Q2 2023 Backblaze Inc Earnings Call

Good afternoon, and welcome to the <unk>.

<unk> second quarter 2023 earnings conference call.

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I would now like to turn the conference over to James Kisner, Vice President of Investor Relations and financial planning.

Go ahead.

Thank you good afternoon, and welcome to <unk> second quarter fiscal year 2023 earnings call.

On the call with me today are Glenn button co founder CEO and chair person of the board and freight Patchell Chief Financial Officer.

Hey back Wade will discuss the financial results that were distributed earlier this afternoon.

Statements on this call include forward looking statements about our future financial results.

Each of our IPO proceeds results new offerings.

Partnerships and sales and marketing initiatives.

We need to compete effectively and manage our growth.

Our strategy to acquire new customers and retain and expand our business with existing customers and our efforts to hire and retain key personnel.

These statements are subject to risks and uncertainties that could cause actual results to differ materially.

Putting this described in our risk factors that are included in our annual report on Form 10-K, and our other financial partners.

You should not rely on our forward looking statements as predictions of future events.

All forward looking statements 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 not as a substitute for our GAAP results.

Reconciliation of GAAP to non-GAAP results can be found in the earnings release furnished with our form 8-K filed today with the SEC.

You can also find a slide presentation related to our comments and webcast, which will also be posted to our investor relations page after the call.

Please also see our press release for a presentation for definitions of additional metrics such as in our <unk>.

<unk> customer retention rate.

Before I turn the call over to Colette.

I'd also like to mention that in the latter portion of our call as in prior calls.

He will be addressing questions from investors to be gathered through the station all of this platform and this will be moderated by our new director of Investor Relations.

I would now like to turn the call of a particular well.

Web.

Thank you James and thanks to all of you for joining US we continued to execute on our growth strategy this quarter.

Company revenue grew 19% year on year with strong 39% year on year growth for Btu cloud storage and 7% growth for computer backup.

I wanted to start with to business highlights first.

First our increasing success in moving upmarket I am proud of our team for executing on larger customer deals for both computer backup and Btu caught storage.

I'll go into the numbers in more detail later, but we're seeing success in moving up market, both among paying customers and in our sales pipeline.

Second I'm happy to report that we are well on our way to our previously announced goal of approaching adjusted EBITDA breakeven in the fourth quarter.

Frank will provide some insight on why we believe the company is well positioned to return to being cash flow positive without needing to access equity capital markets.

I'm excited by the cloud storage opportunity ahead by supporting customers in the direction they want to head with the cloud.

As leading advocates for the value of an open cloud ecosystem, where customers can use the combination of clouds best suited to their needs, we believe customers need to be able to store and use their data any way they see fit.

Additional cloud service providers are walled gardens that charge customers egregious fees to move data out of their clouds.

And yet customers desire for best of breed solutions and high prices of traditional cloud providers are driving customers Jordan open cloud ecosystem being enabled by providers like Frac fleets.

And as these customers discover our ease of use our openness to other technical platforms and our low price leadership, they tend to grow their usage and adoption of open cloud solutions as was evidenced in the customer story I will share later.

As a reminder, we have chew cloud service offerings. The first is our computer backup business and the second is our b to cloud storage service.

I'd like to first give an update on our computer backup business.

Peter backup is our more mature business, representing about 56% of revenue this quarter.

While the majority of our investments have been focused on our <unk> cloud storage service computer backup continues to be a good business for us.

In Q2, we closed our largest computer backup deal in company history with one of the most well known social media companies in the world.

This customer chose back blades to protect all of their employees data because of the speed and ease of deployment of our solution.

And as we worked with them they gave our technical and support teams special recognition for their outstanding service.

See a significant opportunity to address the needs of more businesses with our computer backup solution.

For <unk> storage, we continue to execute on our growth strategy, which includes the following <unk> number one.

Optimizing our self serve go to market motion.

Two <unk>.

Expanding our sales assisted go to market efforts.

Three leveraging partnerships.

And for cultivating application storage use cases.

