Q1 2024 Backblaze Inc Earnings Call
Operator: Hello and welcome to the Backblaze first quarter 2024 conference call. All participants will be in listen-only mode.
Hello, and welcome to the Bok plays first quarter 'twenty 'twenty four conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw from the question queue, please press star, then 2. As a reminder, this conference is being recorded. I would now like to hand the call to Mimi Kong, Director of Investor Relations and Corporate Development. Please go ahead.
Mimi Kong: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw from the question queue. Please press Star then two.
Mimi Kong: As a reminder, this conference is being recorded.
Operator: I would now like to hand, the call to Mimi Kong director of Investor Relations and corporate development. Please go ahead.
Mimi Kong: Thank you, good afternoon, and welcome to Backblaze's first quarter 2024 earnings call. On the call with me today are Gleb Budman, co-founder, CEO, and chairperson of the board, and Frank Patchel, chief financial officer.
Mimi Kong: Thank you good afternoon, and welcome to back basis first quarter 'twenty 'twenty four earnings call on the call with me today are glad that my co founder CEO and chair person of the board and Frank <unk> Chief Financial Officer.
Mimi Kong: Today Backblaze will discuss the financial results that were distributed earlier this afternoon. Statements on this call include forward-looking statements about our future financial results, the use of our IPO proceeds, results from new features and offerings, the impact of price changes, partnerships, and sales and marketing initiatives, our ability to compete effectively and manage our growth, and our strategy to acquire new customers and retain and expand our business with existing customers. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those described in our risk factors that are included in our annual report on Form 10-K and our other financial filings. You should not rely on our forward-looking statements as predictions of future events.
Mimi Kong: Are they back believes will discuss the financial results that were distributed earlier this afternoon.
Mimi Kong: 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 8K filed today with the SEC.
Mimi Kong: Statements on this call include forward looking statements about our future financial results use of our IPO proceeds results from new features and offerings the impact of price changes partnerships and sales and marketing initiatives, our ability to compete effectively and manage our growth and our strategy.
Mimi Kong: G to acquire new customers and retain and expand our business with existing customers.
Mimi Kong: You can also find a slide presentation related to our comments in the webcast, which will also be posted to our investor relations page after the call. Please also see our press release or presentation for definitions of additional metrics such as NRR and gross customer retention rate. Before I turn the call over to Gleb, I'd also like to mention that in the latter portion of our call, as in prior calls, we will be addressing questions from investors that we gathered through the SAE Technologies platform. Thank you for joining us, and I would now like to turn the call over to Gleb. Thanks, Mimi.
Mimi Kong: These statements are subject to risks and uncertainties that could cause actual results to differ materially including those described in our risk factors that are included in our annual report on Form 10-K, and our other financial filings you should not rely on our forward looking statements as predictions of future events.
Gleb: 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.
Speaker Change: 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 our comments in the webcast, which will also be posted to our investor relations page after the call.
Gleb: Please also see our press release or presentation for definitions of additional metrics such as N R R and gross customer retention rate.
Gleb: Before I turn the call over to glad I'd also like to mention that in the latter portion of our call as in prior calls we will be addressing questions from investors that we gathered through the state technologies platform. Thank you for joining us and I would now like to turn the call over to Glenn.
Gleb: Thanks Mimi.
Gleb Budman: Good afternoon, everyone, and thank you for joining us today. We had a record start across our key financial metrics. This quarter, revenue grew by 28%, 8 percentage points better than last year. We achieved an adjusted EBITDA margin of positive 6% versus negative 12% a year ago. And finally, cash usage this quarter was only $600,000, a dramatic improvement from the $13 million of cash used in the same period last year. Not only have we delivered accelerated business growth and Improved Efficiency.
Gleb: Good afternoon, everyone and thank you for joining US today, we had a record start across our key financial metrics. This quarter revenue grew at 28% eight percentage points better than last year.
Gleb Budman: We achieved an adjusted EBITDA margin of a positive 6% versus negative 12% a year ago.
Gleb Budman: And finally cash usage this quarter was only $600000 a dramatic improvement from the $13 million of cash use the same period last year.
Gleb Budman: Not only have we delivered accelerated business growth.
Gleb Budman: But we have also delivered product innovations that serve our mission of supporting customers and partners with the best storage cloud. Before diving into our business results, I want to speak to a customer trend that we're already benefiting from today and which we see accelerating. A few months ago, we conducted a survey of more than 400 IT decision makers.
Gleb Budman: And improved efficiency, but we have also delivered product innovations that serve our mission of supporting customers and partners with the best storage cloud.
Gleb Budman: A majority of the respondents indicated that they prefer to choose from best-of-breed solutions when selecting vendors. And yet, the cloud landscape has been historically defined by cloud 1.0, where a few diversified cloud providers aim to lock customers into their platforms and take away customer choice. You may have heard that Google Cloud, AWS, and Azure recently announced free egress for their customers. They may have done this to mollify regulators because the cloud 1.0 model is a walled garden by design.
Gleb Budman: Before diving into our business results I want to speak to a customer trend that we're already benefiting from today bandwidth.
Gleb Budman: Bandwidth T X already.
Gleb Budman: A few months ago, we conducted a survey of more than 418 decision makers a majority of the respondents indicated that they prefer to choose from best of breed solutions when selecting vendors.
Gleb Budman: But this move does not at all address what customers actually want, because it only applies to customers who leave those platforms completely. What customers really want is to freely use their data with multiple cloud services. These fake free egress announcements are only free exit, not free egress, and underline that cloud 1.0 just doesn't work that way.
Gleb Budman: And yet the cloud landscape has been historically defined by cloud, one dato, where a few diversified cloud providers aim.
Gleb Budman: Two lakh customers into their platforms and takeaway customer choice.
Gleb Budman: You may have heard that Google cloud AWS, and Azure recently announced free egress for their customers.
Gleb Budman: They may have done this to mollify regulators because the crowd one that our model is a walled garden by design.
Gleb Budman: But this move does not at all address what customers actually want because it only applies to customers who use those platforms completely.
Gleb Budman: What customers really want is to freely use their data with multiple cloud services.
Gleb Budman: These fake free egress announcements are only free exit not free egress and underscore that I wonder, though just doesn't work that way.
Gleb Budman: Businesses want Cloud 2.0, an open cloud ecosystem where businesses can use their data wherever and however they want. It's better for them, better for innovation, and ultimately better for the broader economy, and Backblaze is built for Cloud 2.0. First, our egress is actually free, allowing customers to use their data without fear of crippling bills or limits on who they work with.
Gleb Budman: Businesses want cloud Trudeau.
Gleb Budman: And open cloud ecosystem, where businesses can use their data wherever and however, they want to.
Gleb Budman: It's better for them better for innovation and ultimately better for the broader economy and.
Gleb Budman: And backwards is built for cloud Gerardo <unk>.
Gleb Budman: First our egress is actually free allowing customers to use their data without fear of crippling bills or limits on who they work with.
Gleb Budman: Second, we have a robust partner ecosystem, which gives customers easy access to the best of breed platforms they need. Third, we provide a trusted, durable platform that provides strong performance. And last, we continue to deliver innovations that support customers in using the best of breed services they want. A great example of this last point is our newest innovation called Event Notification. Event Notifications gives customers the ability to build automated workflows across different best-of-breed cloud providers. For example, a customer can upload a video to B2 cloud storage. And event notifications will automatically trigger a compute process at another provider that prepares the file for streaming.
Gleb Budman: Second we have a robust partner ecosystem, which gives customers easy access to the best of breed platform as they need.
Gleb Budman: Third we provide a trusted durable platform that provides strong performance.
Gleb Budman: And last we continue to deliver innovations that support customers and using the best of breed services they want.
Gleb Budman: A great example of this last point is our newest innovation called event notifications.
