers ideal customer profiles.
And so as they go along.
We'll pick.
<unk> target profile they'll test it and then to the extent that it looks promising then they'll start scaling that up and they've done that in a couple of verticals over the course of the last year I don't want to go too much into what those specific verticals are but.
For competitive reasons, but the but in general the <unk>.
<unk> is similar with those which is the team goes out.
Reach out to a number of potential prospects they see whether the our core value proposition resonates and then if so then they scale up the efforts on the outbound.
In that ICP and so we've seen a few verticals that we've been focusing on developers I almost put it in a somewhat different category developers as a big strategic focus area for us, it's an area where broadly we're investing behind the product and the platform and the approach.
Of it.
On the on the vertical side of it we can be a little more tactical about going after one vertical after another.
As a as a targeted focus.
Great and then one final quick one just as you think about the ICP Ms.
Is it somebody that's got a lot of data that's price sensitive.
Can you tell us about like the.
Whats, what's resonating with your from a value proposition standpoint, with with those specific customer profiles.
One of the areas that we've been seeing in general interest is and a lot of the ransomware needs until a lot of the customer are ones that are.
Interested and concerned about ransomware and protecting from that and so.
No.
Some of them have been cyclical timing cycle.
Sickle.
Their timing.
We've seen school districts, where there depending on the time of year when they can purchase and deploy new new things. We've seen some of it has been somewhat regional based on areas of the country that have been hit by various natural disasters and they've cared about backup and archive.
It has become top of mind, so different areas, but.
But in general those are some of the types of things.
<unk> has been resonating with our offering with the customers.
Thanks, and good luck.
Thank you.
Thank you. Our next question comes from the line of Eric Martin Uzi from Lake Street. Your question. Please.
Yes, I wanted to focus on.
The cash impact.
Decision to accelerate the investments so if.
If we start with $105 million at the end of December 2021, where do we wind up.
At the end of December .
In 2022, and I'd like you to address it from.
I'm thinking given the guidance for 2022, if we start with the $13 $5 million adjusted EBITDA loss at the mid point and then we throw capex against it capitalized software against it and then the hard disk drive principal payments against it.
Coming up with around $67 million.
Those are my numbers not yours, but can you tell me if I'm in the ballpark therefore projected cash balance ended the year.
Hi, Eric It's frankly now you are too high and the reason is remember that for our capital are you, adding $67 million at the end of the year is that what you said or the usage of <unk> 7 million.
At the end of the year do you think $2 million for Capex and $4 million for capitalized software and $19 million for harvest.
Right. So the only thing I would say to that is that we do lease our hard drive so.
It's not an immediate.
Capital expenditure for us in that regard.
Thing is over a three year period.
So, but the rest of the numbers that youre, indicating a variety of working breakdown are.
Our EBITDA, so I think it's correct.
Okay, Great and then just.
<unk>.
As I look at the head count.
This investment to this incremental $10 million.
Help me understand what that translates into and I think the best way to ask the question is what was head count at year end 'twenty. One and then what are you. What are you planning for head count come the end of 'twenty two.
We had 270.
Employees at the end of 'twenty, one and we're expecting to add approximately 180.
To give us approximately 450 head count at the end of 'twenty two.
I do want to caveat that a little bit because it's very difficult in these times to hire the quality that we want last year, we fell little bit short in our hiring goals, we pushed it over into 'twenty, two but it's Joe.
Situation were to succeed for us means adding a lot of very good people.
Understand.
It's going to keep the HR department busy good luck with that and thanks for taking my question.
Sure.
Thank you. Our next question comes from the line of Erik <unk> from JMP. Your question. Please.
Yes, thanks for taking the question good sea.
Growth on the beat to there.
Talk a little bit about what the impact of the.
The incremental spend will be on the B two service.
Do you think that will enable you to accelerate growth from the current 50% range as we get into 'twenty two or what.
What do you think this will do in terms of a return.
Well you have to remember that it takes time for us from the time, we are making these initial investments for their prices to see significant results.
What I mean by that is we are adding the head count, especially in sales and marketing, but oil across the business, but those head counts are being added now and we're pleased at the pace that we're adding them. These associates new associates will be trained and they'll start contributing.
And then to get a really meaningful number of new accounts will take time. So that's why we attributed the additional revenue growth out into.
Fourth quarter and into 2023.
Okay then.
Curious if you've seen any further.