I'll briefly touch on the progress we are making on these elements of our strategy.

Self serve remains highly efficient for us as we continue to find opportunities to enhance the self serve funnel.

We overhauled our website infrastructure with an entirely new backend that provides a giant step forward in our ability to rapidly test and improve the user experience and to ultimately drive higher conversion rates.

Also on the self serve Brian we lost a more targeted and personalized onboarding process to continue our focus on making it easy for customers to use our card. We're encouraged by the early results from this more intuitive customer onboarding experience.

Moving on to our sales assisted efforts the number of customers with <unk> greater than $50000 increased materially to 74 in Q2 versus 48 a year ago.

We don't plan on sharing this statistic every quarter as it may be variable and does not necessarily meaningful on a quarter over quarter basis, but we believe there is a tremendous opportunity for <unk> to move up market.

We also began engagements with a number of large potential customers, while theres no guarantee that these opportunities will all close we are encouraged that more and more larger customers are bringing us into their consideration set.

Now, let's talk partnerships the third key element of the growth strategy I mentioned.

For beat you partnerships are strategically important recall over one third of our beat your revenue is from customers Identifiably using our joint solutions with partners.

One recent example of a new joint solution with a partner at the announcement of cloud instant business recovery for cloud <unk> by our partner continuity centers.

They built how the IPR using back please be too as the storage cloud to pursue opportunities in the disaster recovery as a service market, which is forecast to be $23 5 billion in 2027.

Now businesses of any size can use this new cloud <unk> service to get enterprise, great disaster recovery capabilities.

Another important aspect supporting our partner and channel efforts as trade shows.

This quarter, we exhibited at Viva and M D.

Major conferences for data backup and the media industry respectively.

We are encouraged to see an almost three fold increase in pipeline from these shows as compared to last year.

Finally, a recent win came through our partnership with technology partner, Fastly and edge cloud platform, which resulted in a petabyte scale deal with one of the world's largest video game companies.

Together with the <unk> team, we were able to quickly satisfy this customer's requirements.

This mutually beneficial arrangement with Fastly is a great example that provides a better solution for the customer and creates opportunities for both Oakland odd companies.

Moving on to the final key aspect of our growth strategy application storage customers.

Recall, we defined application storage customers as businesses that use back. Please beat you as the infrastructure for their SaaS or internet businesses.

We've entirely rebuilt and launched a new developer documentation hub on our website to make it even easier for developers to build applications using our storage field.

This revamped documentation have makes many aspects of their onboarding easier, especially when working with our API.

The new hub is already driving higher user traffic and we have plans for additional enhancements, including more how to videos API test environments and documentation.

Making it easier for developers to onboard just fill it takes both self serve and sales assisted customers towards adopt our storage cloud faster.

As I mentioned earlier I'd now like to share a customer story that hits on white back with as low cost leadership.

Open Quad partnership program and ease of use is compelling to SaaS and internet businesses.

A rapidly growing consumer video App startup received free AWS credits to start.

Once those were used up they found AWS pricing to be prohibitive for them to scale.

It came to us because they recognize that we were dramatically cheaper than AWS.

And they were able to switch to back weight and just two weeks in part because back when he provides Amazon S. III compatible API.

The customer initially chose back waits for their archival data.

But realized that backwards will also be ideal for all of their application data.

And they've migrated the rest of their data to us effectively doubling their storage with us.

They also switch the network provider to reduce their infrastructure costs, which was enabled because we don't charge egress heath to customers using our open cloud technology partners.

This is just one of many examples of how transformation all the open cloud ecosystem for our company's business model.

Before handing the call over to Frank I'd like to touch on two topics of note to investors.

First I'd like to talk about back leases move to a single class share structure on July 6th all outstanding class B stock converted to class a on a one to one basis.

The elimination of the company's dual class share structure provides all shareholders equal voting rights and underscores <unk> commitment to good corporate governance and being a shareholder friendly company.

And second I'd like to share a personal update with respect to my selling look backwards shares which is that I have cancelled my <unk> one trading plan.