Gleb Budman: Event notifications gives customers the ability to build automated workflows across different best of breed cloud providers.
Gleb Budman: For example.
Gleb Budman: A customer can upload a video to be to cloud storage.
Gleb Budman: And event notifications will automatically trigger a compute processed at another provider that prepares the file for streaming.
Gleb Budman: Currently, similar offerings in the market only trigger actions within one platform or require complex and restrictive workarounds to work with other providers. We designed event notifications to be platform agnostic, empowering customers to build workflows from the services they want, cutting out significant inefficiencies and costs in the process. The product launched in private preview just three weeks ago, and we already have over 100 organizations that have requested to join the early release.
Gleb Budman: Currently similar offerings in the market only trigger actions within one platform or require complex and restrictive workarounds to work with other providers.
Gleb Budman: We designed event notifications to be platform agnostic empowering customers to build workflows from the services they want cutting out significant inefficiencies and costs in the process.
Gleb Budman: The product launched in private preview just three weeks ago, and we already have over 100 organizations that have requested to joined early release.
Gleb Budman: Event notifications was also recognized as product of the year for cloud computing and storage at the National Association of Broadcasters Conference, a major trade show for the media and entertainment industry. I'm very encouraged by the early reception and the potential for our services to become increasingly strategic for our customers. Including event notifications, Backblaze has announced four major releases over the past six months, from the Shards Dash Performance Upgrade to Enterprise Control for Business Backup to our Powered by Backblaze program.
Gleb Budman: Event notification was also recognized as product of the year for cloud computing and storage at the National Association of Broadcasters Conference a major trade show for the media and entertainment industry.
Gleb Budman: I'm very encouraged by the early reception.
Gleb Budman: And the potential for our services to become increasingly strategic for our customers.
Gleb Budman: Including event notifications backwards, there's enough for major releases over the past six months.
Gleb Budman: From the sharp stash performance upgrade.
Gleb Budman: Two enterprise control for business back up.
Gleb Budman: Two are powered by Backwoods program I.
Gleb Budman: I am proud of our team for delivering features that differentiate us and strategically position us as the de facto cloud storage provider for the open cloud. In Q1, we also made significant progress in our compliance and security programs, including StateRamp and the Motion Picture Association's Trusted Partner Network. Focusing on compliance and security is another key element in our effort to make our services as easy to adopt as possible, in this case, for the state and local government, the educational industries, and the media and entertainment industry.
Gleb Budman: I am proud of our team for delivering features that differentiate us and strategically position us as the de facto cloud storage provider for the Oracle cloud.
Gleb Budman: In Q1, we also made significant progress in our compliance and security programs, including state ramp and the motion picture associations trusted partner network.
Gleb Budman: Focusing on compliance and security is another key element in our effort to make our services as easy to adopt as possible.
Gleb Budman: In this case for the state and local government and educational industries, and the media and entertainment industry.
Gleb Budman: At the same time, we continue to expand and enrich our partner network. Recently, Backblaze and Kerasoft, which is one of the largest privately held IT software and services companies in the world, announced that we've been added to their NASPO value-point contract, which eases the procurement process in government and education. Our partners also continue to help us facilitate and win deals with larger customers. Recently, when the media team of one of the world's largest retailers needed a trusted location to hold their creative work, their preferred reseller recommended adopting Backblaze.
Gleb Budman: At the same time, we continue to expand and enrich our partner network.
Gleb Budman: Recently.
Gleb Budman: Please and terrorists soft which is one of the largest privately held I T software and services companies in the world.
Gleb Budman: Announced that we've been added to their mask boat Valuepoint contract, which eases the procurement process in government and education.
Gleb Budman: Our partners also continue to help us facilitate and win deals with larger customers.
Gleb Budman: Recently, the media team of one of the world's largest retailers needed a trusted location to hold their creative work.
Gleb Budman: Their preferred reseller recommended adopting back blades.
Gleb Budman: Our performance, ease of use, and affordability won the deal. In addition, our sole focus as a best-of-breed provider for cloud storage means that this retailer doesn't need to worry about any conflict of interest. With a vendor like Amazon, that obviously wouldn't be the case.
Gleb Budman: Our performance ease of use.
Gleb Budman: And affordability won the deal.
Gleb Budman: In addition, our sole focus as a best of breed provider for cloud storage means that this retailer doesn't need to worry about any conflicts of interest.
Gleb Budman: With a vendor like Amazon that obviously wouldn't be the case.
Gleb Budman: Additionally, a number of meaningful partners have already joined our Powered by Backblaze program, which we announced just last quarter. One of the most recent companies to join Powered by Backblaze is Axel AI. Their new Axel AI Cloud leverages our cloud platform to deliver AI-powered media search tools. In the broader AI space, we're seeing a growing number of partners and customers utilizing the value of B2 cloud storage for AI workflows. Since the beginning of 2023, the number of AI companies using B2 for data storage has doubled with a wide range of use cases, such as wildfire management and monitoring, manufacturing optimization, satellite data analysis, and much more.
Gleb Budman: Additionally, a number of meaningful partners have.
Gleb Budman: Already joined our powered by back plates program, which we announced just last quarter.
Gleb Budman: One of the most recent companies to join powered by is Axel AI.
Gleb Budman: There are new OXXO AI cloud Leverages, our cloud platform to deliver AI powered media search tools.
Gleb Budman: In the broader AI space.
Gleb Budman: Seeing a growing number of partners and customers utilizing the value of b to cloud storage for AI workflows.
Gleb Budman: Since the beginning of 2023, the number of AI companies using B two for data storage has doubled with a wide range of use cases, such as wildfire management and monitoring.
Gleb Budman: And manufacturing optimization.
Gleb Budman: Satellite data analysis and much more.
Gleb Budman: I'm very proud of what the team has achieved to not only reach our record financial results but also deliver platform and product innovation. I believe these put us in a strong position to deliver the transformational power of Cloud 2.0. I love seeing what businesses can do after we help to free their data from legacy platforms.
Gleb Budman: I'm very proud of what the team has achieved to not only reach our record financial results.
Gleb Budman: But to also deliver our platform and product innovations.
Gleb Budman: I believe these put us in a strong position to deliver the transformational power of cloud to play out.
Gleb Budman: I Love seeing what this can do after we help to free their data from legacy platforms before.
Gleb Budman: Before I hand off the call, today, we announced that our CFO, Frank, is planning to retire this year. A search for his successor is already underway, and Frank intends to remain with us to help ensure a smooth transition to our new CFO. We're all hugely thankful for everything Frank has brought to the team, but we'll save our gratitude and celebration of his many accomplishments for his departure later this year, until we hire and onboard his replacement. Frank will continue to help us drive great results. I'll pass the call to Frank now to review our financial results.
Gleb Budman: Before I hand off the call today, we announced that our CFO Frank is planning to retire this year.
Gleb Budman: A search for his successor was already underway and Frank intends to remain with us to help ensure a smooth transition to our new CFO.
Gleb Budman: We're all hugely painful for everything Frank has brought to the team, but we'll save our gratitude and celebration of his many accomplishments for his departure later this year.
Frank: Until we hired and on board his replacement right.
Frank: Well continue to help us drive great results.
Frank: I'll pass the call it breaks out to review our financial results right.
Francis P. Patchel: Thank you, Gleb, and thanks, everyone, for joining us today. As Gleb mentioned, I'm planning to retire once we've identified my replacement and completed the onboarding process. There will be time for goodbyes when we get there, but until then, it will be business as usual.
Frank: Thank you Glenn and thanks, everyone for joining us today.
Frank: As Glenn mentioned I'm planning to retire once we've identified might be placement and completed the onboarding process.
Frank: There will be time for goodbyes, when we get there, but until then it will be business as usual.