Changes that AWS since they had.
Announced some some adjustments to their pricing for their egress fees.
Has there been any change from a competitive perspective or from a pricing perspective from a from AWS.
We haven't seen anything material come from that.
The egress change on their front was so tiny and immaterial I think it was.
It didn't affect customers or the market specifically it was just.
Not I guess in the direction of of admitting that.
We've been saying about them being egregious in what they're charging is is being seen by customers, but we haven't seen any any actual impact from the changes.
Okay.
Any change competitively from anybody.
I wouldn't say any any material change in the market since the since the last earnings call.
<unk> to focus on being dramatically easier than other products out there were still one fifth of the price.
For competitive offerings, with Amazon and Google and Azure.
So I can't do anything too material in the market has shifted in the last quarter.
Very good thank you.
Thank you.
Thank you. Our next question comes from the line of Simon Leopold from Raymond James Your question. Please.
Great. Thanks for taking the question I just first wanted to clarify two things pretty straightforward and then my question.
I think upfront glad you said that the sales and marketing line.
Would be $10 million higher.
In 'twenty two so roughly 28 ish million I just want to confirm if that's what you said.
No just it's $10 million higher than what we had previously planned in our earlier planning.
In in kind of the Q3 last year timeframe for 2022 so.
Back then we had planned on increasing spend.
Accelerating that spend by an additional $10 million.
Alright. So are you what are you thinking at this point, so that means roughly $35 million ish.
Approximately.
Okay, great and I'm glad I clarified that and the other one was in answering one of the earlier questions.
You used a phrase $135 13, I think you were making a reference to the number of <unk>.
<unk> hired for sales of Sis and I just wanted to make sure I had that down if that's what you're referring to.
Yes, Youre exactly right. It was not some sort of had been Archie sequence or anything. It was it was the we started the outbound sales team with one person at the beginning of 2021.
When we started seeing some early signs of success, we scaled that up.
We had.
We went to three people to find people and today, we have 13 people on that outbound sales team.
And where do you see that at the end of the year with this hiring push.
So we were not.
We're not.
Guiding that number specifically, but I will say that we continue to intend to scale that up. So this is not the end point for us.
It is it is.
A ramp that we intend to continue hiring for and it is part of our hiring plans.
And just the last one.
I'm glad you gave us these comments I think Frank that we are only going to get the the customer numbers once per year.
Hopefully you'll give us the <unk> numbers on a regular basis I'm just wondering how to think about your expectations of your goals for the <unk> metric by year end.
Yes, its been trending up I think the mix shift helps that I'm, just trying to get a sense of the range of how to think about the growth in ARPA.
Well, we're not really prepared to guide or who but you can see and youll see in our filings the trending that we have there, which we're very pleased with.
And the.
Areas that are going to benefit <unk> are ones that you said, so we really see that continuing.
Thank you for taking the questions.
Thank you.
Our next question comes from the line of Zach Cummins from B Riley Securities. Your question. Please.
Yes, hi, good afternoon. Thanks for taking my questions a lot of the ones I wanted to ask have already kind of been alluded to but.
Yes in terms of just your initial 2020 to annual guidance can you dig down a little bit about what's really baked into that I mean, it seems like youre not really assuming much for any of these investments or anything from new products like cloud replication really impacting much. So this year. So I'm just kind of curious of what's really baked.
So that initial range you guys gave us.
That's correct on cloud replication, it's mid year be Lee.
And it takes a lot of even though it doubles the revenue for the any b to customary that.
Take said it you need a meaningful amount to really move the needle so we're not forecasting.
A lot of revenue there in 2022, but beyond that it's a very exciting product with a big need in the market. So we have good expectations going forward.
On our overall revenue the $83 million to $86 million. So we really look at how we've been trending and.
You know that 99% of our revenue is recurring so then when you look at what is going on with.
Additions to our client base and additions to our data in <unk> for our customers and how subscriptions are being added into our computer backup and those are the areas that we have a beat on and where we're forecasting in.
Understood that's helpful and Glenn in reference to the partner marketing team that Youre building out.
What are kind of the key areas of focus for them is it really kind of out of the gate just trying to sign up more partners or is it really focusing on some of the bigger partners you have right now in the near term and really expand to those out kind of what the example that you gave with beam.
Yes, it's a good question. So the part of our marketing team is more focused on doing activities with partners. So we have a.