I'll now turn the call over to Frank who will review the financial results in more detail.

Great.

Thank you Glenn and thanks, everyone for joining us today.

Turning to our Q2 financial results unless otherwise noted I will 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, which is defined in our earnings release.

Our Q2 revenue totaled $24 6 million, an increase of 19% back.

<unk> be two contributed sales of $10 8 million, reflecting 39% growth.

And Peter backup revenue totaled $13 8 million, representing 7% growth. Please.

Please note that included in this number is a one time catch up payment of approximately $200000 from one customer that was received ahead of our estimates which will not reoccur in quarter three.

In Q2, B two cloud storage represented 44% of total revenue continuing its upward trend.

Pleased by the continued strong growth as this highlights the resiliency and predictability of our business model and the appeal of our cost effective solutions for customers.

Turning to retention metrics, we track gross customer retention and net revenue retention or NR or gross customer retention was 91% overall with 90% per btu cloud storage and 91% for computer backup.

Total company at our our was 110% with <unk> cloud storage at 121% and computer back up at 103%.

Working down the P&L adjusted gross margin was 75% down from 77% last year, but an improvement from 72% in quarter one 'twenty three.

The primary driver of the decrease in gross margin year on year is due to the costs associated with our new and expanded data centers, which we mentioned in Q1.

Adjusted EBITDA was a loss of $1 8 million or negative 7% of revenue compared to a loss of $1 9 million or a negative 9% in Q2 of 2022.

Turning to the balance sheet cash and short term investments, including restricted cash totaled $45 million at the end of Q2 2023 versus 57 million at the end of Q1 2023.

Both Q1, and Q2 included significant expenditures for severance and other restructuring costs, we expect lower cash usage in Q3 and Q4 since these expenses have substantially concluded.

I will elaborate more fully on the cash usage improvements momentarily.

Now I'd like to provide our outlook for Q3 for.

For the third quarter, we expect revenue to be in the range of 25 to $25 4 million.

We expect Q3, adjusted EBITDA margin between minus eight to a modest four per se.

For the full year 2023, we are reiterating our full year revenue guidance of $98 million to $102 million.

We are improving our full year adjusted EBITDA guidance from the prior range of negative 10 to negative 6% to a new guidance range of minus eight five to minus four 5%.

Turning back to cash usage, we have several noteworthy improvements while we do not guide to cash usage or generation specifically there are several reasons why we feel comfortable in our cash position.

First our recent restructuring which included reductions in staff, a consolidation of facilities and other savings totals over $6 million in annual savings.

Second in Q3, and Q4 'twenty three we will conclude the principal and interest payments on pandemic era leases commenced in late 2020.

These leases totaling an additional amount of over $6 million in capital expenditures plus interest previously established an extra buffer to safe guard against supply chain disruptions, we continue to maintain sufficient buffers today, but no longer require elevated levels.

Thirdly, due to both our software innovation and greater hardware efficiency from the manufacturers are capital expenditures for production equipment are lower both as a percentage of revenue and in total dollars year on year for.

For example, during the most recent three year period capital expenditures as a percentage of revenue is expected to decline from 28% in 2021 to approximately 18% in 2023.

This reduction is occurring despite the 2023 data center expansions and openings.

Please keep in mind, we finance our capital expenditures for production equipment purchases over multiple years.

Finally, we remain on track to approach adjusted EBITDA breakeven in Q4 23.

This improvement stems from the areas already mentioned plus lower growth and head count additions relative to 2022, when many departments stood up brand new teams that were critical to pursue our growth initiatives and support our new public company requirements.

We believe this combination of restructuring savings moderating growth in head count and slower capital additions positions us well to reach cash flow breakeven without accessing equity capital markets.

I will now pass the call back to Glenn.

Thanks Frank.

Finally, I would like to recognize the commitment and hard work of the entire Barclays team for delivering another strong quarter.

Operator, we're now ready to take questions from the sell side analysts on our call.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the key.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

And our first question will come from Chad Bennett of Craig Hallum. Please go ahead.