Francis P. Patchel: And I'm happy to turn to the record business results we have to share today. As a reminder, 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. As Gleb mentioned, we have made significant strides in strengthening our financials from a year ago. This quarter, compared to last year, we accelerated our growth rate while expanding our adjusted gross margin, significantly improving adjusted EBITDA margins, and meaningfully reducing cash usage. The tremendous strides made over the year were positively impacted by the operating leverage inherent in our business. We have continued to execute and build a strong and consistent track record as a public company.
Frank: And I'm happy to turn to the record business results, we have to share today.
Francis P. Patchel: As a reminder, unless otherwise noted I will be referring to non-GAAP metrics and the growth rates mentioned are year on year.
Francis P. Patchel: We remain focused on two key metrics revenue growth and adjusted EBITDA, which is defined in our earnings release.
Francis P. Patchel: As Glenn mentioned, we have made significant strides in strengthening our financials from a year ago this quarter compared to last year, we accelerated our growth rate.
Francis P. Patchel: Expanding our adjusted gross margin significantly improving adjusted EBITDA margins and meaningfully reducing cash usage.
Francis P. Patchel: The tremendous strides made over the year were positively impacted by the operating leverage inherent in our business we.
Francis P. Patchel: We have continued to execute and build a strong and consistent track record as a public company.
Francis P. Patchel: Our Q1 revenue totaled $30 million, an increase of 28% year-over-year versus 20% for the same period of last year. B2 cloud storage revenue was $14.6 million, reflecting 47% growth. Computer backup revenue totaled $15.3 million, reflecting 14% growth.
Francis P. Patchel: Our Q1 revenue totaled $30 million, an increase of 28% year over year versus 20% the same period last year.
Francis P. Patchel: <unk> cloud storage revenue was $14 6 million, reflecting 47% growth computer backup revenue totaled $15 3 million, reflecting 14% growth.
Francis P. Patchel: Turning to our Net Revenue Retention, or NRR, total company NRR was 112%, with B2 cloud storage at 126% and computer backup at 101%, which continue to show quarter-on-quarter improvement. Working down the P&L, Adjusted Gross Margin increased about 500 basis points year-over-year to 77 percent, reflecting the price increase we put in place in Q4 of last year and further operating efficiencies at our data center. This quarter, adjusted EBITDA was $1.9 million, or 6% of revenue, reflecting a substantial 18 points higher than the same period last year.
Francis P. Patchel: Turning to our net revenue retention or in our our total company and all of our was 112% with be two cloud storage at 126% and computer back up at 101%.
Francis P. Patchel: Which continued to show quarter on quarter improvement.
Francis P. Patchel: Working down the P&L adjusted gross margin increased about 500 basis points year over year to 77%.
Francis P. Patchel: Putting the price increase we put in place in Q4 of last year and further operating efficiencies at our data centers.
Francis P. Patchel: This quarter adjusted EBITDA was a positive $1 9 million or 6% of revenue, reflecting a substantial 18 points higher than the same period last year.
Francis P. Patchel: Over the past year, we have significantly increased revenue while carefully managing expenses and increasing operating efficiency. This quarter, we also had slower headcount additions, which was offset by an increase in payroll taxes related to the recent stock price appreciation. Turning to the balance sheet, cash and short-term investments, including restricted cash, totaled $32.8 million at the end of Q1 2024 versus $33.4 million at the end of Q4 2023, reflecting just $600,000 in cash use.
Francis P. Patchel: Over the past year, we have significantly grown revenue, while carefully managing expenses and increased operating efficiencies. This quarter. We also had slower head count additions, which was offset by an increase in payroll taxes related to the recent stock price appreciation.
Francis P. Patchel: Turning to the balance sheet cash and short term investments, including restricted cash totaled $32 8 million at the end of Q1, 'twenty 'twenty four versus $33 4 million at the end of Q4 2023, reflecting just $600000 in cash usage.
Francis P. Patchel: Even after removing the benefit of option proceeds, cash usage for the quarter was about $4.9 million compared to $13.7 million in Q1 of last year, an almost $9 million improvement. The reduction in cash usage benefited from the price increases we put in place last quarter and operating expense discipline. Moving on to our guidance, for the second quarter, we expect revenue to be in the range of $30.7 to $31.1 million, and we expect Q2 adjusted EBITDA margin between 6 and 8 percent.
Francis P. Patchel: Even after removing the benefit of options proceeds cash usage for the quarter was about $4 9 million compared to $13 7 million in Q1 of last year and almost 9 million dollar improvement.
Francis P. Patchel: The reduction in cash usage benefited from the price increases we've put in place last quarter and operating expense discipline.
Francis P. Patchel: Moving onto our guidance for the second quarter, we expect revenue to be in the range of 37 to $31 1 million.
Francis P. Patchel: We expect Q2, adjusted EBITDA margin between six and 8%.
Francis P. Patchel: For the full year 2024, we are reiterating revenue guidance of $126 to $128 million and an adjusted EBITDA guidance range of 8 to 10%. For year-end 2024, we continue to project having at least $20 million in cash. So to wrap it up, we are very pleased with our Q1 performance. We had a record start to the year where we accelerated growth and continued to drive more operating leverage. I will now pass the call back to Gleb. Thanks, Frank.
Francis P. Patchel: For the full year 'twenty 'twenty four we are reiterating revenue guidance of $126 million to $128 million and adjusted EBITDA guidance range of 8% to 10%.
Gleb Budman: For year end 2024, we continued to project, having at least $20 million in cash.
Gleb Budman: So to wrap it up we are very pleased with our Q1 performance. We had a record start to the year, where we accelerated growth and continue to drive more operating leverage.
Gleb Budman: I will now pass the call back to Clive Thanks, Frank I'm proud of our record financial results and technology innovation. Thank.
Gleb Budman: Thanks, Frank. I'm proud of our record financial results and technology innovation. Thank you to our employees, customers, partners, and investors for joining us on this journey as we help lead the industry shift to Cloud 2.0. I'm excited to see many of you at the Oppenheimer Conference tomorrow and the Needham and Craig Hallam Investor Conferences later this month. And with that, I'd like to open it up for questions. Operator?
Gleb Budman: Thank you to our employees customers partners and investors for joining us on this journey as we help lead the industry shift to cloud to Plano.
Gleb Budman: I'm excited to see many of you at the Oppenheimer Conference Tomorrow.
Gleb Budman: And then meet them and Craig Hallum Investor conferences later this month.
Gleb Budman: I'd like to open it up for questions operator.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. We will now pause momentarily to assemble our roster. Today's first question comes from Simon Leopold with Raymond James. Please go ahead.
Speaker Change: Thank you 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 keys to withdraw your question. Please press Star then two.
Operator: We will now pause momentarily to assemble our roster.
Operator: Yeah.
Operator: Today's first question comes from Simon Leopold with Raymond James. Please go ahead.
Operator: Okay.
Victor Chiu: Hi guys, this is Victor Chiu in for Simon. I wanted to follow up on the egress comment that you guys made. Acknowledging that Google and AWS' free egress has a number of strings attached, do these moves at least slightly alleviate concerns from customers whose primary concern was vendor lock-in and maybe close the gap slightly versus Backblaze when considering egress fees?
Operator: Hi, guys. This is Victor Chu in for Simon.
Victor Chiu: I wanted to follow up on the <unk>.
Victor Chiu: The egress B a comment.
Victor Chiu: Did you guys made it acknowledging that the Google and AWS.
Victor Chiu: <unk> quote unquote egress do you know has a number of strings attached.
Victor Chiu: Do these moves at least slightly alleviate concerns from customers whose primary.
Victor Chiu: No concerns as vendor lock in and maybe you know closed the gap slightly universe as badly as Glenn are you now considering groceries.