We have a partnership team that has been responsible for bringing partners on board.
And the partner marketing team one of the things that we found is that Cardinal has come on board and many of them.
Say, hey, we want to do X y and Z with you and the partner.
Our marketing team is.
And so for making more of those activities happen. So we do joint Webinars joined activities joint events.
Joint materials for the for sales.
Training.
So.
<unk> kind of things are what the partner marketing team.
Initially responsible for it.
Understood well, thanks for taking my questions and best of luck here in the coming quarters.
Thank you.
Thank you.
Thanks for all those great questions from the sell side analyst community I would now like to read questions that come from our non institutional investors, while a handful looks like they have already been answered we're going to address the handful of the popular questions that were submitted.
The first one is for glib.
Glib.
Where do you see topline revenue coming from over the next five years.
Thanks, Dave.
First before I answer I want to thank all of the investments who submitted questions.
We've always aimed to be transparent with our customers partners and employees and we aim to extend that approach to how we operate as a public company.
We have a community of about 3 million blog readers and half a million customers and they were critical as a part of our success to date and we're excited to take the same approach and engage with our retail investors is a key community and stakeholders in our journey.
So thanks for the question on growth over the next five years, we expect the primary driver of our growth will be from B to cloud storage as it becomes a greater portion of our business.
We expect that that'll be the case with both from new customers.
And also in spend by existing customers. So the sales and marketing activities that we've been talking about driving a lot of the activities to drive more new and somewhat larger customers still in the mid market and then also driving at R. R, which is the net revenue retention from our existing customers and the.
Product and platform investments that we're making to support those those customers.
With things such as cloud application that we talked briefly about.
Okay glad to have another one for you are.
Are there any plans to expand the data centers to more regions and allows selection of our data is toward like with Amazon.
Today, we have multiple data centers, we have them around the U S and in Europe and customers can choose to keep their data in the U S in Europe or both.
And while we aren't going to pre announce the plans for competitive reasons. We do continue to regularly evaluate whether to add additional regions and whether that would be valuable for our customers and we'll continue to do that.
Next one is for Frank.
When do you anticipate the company will turn a profit or post positive adjusted EBITDA margin.
Well, we need to remember that we have positive adjusted EBITDA in 2021.
We're conscious of the fact that many of the new public companies do.
Do not but we've had a history of that but.
But right now what we're doing is we're really prioritizing growth.
And that and investing in that growth, which is causing a downward pressure on earnings. So we expect that to happen and that's why our guidance is for the negative EBITDA.
Alright next one.
What's the company's next big move.
As we discussed earlier, it's not really one single big move.
Series of multiple moves all focused on growing beat to cloud storage rapidly.
Those big moves include.
The scaling up of activities that we're seeing successful in sales and marketing.
And investing in the product and platform with things like cloud application and focusing on those key target audiences. So the developer community.
Yeah.
Community and helping more and more of those customers find out about us.
Okay next one.
What's the.
What's the company's next big move.
I'm, sorry, I just asked that one.
What do you see being the biggest opportunities in markets for security to storage and is it more commercial residential.
The biggest opportunities so we believe that.
Commercial market more broadly the small and medium enterprise market, where we're most focused is where we see the biggest growth opportunities for us.
IDC estimates.
Medium enterprise market is about 60% of the entire storage as a service market and we believe it's the most under served quite of that Margaret. So while we are thrilled to continue to support it.
And individuals.
The biggest growth opportunity, we see for us is in that <unk>.
<unk>.
And more specifically in the small and medium enterprises that's underserved.
Okay last one when we went back please release a cloud cellphone backup.
I'm not sure if that's coming from an investor a customer, but it's not something that's currently on our roadmap.
At this time, we believe much better use of our capital is to invest more in growing the <unk> cloud storage business, where we believe we have strong competitive differentiation, great product market fit and it's a very large and fast growing market.
Thanks to both of you for those answers before handing back to glib I just wanted to mention that we will be conducting virtual investor meetings next week hosted by Raymond James in February 2024th we will also be attending the JMP Securities Analogy Conference March six in terms of San Francisco and the William Blair original taken into your summit on March 15th.
I'll now turn the call back to Glenn for closing comments.
Thanks, James and Thanks again to all of you for your interest your participation and we look forward to updating you again on our progress in just a few short months.
Operator, you May now end the call. Thank you.
Thank you and thank you ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.