Great. Thanks for taking my question congrats on the quarter. So just club maybe just talk about on the B two cloud side.

A little but I didnt hear much on on the macro commentary if there was any and and I think the past few quarters or a couple at least we've talked about.

Sales cycles shrinking and in win rates, improving just kind of how that business performed relative to your expectations from a bookings or a R. R standpoint would be great.

Yes, Thanks, Jeff for the question good to hear from you.

So maybe I'll start and then.

Is there anything to add to it I think from the macro perspective, what are the things that we talked about in prior quarters is that.

The traditional cloud providers have been talking about the headwinds and challenges of customers looking to optimize their spend with them. The customer is basically looking at it and saying how can I provide the same value to my customers, while decreasing my cost of infrastructure and obviously.

Way to do that is to switch to a lower cost provider like backwards.

So.

They've been seeing significant optimization challenges to their to their environment and we have been on the one hand, there are some of the headwinds in the past of Av.

Customers, just generally doing less.

Industry wide, but on the other hand, we get to be the beneficiaries of a customer is looking to optimize away from some of the traditional clubs.

We're still seeing customers coming to us.

For those same reasons right customers are continuing to try to optimize off of the traditional copywriters and continuing to look for high value choices and we're the beneficiaries of that so we talked about close rates and close cycles in the past, we're not going to report on those quarter on quarter on quarter.

But what I'll say is that they've been relatively consistent with what we've said in prior quarters.

<unk> been improving slightly so.

I think we are enthusiastic about kind of how that's looking overall.

Okay, and then maybe maybe a follow up on on B to cloud just any commentary on Btu reserve bookings and in particular kind of performance through through the channel there and then I I believe from a from a guidance standpoint.

You guys have talked about a b to cloud era are growing you know 40%. This year are you still comfortable with that growth rate.

Yeah.

So let me touch on the B two reserve and then I'll hand to Frankfurt the growth rate for B to.

B to reserve one of the things that just for people who may not may not remember from prior calls. The reason we are excited about Beecher reserve is that.

We see it as something that is good for customers for the channel and for back please be to reserve is the packaged version.

The fixed price version of our B two offerings. So it's good for the customers because they have predictability. It's good for the channel because it's easier for them to sell that and so we launched that in roughly the middle of last year.

So.

Future Reserve. It is has continued to grow strongly.

Sequentially quarter on quarter so.

We're seeing we're seeing good traction with it.

As we talked about last quarter. It was a million and they are so it's not.

A dominant portion of the business, it's not super material yet.

But we are enthusiastic about the growth.

And then maybe Frank you can talk to the B two growth numbers that.

Hi, Chad.

So recall that beat two grew.

Around 40% in quarter, one and in quarter, two and we expect a similar growth rate in quarter four.

Specifically in quarter, three we do see a one quarter dip in that piece to grow to around 30%.

And this is due to certain headwinds, including softer data growth recently, some seasonality and it really a tough comparison to the quarter three 2022 due to that prior initial ramp of our largest account ever.

So, but as I said, we expect that Q3 dipped to be temporary and we believe beach will accelerate back to with Q.

Q4, 40% or above.

Got it and then maybe last one if I may for you Frank probably just so that it is what it appears to beef took.

Took out you know 12 million plus in annual cost out of the business I guess, a couple questions does that annualized rate run rate start in Q3 here and then secondly can you provide us any any color into how that that segmentation work looks on the P&L from.

From a cost standpoint, and where that those costs came out of.

Yes.

It's actually what's going on is that we've got costs that are moderating in many areas because remember that in 2022, we stood up all of our new <unk>, new departments right and that was to really participate with that enormous potential for our beat to in front of us and to be.

Public company, so what's happening right now is for Wayne moderating that growth quite a bit.

From a P&L standpoint, we do have savings across all the line items.

So in the gross margin for example, we have.

Because we have lower lease costs, whereby life equipment for the reasons I stated the depreciation does go down we do have head count that either reductions or in a much slower growth in really all the areas. So it's really pretty widespread.