Victor Chiu: Yeah.
Gleb Budman: Hey Victor, this is Gleb. Thanks for the question. So, the short answer is no. What they've really done is allowed free exit, not free egress. And the thing about it is that in the past, before these things, customers could exit the clouds, and some of us as open cloud vendors would actually cover the costs of having them leave those traditional cloud providers. What customers really want is to be able to actually use their data.
Victor Chiu: Hey, Victor this is Glenn.
Speaker Change: Thanks for the question. So the short answer is no.
Gleb Budman: Alright, so that what they've really done is three exit not free egress and the thing about it is that in the past before these customers could exit the clouds and some of us as as open cloud vendors would actually cover the costs of <unk>.
Gleb Budman: Giving them leave.
Gleb Budman: Traditional cloud providers, but what customers really want is to be able to actually use their data. So the the barrier that they have put in place for what Theyre doing is you have to fully 100% stop using their platforms that's not what.
Gleb Budman: So, the barrier that they have put in place for what they're doing is that you have to fully 100% stop using their platforms. That's not what these customers are trying to do. They're trying to actually use their data. And so, an example I think I shared in a prior earnings call was a customer that had previously been entirely on AWS, had some outages, and wanted to use multiple cloud services to improve durability, made AWS the secondary, and decreased their cost by half overall because of our partnership with one of the cloud CDNs.
Gleb Budman: These customers are trying to do they're trying to actually use their data and so on.
Gleb Budman: An example, I think I've shared in our prior earnings call was.
Gleb Budman: Customer that had previously been entirely on AWS had some outages and wanted to use multiple cloud services to improve durability. They actually added back ways made us the primary.
Gleb Budman: Made AWS the secondary.
Gleb Budman: And the and decrease their cost in half overall because of the.
Gleb Budman: Our partnership with one of the cloud C D ends.
Gleb Budman: They have enabled them to transfer data for free, and therefore, they could double their durability, decrease their overall cost by half, and improve their overall infrastructure. So that's the kind of thing that customers want. These free exit moves don't help with that at all.
Gleb Budman: It enabled them to transfer data for free and therefore, they could double their durability decrease their overall cost in house and improve their overall Fisher. So that's the kind of thing that the customers want these free exit moves.
Gleb Budman: Don't help with it with that at all for customers.
Victor Chiu: Okay, got it. So the full, you know, that the kind of migration away was never really, you know, an issue. Anyways, it's kind of what you're saying. Exactly.
Speaker Change: Okay got it so the full the kinda migration away. It was never really a you know.
Victor Chiu: An issue anyway, just kind of what you're saying.
Victor Chiu: Exactly because okay and Ah I, just Lisa can you give us an update I don't know if you.
Victor Chiu: Can you give us an update? I don't know if you spoke about this in your pre-recorded comments around the AI-focused solutions that you mentioned last quarter that you guys are working on and developing. Can you give us an update on that and kind of your progress?
Victor Chiu: About this and your your prerecorded commentary.
Victor Chiu: Around the AI focused solutions that you mentioned last quarter that you guys are working on it and develop it can you give us an update around that.
Victor Chiu: And kind of your progress around that.
Gleb Budman: Sorry, Victor, I'm not sure about the AI solution we talked about developing, but what I'll tell you is that we were focused on helping customers with their AI use cases. And we shared some of the examples, like the wildfire example and the satellite navigation example that I mentioned on the call, just to give maybe a little more color on those. So as customers are building their AI workflows, they need a place where the data itself lives, the foundational data platform for all that information. And more and more customers are coming to Backblaze to have Backblaze be that foundational data platform. So I gave a couple of examples of that on the prior earnings call.
Speaker Change: Sorry, if I could I'm not sure about an AI solution, we talked about developing but what I would tell you is that we bought.
Gleb Budman: We're focused on helping customers with their AI use cases.
Speaker Change: And okay.
Gleb Budman: We shared some of the examples like the wildfire.
Gleb Budman: Our example in the AR.
Gleb Budman: And the satellite Navigation example, that I mentioned on the call just to give maybe a little more color on those so as the customers are building their AI workflows.
Gleb Budman: They need a place where the data itself lives the foundational data platform for all of that information and more and more customers are coming to back. Please to have back with b that foundational data platform. So I gave a couple of examples of that on the prior earnings call. The in the case of a customer that does.
Gleb Budman: In the case of our customer that does wildfire analysis, what they're trying to do is take camera footage, look at all the potential wildfires out there, and then triage them using AI. And the data for all that underlying analysis is on Backblaze. What the satellite navigation company is trying to do is help create better global navigation, and they're using AI to make the models better, especially in places where tall buildings and other things get in the way of creating those models.
Gleb Budman: Wildfire analysis, what they're trying to do is.
Gleb Budman: Take camera footage look at all the potential wired wildfires out there and then triage them using AI and the data for all of that underlying analysis is on back. Please what the satellite navigation company is trying to do is help create better global navigation and they're used.
Gleb Budman: <unk> AI to make the models better, especially in places where tall buildings and other things get in the way of creating those models and they're using AI to make those models better and they're using back. Please the defense foundational data platform for there.
Gleb Budman: And they're using AI to make those models better. And they're using Backblaze as the foundational data platform for their AI workflows. So that's what we're doing. We're providing that really high-performance, highly durable, highly available platform, which supports them in building these workflows because of our support for the open cloud ecosystem.
Gleb Budman: I worked for us so that's what we're doing where we're providing that really high performance highly durable highly available platform, which supports them in building. These workflows because of the our support for the open cloud ecosystem.
Victor Chiu: But didn't you mention some specific focus? I'm sorry, it's kind of like investment. Let me think.
Gleb Budman: But didn't you mentioned some specific.
Victor Chiu: Focus I'm, sorry, you know kind of like investment.
Gleb Budman: Yeah, last quarter, you know, you said to the head of sales, no recurrence focus on our AI initiatives, which are aimed to help support customers and managers. So, okay, so that's what you were referring to. It wasn't a specific... Yeah, exactly. Okay, got it.
Speaker Change: Yeah last quarter, you said the head of sales now I will turn this.
Gleb Budman: Focus to our AI initiatives.
Gleb Budman: Aimed to help support customers and then so okay. So so that's what you were forgotten.
Gleb Budman: It wasn't a species that's exactly it.
Gleb Budman: Okay got it.
Victor Chiu: Right, so as we bring on a new head of sales, our current head of sales, Neil A, will be stepping into the role focused on our AI initiatives. By AI initiatives, what I don't mean is product launches; what I mean is the opportunities in the AI space that we have to help customers, because we do think that there are plenty opportunities that we can help. There are many customers who are already doing it, and we would like him to take on the role of really understanding how we can further help more customers with it.
Gleb Budman: So as that as we bring on a new head of sales our current head of sales anyway will be stepping into the role focused on our AI initiatives.
Victor Chiu: He didn't want by AI initiatives.
Victor Chiu: What I don't mean is as product launches what you got at.
Victor Chiu: The opportunities in the AI space that we have to help customers because we do think that there there are plentiful opportunities that we can help there are many customers who are already doing it and we would like them to take on the role of really understanding how we can further help more customers with it.
Gleb Budman: I see. So it's like a marketing initiative to help customers, you know, understand, you know, Backblaze's role in being able to do those things. That's more of what you're referring to.
Victor Chiu: So it's like a marketing initiative to help customers understand you know backwards just role in being able to.
Gleb Budman: So those things that's more like you.
Gleb Budman: Okay.
Gleb Budman: It's a two-sided coin, yeah. It's both inbound and outbound. So it's both going out and helping educate more customers and also understanding what their use cases and needs are, and bringing more of that insight into the organization so we can evolve with their needs.