And in evenly spread would you say I mean, it is is there a way to.

Think about magnitude of each line you know rough magnitude of the line items.

Okay.

Well that the facilities are goes into the G&A, but we have other moderating expenses there and in the when in our restructurings. We reported that it was in sales and marketing areas that were not performing as well as we had hoped so we did some moderation there.

Okay.

Good I appreciate it nice job on the quarter good to see the reiteration of the guide also.

Thank you.

<unk> did they expect customers to continue to be focused on optimization for the for the near term and possibly slightly longer term future. So you know just cause I'm kind of the industry data that we're seeing it seems like.

This trend of customers continuing to look for where to find value.

So that they can provide the services that they want to provide to the customers while continuing to look for spend optimization doesn't seem to have quite stop yet and I think <unk>.

In in the <unk>.

<unk> announced that they that there is <unk> still slowed to 12% ear on your end I think that was still driven in large part by customers continuing to look to optimize their infrastructure and so it seems like <unk> that has not yet stopped and so <unk> mmm.

As they continued to look to optimize will continue to look to help them.

Great. Thank you and then last question could you just touch on gross margin a bit more and go into detail and you too and what you're expecting for the rest of 2023.

Yeah, we always are expected I'll do not <unk>, well, you always expecting the non-GAAP gross margin to be in the mid 70% range what happened wisely for lower than that in <unk> in quite a while we were at 72 and the reason that we bounce back up in quarter. Two is that we had just.

<unk> cessation of a lot of duplicate expenses as where I'm moving into our larger data centers and then we opened up new data centers as well and there's a lot of one time costs and setting them up kind of across the board and once we had all of that behind us which was in quarter. Two we have that nice bounce up and.

<unk> so as we look at the gross margins stolen forward, we do feel that they're gonna be quite you know they're going to be in that range continuing because we do invest all the time and the data centers, but we don't have this large increase in either the number of data centers or expansions.

Great. Thank you.

The next question comes from Eric <unk> Security.

Go ahead.

Yeah, Thanks for taking my questions.

Just curious any update on on what you're hiring plans are for the rest of the year and and where you expect head count the.

At least where where did you end with head count in in queue too.

And then.

You had talked about.

Your your.

Growth year over year growth going to going down to 30 per cent Q3, and then back to 40 per cent in Q4.

What is is the biggest factor for Q3, the the tough comp or what gives you the confidence that we will see see the growth rate recovered.

Okay.

<unk> can't we haven't provided quarterly head count, but what we did provide with this last year, we grew headcount by 45% for the reasons that I stated earlier.

First public here and we needed to standup groups to go after this enormous opportunity that we have.

Now what we said all set with that it's really moderating were filling in here and there for programs and our head count is and then we did have a rejection dash sorry head count remains low it has a very modest uptick uhm for the rest of the year and that's one of the reasons that we're so quickly heading to.

<unk> if it a breakeven.

As far as that confidence okay, it's as far as our confidence on what is causing that one time depth. It is for the reasons that we said, they're pretty equal I would say the when you have your fastest.

And largest when you have your largest accounts start as fast as they did in quite a few that grew the entire quarter and were at their peak within one quarter that does make a difficult comp.

Because they're so large we had said before there are a million dollar account annualized and the other factors are there as well so but when we look at quarter for we have a much more optimism of the 40%, it's usually returning back to where we said.

Okay, and then lastly have you seen any any change for me W. S from a pricing perspective.

Mmm.

But we we haven't I mean, I think that from a competitive landscape prospective with them. We continue to see similar <unk> fairly consistent so we still see you know a number of customers moving over to us from AWS. We shared another one on the call. This time we've.

Can the last quarter, we should one coming from Amazon one coming from Google one coming from Azure and we continue to see customers moving from those both from the for the pricing reason directly that were about one fifth of their price point, but also because of our open ecosystem. The free <unk> that we provide to our technology partners if something.

That's a lot of our customers appreciate as well as the ease of use of the service.

Alright, very good thank you.

Okay Sir.