Gleb Budman: It's a two sided yeah. It's it's it's both inbound and outbound. So it's it's supposed to going out and helping educate more customers and also understanding what their use cases and needs are and bring more of that insight into the organization. So we can evolve with their with their needs.
Operator: Got it. That's helpful. Thank you. Thanks, Victor. Thank you. The next question is from Zach Cummins with B. Reilly Securities. Please go ahead.
Speaker Change: Got it that's helpful. Thank you.
Operator: Thanks, Victor. Thank you. The next question is from Zach Cummins with B. Riley Securities. Please go ahead. Hi, this is Ethan Waddell calling in for Zach Cummins. Thanks for taking my questions.
Operator: Thanks, Victor. Thank you. The next question is from Zach Cummins with B Riley Securities. Please go ahead.
Ethan Waddell: Hi, this is deep and wide L calling in for Zach Cummins, Thanks for taking my questions.
Ethan Waddell: To start could you maybe speak a little bit to the different levers that you can possibly pull to sustain your strong growth in the b two called the storage area.
Gleb Budman: Sure, happy to touch on some of those. So the first one is just go to the market. When we went public, we talked about that 80% of all of our revenue was self-serve. So customers show up on the website, prospects show up on the website, they enter, and you want a password, they enter a credit card, and they sign up and go; they don't ever talk to a human. And 20% was with our sales-assisted motion.
Operator: Sure happy to touch on some of those so the at the first one is just go to market.
Gleb Budman: We when we went public we talked about that 80% of all of our revenue was self serve so.
Gleb Budman: Customers show up to the website prospects joked at the website they enter and you want a password they enter a credit card and they sign up and go they don't ever talk to a human.
Gleb Budman: And those customers were about 20 times bigger. And so at IPO, we said we wanted to lean into that sales motion in addition to continuing to optimize our really efficient self-serve motion. So, we've added resources and investment to the self-serve side. We've done things like optimizing the way the website works. And we continue to do that to drive more self-serve business, and we've seen year-on-year growth, quarter-on-quarter, in the number of paying customers on the self-serve side.
Gleb Budman: And 20% was with our sales assisted motion and those customers were about 20 times bigger and so at IPO. We said, we wanted to lean into that sales motion. In addition to continuing to optimize our real efficient self serve motion. So we've we've added resources and investment to the self serve side we've done.
Gleb Budman: Things like.
Gleb Budman: Optimizing the way the website works and we continue to do that to drive more self serve business and we've seen them.
Gleb Budman: Year on year growth quarter on quarter with the number of paying customers on the self serve side. We believe we continue to have opportunity for that we also have.
Gleb Budman: We believe we continue to have an opportunity for that. We also have built up the sales motion. And we've done that with sales people. We've brought on some additional sales people this quarter for some of the up-market. Those are all innovations which help us expand into new markets, expand our opportunities with existing markets, and also upsell to our existing customers.
Gleb Budman: Built up the sales motion and we've done that.
Gleb Budman: With sales people.
Gleb Budman: <unk> brought on some additional salespeople.
Gleb Budman: This quarter for some of the up market.
Gleb Budman: Motion.
Gleb Budman: And the channel side. So we've we've last year, we kicked off an initiative to build out our channel efforts and so we've been starting to lean more into that so the go to market motion overall is one way to drive growth and then the other is the innovation side. So.
Gleb Budman: I highlighted on the call shirts dash enterprise control powered by and now event notification.
Gleb Budman: Those are all innovations, which help us expand into new markets expand our opportunity with existing market and also upsell to our existing customer base.
Speaker Change: Thank you that's really helpful and then.
Gleb Budman: Can you speak to maybe if theres been any uptick or downtick in churn.
Francis P. Patchel: Hi, this is Frank. I can speak to that. We're really pleased about the churn statistics that we've seen. We think of it as customer retention. Our customer retention has remained at 91 percent overall, and that considers the fact that we did do a price increase in quarter four. So, it's been very, very strong. We also look at our renewal rates. Our computer backup customers are continuing to renew at very strong rates, actually a little stronger than we thought. So, it's actually kicking up our deferred revenue nicely, and the customer retention there is quite strong as well.
Gleb Budman: Hi.
Gleb Budman: Hi, This is Frank I can speak to that.
Francis P. Patchel: We're really pleased about the churn statistics that we've seen we think of it as customer retention our customer retention has.
Francis P. Patchel: <unk> remained at 91% overall.
Francis P. Patchel: And that considers the fact that we did do a price increase in quarter. Four so it's been very very strong and we also look at it.
Francis P. Patchel: At our renewal rates are.
Francis P. Patchel: Backup customers are continuing to renew at very strong rates actually a little stronger than we thought.
Francis P. Patchel: So it's actually kicking up our deferred revenue nicely and.
Francis P. Patchel: The customer retention, there is quite strong as well.
Speaker Change: That's good to hear thank you.
Operator: Thank you. The next question comes from Jason Ader with William Blair. Please go ahead.
Francis P. Patchel: Thank you. The next question comes from Jason Ader with William Blair. Please go ahead.
Jason Noah Ader: Yeah, thank you. Good afternoon, guys. Just a few questions. First, just maybe some commentary on the macro environment and how it might have changed or not since last quarter. And then I have some questions for you, Frank, just on the numbers.
Jason Noah Ader: Yeah. Thank you good.
Jason Noah Ader: Afternoon, guys. Just a few questions first just maybe some commentary on the macro environment and how it is.
Jason Noah Ader: Might've changed or not since last quarter.
Jason Noah Ader: And then.
Jason Noah Ader: Just a question for you Frank just on the the numbers are so 14% growth in computer back up.
Jason Noah Ader: So 14% growth in computer backup. What is driving that? Is that just the price increase? But it's definitely a better growth rate than what we've seen over the last four quarters. And then on this B2 growth rate, it's a little bit worse than what we saw last quarter and then also last year ago quarter, you know, 49 and 47. This quarter was 43. So just what's going on here? How come we've seen some deceleration in the cloud, and while we've seen some acceleration on the computer back?
Jason Noah Ader: What is driving that is that just a price increase but it's definitely a better growth rate than what we've seen over the last four quarters and then on the just to be to growth rate, it's a little bit worse than what we saw.
Jason Noah Ader: Last quarter, and then also last year ago quarter.
Jason Noah Ader: 49% and 47 this quarter was 43, so just what's going on there how come and we've seen some deceleration on an on cloud and why we've seen some acceleration on computer backup.
Gleb Budman: Jason, I'll start with the first bit of it, and then I'll let Frank address the questions you asked him directly. So, on the macro side of things. We aren't seeing anything massively different. What I will say is that I think we've all seen that the Fed has kept interest rates where they are. The bulk of our focus in terms of our customer base is small to mid-market customers who are certainly sensitive to the macroeconomic environment.
Speaker Change: Jason I'll start with the first Peter with of it and then I'll, let Frank address the question that you're asking for to him directly so on the macro side of things.
Gleb Budman: We arent seeing anything massively different what I will say is that I think we've all seen that the fed has has kept interest rates, where they are the bulk of our focus in terms of our customer base is the small to mid market.
Gleb Budman: Customers, who are certainly sensitive to the macroeconomic environment and so we're being cautious about where that's headed but we havent seen anything too significant one way or the other with customers.
Gleb Budman: And so we're being cautious about where that's headed, but... We haven't seen anything too significant one way or the other with customers. We continue to sign up customers. Obviously, we had a strong quarter overall, and that's driven by customers continuing to stay with us and continuing to sign up.
Gleb Budman: We continue to sign up customers, obviously, we had a strong quarter overall.
Gleb Budman: And that's driven by customers continuing to stay with us and continuing to sign up.
Francis P. Patchel: I'm going to talk about the growth rates of the product side. So, actually, we're pleased with our growth rates. The first one is that in computer backup, it was 14% this quarter, which is very strong. That is due to the price increase, but it's also due to what I was referring to before, which is very high renewal rates. Because remember, every month we have more and more customers renewing off of their one-year and two-year contracts. So those renewal rates have been particularly high. For the full year, we did see 10%. We said that, and we're remaining at that amount. So we are still thinking in that double digit.
Gleb Budman: I talk about the growth rates of the product side. So actually we're pleased with our growth rates at the first one is that in computer back up it is 14% this quarter, which is very strong.
Francis P. Patchel: That is due to the price increase but it's also due to what I was referring to before which is very high renewal rates because remember every month, we have more and more customers renewing off with their one year and two year contracts. So those renewal rates have been particularly high for the full year, we did see 10% we set.
Francis P. Patchel: That we have remaining at that amount. So we do still thinking into that double digits. One of the things that's starting to contribute to the revenue side is b one he wishes our enterprise version of.
Francis P. Patchel: One of the things that's starting to contribute to the revenue side is B1e, which is our enterprise version that is an upsell version for existing accounts. And we're seeing some uptake there already, even though it's just been introduced. And also, we have some new customers coming in on B1e as well, and we're very excited about that. And that enterprise is really aimed at larger companies as we move up the market. So, good things there.
Francis P. Patchel: That is an upsell version for existing accounts and we're seeing some uptake there already even though it's just been introduced and also we have some new.
Francis P. Patchel: Are the customers coming in on <unk> as well and we're very excited about that note that enterprises really aimed at.
Francis P. Patchel: Larger companies as we move up market so good things there.
Francis P. Patchel: On B2, the growth there, at 47% this quarter in revenue, was a bit higher than we thought. That's why we were at the top of our range. We are pleased with that. It is due to the combination of the price increase and new business. But you're right, as we move through the year, we're saying that our total growth for the entire year will be about 40%. And the reason for that is that in quarter four, we'll be lapping our price increase. So there's less growth there in that quarter. But overall, we do like...
Francis P. Patchel: On computer back up it's it's I mean, excuse me not to be too the.
Francis P. Patchel: Growth there at 47% this quarter and revenue was a bit higher than we thought that's why we were at the top of our range.
Francis P. Patchel: We are pleased with that it is due to the combination of.
Francis P. Patchel: The price increase that in the new business, but.
Francis P. Patchel: But youre right as we move through the year, we're saying that there are total growth for the entire year will be about 40% and reason for that is in a quarter.
Francis P. Patchel: Quarter four will be lapping.
Francis P. Patchel: Lapping a price increase so there's a little bit less growth, there's less growth there in that quarter.
Francis P. Patchel: But overall, we do like what we see.
Jason Noah Ader: Yeah, sorry, I misspoke. I meant B2 cloud ARR growth was lower than last quarter. It was 43%, I believe, 49% last quarter, and then 47% a year ago. So that's what I was trying to get at.
Speaker Change: Yeah, sorry, I misspoke I meant.
Jason Noah Ader: It would be to cloud are our growth was.
Jason Noah Ader: Lower than last quarter. It was a 43% I believe at 49% last quarter and 47% a year ago.
Jason Noah Ader: So that's what I was trying to get at.
Jason Noah Ader: I see so a R R.
Francis P. Patchel: So ARR is not a great predictor for our business because of the ups and downs and the calculation wobbles a bit because we calculated off of the last month of the quarter. So we have a higher month because we have so much pay-as-you-go revenue that every day is important. So it wobbles a little bit based on the calculation methodology. But we still think that our growth rates there are well above the market or the growth rates of the market. So we do feel good about it.
Jason Noah Ader: It's not a perfect predictor for our our business because of the ups and downs in the calculation of wobbles a bit we calculated off of the last month of the of the quarter. So when you have a higher month, because we have so much.
Francis P. Patchel: Pay as you go revenue that every day is important so it was a little bit based on the calculation methodology, but we're still think that our growth rates, there and are well above.
Francis P. Patchel: The market or the growth rates over the market, So where we do feel good about it.
Francis P. Patchel: Okay.
Speaker Change: Thank you.
Operator: Thank you. The next question comes from Bruce Goldfarb with Lake Street Capital Markets. Please go ahead.
Francis P. Patchel: Thank you. The next question comes from Bruce Goldfarb with Lake Street Capital markets. Please go ahead.
Bruce Goldfarb: Gleb, Frank, congratulations on the great results. Thanks for taking my questions, um... In terms of the market segments, can you compare midsize company demand with SMV demand? What I'll say is that we've been doing the smaller size of the mid-market for a while, and we have volume there. We have about 100,000 customers overall using B2, so we have volume there. On the larger end of the mid-market, it's an up-market momentum that we've been doing more recently, and so I think it's harder to gauge the statistical significance of the number of deals in that part of the market to be a strong indicator of overall market demand.
Operator: Frank.
Bruce Goldfarb: Graduations on the great results. Thanks for taking my questions.
Bruce Goldfarb:
Bruce Goldfarb: In terms of the market secondly segments can you compare midsize.
Bruce Goldfarb: Company demand with SMB demand.
Speaker Change: Where you're seeing interesting what's a strong go ahead, yeah. It's an interesting question Bruce and thanks for the question.
Bruce Goldfarb: What I'll say is that we've been doing the smaller size of the mid market for a while and we have volume there right. We have about 100000 customers overall using be too. So we have volume there on the larger end of the of the mid market. It's a tough market momentum that we've been doing more recently.
Bruce Goldfarb: And so I think it's harder to gauge the.
Bruce Goldfarb: Statistical significance of the number of deals.
Bruce Goldfarb: In that part of the market.
Bruce Goldfarb: To be a strong indicator of overall market demand I think what we are seeing is that customers in upper market are interested in the value proposition, we provide which is part of why we decided to put more focus there.
Bruce Goldfarb: I think what we are seeing is that customers in the higher market are interested in the value proposition we provide, which is part of why we decided to put more focus there. Backblaze provides a lot of value for a larger customer because if they have more data, they have more needs around that data, and they have the opportunity to optimize their platform further by using Backblaze.
Speaker Change: It does.
Bruce Goldfarb: Platform provides a lot of value for a larger customer because if they have more data.
Bruce Goldfarb: They have more needs around that data and they have the opportunity to.
Bruce Goldfarb: Optimize our platform further by using back blades. So we think that while it's hard to draw statistical significance from what we're seeing to the broader market trends.
Gleb Budman: So I think that while it's hard to draw statistical significance from what we're seeing to the broader market trends, I think we're pleased with the interest and engagement that we're seeing in the upper mid-market. And just to make sure it's clear, when we talk about moving up the market, this is not Fortune 500 and the federal government. These are companies that are up to about 1,000 employees.
Gleb Budman: I think we're pleased with the interesting engagement that we're seeing in the upper mid market and just to just to make sure. It's clear when we talk about moving up market. This is not fortune 500, and the federal government. These are.
Gleb Budman: Companies that are up to about 1000 employees.
Bruce Goldfarb: Thank you. Yeah, that does work. That does work. Thank you. And then, in terms of competition, have you seen competitors, have they kept their rates stable, or have they also rolled out price increases?
Speaker Change: Thank you.
Speaker Change: And then yeah that does that does thank you and then in terms of competition have you seen competitors. They kept our rates stable or if they also rolled out price increases.
Gleb Budman: So, I would say that some of the competitors have rolled out price increases, a number of them have kept their rates the same, but when we talk about the same, the traditional 1.0 providers, like Amazon, Google, and Microsoft, their default rates are 3, 4, 5 times our rate for storage, and on top of that, they charge a lot more in transaction fees. And then, on top of that, they charge egregious egress. So while they may not have raised rates, their rates are much, much higher than ours.