The next question comes from Simon Leopold Awesome Raymond Jones.

Go ahead.

Alright, Thanks for taking the question I wanted to see if maybe you could help us understand the sensitivity of your cost of goods sold to essentially the cost and data centers and really the question sort of rooted in the.

The view that data center space is scarce and therefore, there's a lot of people competing for for the P. C capacity and then also just relative to a year or two years ago cost of electricity has gone way up.

And your gross margins have been pretty stable, so I'm trying to get an understanding of <unk>.

And how that's affected you and how you think about that for 10 minutes if possible. So thanks.

Yeah, you're <unk>, you're right Uhm, Eric the data centers have been and they're expensive had been stable in the sense that we haven't been as affected by what you're doing but what you're saying the data centers when we actually remember their color sides and we only cause.

On track for what we believe we will use and if we need more we can do that so we're wearing contracted rates with a major providers and we so therefore I can anticipate you know what our costs will be in the future.

The power, we didn't anticipate electricity, we didn't dissipate and a large increase is not as large as what we saw in Europe at Europe is a smaller data center and so we we've been comfortable in in being able to forecast data absorb those costs.

Great and just as a quick follow up sort of rough math suggests that you're you're operating expenses should be maybe just south of 19 million in the next quarter.

So you're just putting a number two it would be helpful. I think everybody should have asked that question coupled with some fashions.

Let me just south 19 makes sense to to what you were expecting.

What we've said before is that we really expect quarter on quarter expenses to be relatively flat, they're not exactly flat because we have programs that are in some quarters and out of others, but I think you can continue to see that what you saw on quarter wanted to quote or two with only a 1% increase in X X.

<unk>. So you know that's that's been a trend.

Alright, thanks for taking the questions.

The next question comes from that.

Come in.

Security. Please go ahead.

Hi, good afternoon. Thanks for taking my questions Uhm Glib I just wanted to ask you about the prospects of moving up market as you were thinking about.

Getting involved with with larger customers I mean, what's the primary channel that that you believe that is gonna be getting you towards those larger customers does it really be outbound channel or through strategic partners.

Yeah. Thanks for the questions. So what are the reset it at the I P. O was that while we're focused on the mid market. We are our platform can be it can support any sides of customer and so the first part of that is you know I'm I'm excited that we're seeing larger customers wanting to use the platform and were successfully.

Winning those deals and and.

Having them be happy satisfied customers on our platform.

Terms of where do we find them from our outbound sales team that we stood up it with the some of the proceeds from the I P. O has started generating pipeline and bringing in some of those deals. So that you know, we're seeing healthy pipeline of which larger deals are a an important part of that pipeline.

Uhm, but we're also seeing deals coming tourists that come to us inbound and this is I think a function of the the blog and the content marketing that we have.

Invested in two over the years and.

Some of those those customers they they read about state learn about us and then they come to us proactively directly so we see it from both I would say that we expect that we will.

Be getting some from channel we mentioned one that came through our technology partner Fastly, We think that our partners benefit from working with US. So the fast example is any customer that works with one of the edge computer providers <unk>.

They need to have data in that data needs to be stored somewhere if that data is locked up inside of one of the traditional cloud providers. If it makes it expensive and difficult for the customer to a.

Use those other best of breed urge copywriters and so it's in the customer's best interest it's in our partners best interests to have them move their data to us and so we we <unk> we had that when <unk>. We then uhm they brought to us and we expect to see more deals coming from technology partner.

As part of the ecosystem bring Joseph some from the channel, we're already seeing pipeline from Alabama, and we're already seeing inbound deals as well.

This concludes that question and answer session I would like to turn the conference over time.

<unk> director.

That's the relation.

<unk>, Yeah, I want to thank all the animals.

Call today and thank you for all your questions naturally will answer your questions submitted by retail investors understand technology platform.

My first question I have is for both glad Anne Frank Uhm, what is management plan could I come a more profitable company.

So in terms of becoming a more profitable company.

There is too obvious pieces to that we're going to grow revenue and we're going to moderator expenses.

On the growing revenue side of it we talked about the four pillars that were focused on with our growth initiatives, which is.

Optimizing our self serve motion, which makes it very efficient for customers to sign up.

Scaling our sales assisted with deals like the ones that we talked about or $50000 that we're seeing traction with in the million dollar deal that we signed last year.

Largest computer backup deal that we just announced this correct.

So that's on a <unk> on the partnerships side and expanding both with technology partners and channel.

And then the last one being the application storage use case, where we help customers as a strategic part of their furniture, so investing behind the growth.

Of the company so that we grow revenue and then moderating on the expense side and maybe Frank can touch on the moderating on the expense side yeah.

We're continuing to drive efficiency and it's through the discipline headcount additions and as Glib said, we're really invest in projects with solid returns we measure everything so we can see which ones are doing the best for more investment should be and which ones we should call back on because.

Not as happy with those returns and the other important thing is that Brian track to approaching adjusted EBITDA breakeven in that fourth quarter.

Now the next question is for he's glad what are some feature projects for the company.

So future projects I assume also includes future products. So we have a long history of.

Improving our services, adding value to customers, we don't disclose our product roadmap for competitive reasons, but you can look back at some of the things that we have done. So for example, we reopened the east coast Theta region for customers to be able to choose that we we added carpet location, which enabled.

Customers to store the data in multiple regions mm bye training on that functionality, we lost feature reserve, which we talked about it a little bit earlier during the Q and a.

A part of our a T I uhm, which helps our partners mm make it easier for them to integrate our service into their product offerings extended version history for our computer backup customers. So we've done a lot of things to help customers store their data protect their data and also use their data and that's where we can see.

You to invest in we also are working with our partners on enabling them solution sets. So the solution set that we talked about with our partner continuity centers for disaster recovery is an example of that as well as some of the other services that we've done with our extra few partners.

So overall I think you can look back at some of the roadmap items that we have shipped as as examples of things that are on a road map to ship.

<unk> <unk> is back please as competitive advantage over other companies offering similar services, what is distinct or unique about back please compared to competitors.

So in terms of distinct and unique so first of all we're dramatically easier to use and I know a lot of people say that I know a lot of technology companies in particular say that and one of the things that we've seen as customers that sign up with US and then later come back and say Oh My God. It was so easy.

To use your services and.

The conversations I've had with some of them was like well, yes, we said that it was easy and.

The response I often get it I know you said it was easy everybody says their their technology is easy, but yours actually was and I think a lot of times ease of use is an underrated benefit <unk>.

And analysts found that our customers save 92% of their time.

By being because we're so much easier to use Apple has built a trillion dollar company uhm by focusing on making products easy to use so ease of use is one very key differentiator well first we're also dramatically less expensive than other providers.

And we are supporting the open cloud of ecosystem, and we do that by making it easy and inexpensive for customers to use their data in the way they see fit to use it with other edge computer provider as with other uhm, a I services with other compute providers et.

So by enabling them to have that open ecosystem data, we make it so that it's easier for them to build their business the way they want to build it so much easier to use much less expensive and supporting the open ecosystem.

And this next investor would like to know where do you see growth opportunities in the coming year.

The growth opportunities in the coming here I mean, we're pursuing this 50 billion dollar market mm bye.

By 2027, so there are many opportunities I think that we've talked about the growth initiatives that we're pursuing we also highlighted that we're seeing momentum and investing behind going after larger customers in the mid market and so I see that.

As a interesting opportunity for us Beecher reserve, which we talked a little bit about it earlier on this call. It's not a very large part of me too, but it is a rapidly growing part of B two and on the computer backup side, we <unk> have.

Helped both individuals and businesses for a long time, we're continuing to see more businesses, specifically come to us looking for us to help them protect all of their employees and all their until you data with our computer backup services.

Now this next shareholder asked how will I benefit the other shareholders paying my <unk> and money with your company.

As in optimistically happy and supportive today.

Why should I continue down this path.

So first of all I appreciate all investors and shareholders investing in having faith in that's in and giving us the runway to execute on our <unk>.