Speaker Change: So I would say that some of the competitors have rolled out price increases a number of them have kept their their rates the same but when we talk about the same.
Gleb Budman: The traditional cloud one dot O providers like Amazon, Google and Microsoft there.
Gleb Budman: Default rates are 345 times, our rate for storage and on top of that they charge a lot more on transaction fees and then on top of that they charge you egregious egress fees. So while they may not have raised rates the rates are much much higher than ours.
Gleb Budman: Yes.
Bruce Goldfarb: Thank you. And then, do you still anticipate cash generation by mid-25?
Gleb Budman: Thank you and then and then are you still.
Bruce Goldfarb: Do you still anticipate cash generation by mid mid 'twenty five.
Gleb Budman: Yes, yes, that's right. At the end of 2024, we said that we'd have at least 20 million dollars and that we would have total cash flow breakeven or approaching that by mid 2025.
Bruce Goldfarb: Yes, yes, that's right at the end of 2024, we said that we'd have at least $20 million and that we will have.
Gleb Budman: Total cash flow.
Gleb Budman: Breakeven or approaching that by mid 2025.
Gleb Budman: Right.
Bruce Goldfarb: Great. Thank you. Congratulations again on the results.
Speaker Change: Great. Thank you.
Gleb Budman: Congrats again on the result.
Speaker Change: Thank you thanks Bruce.
Mimi Kong: Thank you. I would now like to turn the call over to Mimi for some questions gathered off the line. Mimi?
Speaker Change: Thank you.
Bruce Goldfarb: I would now like to turn the call over to Mimi for some question scattered off the line Mimi.
Mimi Kong: Thank you, MJ. The first question is for Frank. This investor would like to know, you know, I would really like to see dividends. Are there any in the future?
Mimi Kong: Thank you I'm Jay first question is for Frank This investor would like no no I would really like to see dividends are there any in the future.
Francis P. Patchel: We're not planning dividends for the foreseeable future, and the reason is that we are in a $50 billion market that's underserved by small and mid-sized companies. So we really are investing in our growth, and we think that's best for our investors.
Mimi Kong: We're not planning.
Francis P. Patchel: Dividends for the foreseeable future and the reason is is that we are in a $50 billion market. That's underserved in this in small and mid sized companies. So we really are investing in our growth and we think that's best for our investors.
Mimi Kong: And our next question is for Gleb. Does Backblaze have a plan to attract younger clients like university or secondary school students, granting them a special fee, so that then Backblaze would have them for years to come?
Francis P. Patchel: The next question is for Glenn.
Gleb Budman: There's batteries have a plan to attract younger clients like University or secondary school students granting them. The special fee that spend back lease would have them for years to come.
Mimi Kong: Yeah.
Gleb Budman: So as far as keeping customers for years to come is concerned, I think it's a good point because of the high retention rate. Frank talked about 91% gross customer retention, which means customers stay with us for something like a decade. Certainly, having customers join the platform is great, as they stay on for a very long time. In terms of universities and secondary schools,
Gleb Budman: So as far as keeping customers for years to come I think it's a good point.
Gleb Budman: Because of the high retention, Frank talked about 91% gross customer retention, which means customers stay with us for something like a decade.
Gleb Budman: Certainly having customers joined the platform as great as they stay on for a very long time in terms of University and secondary schools.
Gleb Budman: Our product and platform work really well for them by default. In part, that's because on the computer backup side, it's unlimited. So it's just easy, and they don't have to worry about it. On the B2 side, we actually provide a free tier. So they can start with a limited amount of data and just use it for free. And it's very, very inexpensive to use it at their scale. So it's actually a great set of services specifically for their use cases as it stands.
Gleb Budman: Our product and platform worked really well for them by default and in part that's because on the computer backup site. It's unlimited. So it's just easy and they don't have to worry about it on the <unk> side, we actually provide a free tier so they can start with a limited amount of data and just use it for free and it's very very inexpensive to use it at their scale.
Gleb Budman: Typically so it's actually a great.
Gleb Budman: Set of services, specifically for their use cases as it stands.
Mimi Kong: Next question is also for you, Gleb. Will there be any plans this year to pioneer any revolutionary strategies that will put Backblaze ahead of its competitors?
Gleb Budman: Next question is also for you Glenn will there be any plans this year to pioneer and he was a revolutionary strategies that will put back ways ahead of its competitors.
Gleb Budman: So, in terms of revolutionary strategies, I think one of the things we've talked about is this trend to cloud 2.0 and how we facilitate that. So, I think most of the traditional competitors are still aiming for that walled garden approach, and the reality that we see is that more and more customers want to use an open cloud with best-of-breed providers and get all the benefits that that entails. And so that strategy and the things that we're doing to support that, and they talked about event notification, which enables customers to create automatic workflows between these different providers, is a great way of helping to lead that shift.
Gleb Budman: So I think in terms of evolutionary strategies I think one of the things. We've talked about is this trend to cloud Trudeau and how we facilitate that so I think most of the traditional competitors are still aiming for that walled garden approach and the reality that we see is that more and more.
Gleb Budman: More customers.
Gleb Budman: Want to use an open cloud with best of breed providers and get all the benefits that that entails and so that strategy and the things that we're doing to support that and they talked about event notifications.
Gleb Budman: Which enables customers to create automatic workflows between these different providers is a great way of helping to lead that shift. So I think that's probably the one I would mostly highway.
Gleb Budman: So I think that's probably the one I would most highlight. Other than that, I think the strategies that we're pursuing are enabling us to already grow faster than the market and take market share. So I think between the go-to-market activities that we're doing and the product innovations that we're coming out with, I think we're well positioned to do that.
Gleb Budman: Other than that I think.
Gleb Budman: The strategies that we're pursuing are enabling us to already grow faster than the market and take market share. So I think between the go to market motions that were doing in the product innovations that we're coming out with I think we're well positioned to do that.
Mimi Kong: And again, what are the most important goals for the next 12 months?
Speaker Change: And again what are the most important goals for the next 12 months.
Mimi Kong: Yeah.
Gleb Budman: So in terms of goals, I guess, first with financials, so financial goals: we want to continue driving revenue growth. It's like Frank said, it's a $50 billion market.
Speaker Change: So in terms of goals.
Speaker Change: I guess first with financial so financial goals, we want to continue driving revenue growth.
Gleb Budman: Like Frank said, it's a $50 billion market, we believe there's a lot of opportunities and so driving revenue growth.
Gleb Budman: We believe there are a lot of opportunities driving revenue growth. The second part is continuing to drive efficiency, and that's reflected in our positive EBITDA growth. And the third financial one is driving towards that total cash flow positive stature so that the business is just running on its own steam. So, that's on the financial side.
Gleb Budman: Key the second part is continuing to drive efficiency and that's reflected in our in our positive EBITDA growth.
Gleb Budman: And the third financial one is driving towards that total cash.
Gleb Budman: So part of it.
Gleb Budman: So that the business is just running on its own its own steam so that's on the financial side on the business side continue to drive that up market growth. So with the new sales executives that we've hired in Q1 with a new head of sales that were in the process of hiring right now.
Gleb Budman: On the business side, continue to drive that upmarket growth. So, with the new sales executives that we hired in Q1 and a new head of sales that we're in the process of hiring right now, driving that upmarket growth. The second is continuing to drive the overall go-to-market motion and the channel motion. And then the last one is really taking those innovations that we shipped and getting them into the hands of more and more customers. I think those are probably the main ones that I would like to highlight.
Gleb Budman: Driving that up market growth. The second is continuing to drive the overall go to market motion in the channel motion and then the last one is really taking those innovations that we shipped.
Gleb Budman: And getting them into the hands of more and more customers.
Gleb Budman: I think those are probably the main ones that I would like to highlight.
Mimi Kong: The next question we have is a follow-up from last quarter. Last quarter, my question received an incorrect answer.