Growth initiatives.

Certainly I also hope for that Uhm is Charles some of you may choose to become customers, which will both help help help the growth of the company and also hopefully help you as well.

From the investors sides specifically.

Since the time, we went public we entered into a a market, which was facing inflation recession fears interest rate hikes and despite that.

We executed as we said we have been.

We've been building the accompanying a stable and predictable fashion.

We execute it on our growth initiatives, we grew revenue double digits, you're on your and every quarter since we went public.

<unk> adjusted EBITDA breakeven, which is a key milestone on our path to profitability and as Frank talked about we have taken action on improving our cash flow trajectory as well recently, we also eliminated the <unk> structure that we had which now gives all shareholders equal voting rights.

And we saw that as a a good step for corporate governance and also just being a shareholder friendly company. So I think we've executed well and we're taking actions to be supportive to to shareholders overall.

The next question comes up my technical what strategies are in place to ensure privacy store data.

So privacy and security of data are actually both critically important for us.

We have a chief information security officer with a staff in place.

<unk> team works every day to ensure privacy and that team also has throughout the organization.

Other partners that work with them across the company to ensure the security and privacy of of data, we encrypt data in transit.

We offer various levels have been corruption at rest we.

We used third parties to attempt to find for all my abilities in our systems.

Overall, we have a robust security and privacy program with physical digital and policy safeguards. We recently completed our stock too alright, So uhm overall taken a host of actions and have the teams in place to protect customer privacy.

Customer data privacy and security.

I got this next and that's Jas your competitors have raised prices are you considering the same <unk>.

So we certainly believe that we're in excellent value as we talked about the we're seeing many customers, leaving the traditional clouds to continue providing high value to their customers, while reducing their infrastructure costs. We believe we're a great value in the current.

Margaret and we are always considering ways to both optimize our product offering and ways to grow our business.

Now this next question <unk>.

Back pain is going to use a I for future growth.

Oh Aye AI is certainly something that's top of mind, it's very exciting time to run a business that benefits from data growth. When is there a new applications are constantly that are generating data certainly Jennifer AI is growing explosively.

We are.

Starting to use and looking at ways additional ways to improve productivity inside of the company using AI and on the front of our customers are using <unk>. We have dozens of AI customers that are through our sales assistant motion alone and three you may remember.

<unk> customers are about 20 times larger than ourselves serve customers yeah. So.

There's there's certainly a lot of <unk> being generated bye bye in data by a I use cases, and we're excited about the opportunities to leverage that for the growth of back wasteful.

Next question.

How are you encouraging employees to seek more responsibilities and leadership calls.

Sure I'll send notes I believe <unk> south come up the company and in part create positive culture and increase R. L. I.

So I I I I love that the question in part because.

We all agree with the we agree with the sentiment right, which is that at the end of the day that people make the company and the.

Happy and successful people in the company lead to happy and successful outcomes for everybody, including for Investor. Our lives. So our culture is very important to us we certainly believe from promoting from within.

We have some some data points that show that we've been supportive on this front. We we were recognized bright great places to work we recognized free when 23 diversity Award <unk>.

By Fortune's best workplaces in the Bay area.

Our turnover continues to be to be low and we continued to regularly reevaluate how we can help them ensure that our employees are happy and successful as.

That's part of the company and hopefully that also are excited about promoting back please to the customer is their friends or other.

Other partners et cetera.

Can you give your <unk> [laughter]. He did a marathon of questions next question will be for Frank.

So how has the management.

Managed to quite limited possible exchange rate fluctuations.

It's a good question because we do have customers 175 countries, but we don't have large foreign currency risk and the reason for that is that our customers pay us and U S dollars and then when we look at our expense side. We just don't have a lot of international expenses. So we have some for orange now.

<unk> data centers, we have international taxes, all for all the foreign currency risk for us is very well.

And that concludes suppression of questions from Saint technologies Andrea.

Can you spell that.

[noise] the conference right now.

Thank you for today's presentation and you may now disconnect.

[music].