Speaker Change: The next question, we have is a follow up from last quarter.
Mimi Kong: Last quarter. It my question received an incorrect answer backwards cannot backup file sync by one drive due to reap harsh point flags assigned by Microsoft well that plays develop a solution such as a beta integration to backup one drive cloud to cloud or are we left with the safe versus synced files.
Mimi Kong: Backblaze cannot backup files synced by OneDrive due to reparse point flags assigned by Microsoft. Will Backblaze develop a solution such as a B2 integration to backup OneDrive files cloud-to-cloud? Or are we left with the safe versus synced files?
Gleb Budman: So that's probably a nuanced question for an investor call, but I very much appreciate both the person asking the question being a customer. That's key for us, and for digging in as well.
Speaker Change: So that's probably a nuanced question for a for an investor call, but I very much appreciate both the the person asking the question being a customer that's key for us.
Gleb Budman: So what I'll say is we don't have on our roadmap a plan to develop one cloud drive integration directly. We do have partners that do that, and we would love for you to use one of our partner products along with B2. It's part of the whole open cloud approach that we're working toward, supporting a broad ecosystem of partners with our B2 cloud storage. The computer backup service itself, which sounds like the one that you're primarily using, is really designed to backup all of the data on the laptops and desktops that customers are using, so people can just sleep peacefully at night knowing that those machines and the data on them are protected. B2, with our partner ecosystem, supports all of these potential other uses.
Gleb Budman: And for the and for digging in as well so what I'll say is we don't have.
Gleb Budman: On our roadmap.
Gleb Budman: A plan to develop one cloud drive integration directly we do have partners that do that and we would love for.
Gleb Budman: To use one of our partner products along with be two it's part of the whole open cloud approach that we're that we're working toward is supporting a broad ecosystem of partners with our Btu cloud storage.
Gleb Budman: The computer backup service itself, which sounds like the one that you're primarily using the computer backup sources really designed to back up all of the data on the laptops and desktops that customers are using so people can just sleep peacefully at night that those machines and the data on them are protected.
Gleb Budman: Two with our partner ecosystem supports all of the potential other use cases.
Mimi Kong: Next question for Gleb. Do ongoing developments in AI present any opportunities for Backblaze?
Gleb Budman: Next question for Glenn do ongoing developments in AI, presenting any opportunities for Barclays.
Gleb Budman: So I think I touched on that a little bit earlier, but yes, the short answer is that AI is a multi-year, possibly multi-decade opportunity for Backblaze. When you're working with AI use cases, you're working with a lot of data and analysis and use of that data, and you need somewhere to put that data where it is durable, where it's available, where it's performant, and where you can afford to do that
Gleb Budman: So I think I touched on that a little bit earlier, but yes. The short answer is I think that AI is a multi year, possibly multi decade opportunity for back ways.
Gleb Budman: When you're working with are use cases, you're working with a lot of data and analysis.
Gleb Budman: And use of that data.
Gleb Budman: You need somewhere to put that data where it is durable.
Gleb Budman: Where it's available worth performance and whether you can afford to do that and then you want to use that data with all of the myriad other best of breed service is being developed for AI and Theres a variety of them constantly coming out every single day and so by being a leader in the open cloud movement and provides.
Gleb Budman: And then you want to use that data with all of the myriad other best-of-breed services being developed for AI, and there's a variety of them constantly coming out every single day. And so by being a leader in the open cloud movement and providing a great storage platform, I think we have a great opportunity to do that. I'll also mention another company that I talked with recently. They're in the process of coming out with a service that's going to create AI videos at scale.
Gleb Budman: A great storage platform I think we have a great opportunity to do that I'll mention also is another.
Gleb Budman: Company that I talked with recently there are in the process of coming out with a service to that's going to create video.
Gleb Budman: AI videos at scale.
Gleb Budman: They're talking to us about leveraging the <unk> platform because it provides efficiency connectivity with the CDN providers that it would distribute that video too I talked with the about another customer with one of our folks. This morning that they do web scale data analysis.
Gleb Budman: They're talking to us about leveraging the Backblaze platform because it provides efficiency and connectivity with the CDN providers that it would distribute that video to. I talked about another customer with one of our folks this morning that they do web-scale data analysis for an AI company, and they're leveraging Backblaze as the underlying foundational platform for all of that data that they're capturing. So I think that the number of use cases and opportunities here are just endless.
Gleb Budman: For for an AI company in there.
Gleb Budman: Bridging back ways as the underlying foundational platform for all of that data that they're capturing so I think that the the number of use cases opportunities you're just ambulance.
Mimi Kong: The next question is, what is the decision threshold to compete for larger clients, meaning companies with more than 1,000 employees?
Gleb Budman: Next question is what is the decision threshold to compete for larger clients, meaning companies above 1000 employees.
Gleb Budman: So we absolutely have customers that are above 1000 employees, but our target that we focus on is customers below that, in large part, because we think it's the most underserved part of the market, where we can have a good velocity of solving and addressing many of those customers' needs. Having said that, we do help customers larger than that, particularly ones that have a lot of data and use cases that are well-suited to an easy-to-use, affordable storage platform. We don't actively try to compete with Fortune 500 companies or the federal government because of the complexity of the features and functionalities that they need, which are not those same features and functionality that the mass market of mid-market companies need. So we believe we're really well- We are well-suited for many of the customers above $1,000, and we will work to address and solve those customers' needs when it's a good fit.
Gleb Budman: Yeah.
Mimi Kong: And at what point is the risk of hiring more sales and customer relations staff worth the reward?
Gleb Budman: So we absolutely have customers that are above 1000 employees.
Mimi Kong: Our target that we focus on is customer is below that in large part because we think it's the most under served part of the market, where we can have a good velocity of.
Mimi Kong: Solving and addressing many of there are many of those customers needs.
Mimi Kong: Having said that we do help customers larger than that particularly ones that have a lot of data and use cases that are.
Mimi Kong: Well suited to E.
Mimi Kong: Easy to use affordable storage platform.
Mimi Kong: We don't actively try to compete for the fortune 500 companies or the federal government because of the complexity of the the features and functionality that they need which are not those same features and functionality that the mass market or mid market companies need. So we believe we're really well suited.
Mimi Kong: For customers below 1000, we are well suited for many of the customers above 1000, and we are.
Mimi Kong: We'll work to address them to solve those customers' needs when when it's a good fit.
Mimi Kong: And at what point is the risk of hiring more sales and customer relations staff with different ward.
Gleb Budman: So I mentioned that in Q1, we actually hired a number of new account executives on the sales team specifically because we see the opportunity of closing more upmarket deals with additional people. So we're constantly evaluating our go-to-market activities and determining what's working and what can be improved. In general, that evaluation is what drives when we invest further in those areas.
Mimi Kong: So I mentioned that in Q1, we actually hired a number of new account executives on the sales team specifically, because we see the opportunity of closing more upmarket deals.
Gleb Budman: With additional people. So we're constantly evaluating our go to market motions and determining whats working and what what can be improved.
Gleb Budman: The in general.
Gleb Budman: That evaluation is what drives when when we invest further in those areas.
Mimi Kong: And this is our final question. As a software engineer, Backblaze's B2 API was much more difficult to integrate than I would expect from a company that boasts the simplicity of its developer experience. What are Backblaze's plans to improve the developer experience and make B2 adoption by the average developer easier?
Gleb Budman: And this is our final question as a software engineer that places BT API was much more difficult to integrate than I would expect from a company that boasts the simplicity of its developer experience what are back lasers plans to improve developer experience and may be to adoption by the average developer easy.
Gleb Budman: So first of all, I'll say again, thank you for being a customer. Thank you for integrating with our platform. I love it.
Speaker Change: So first of all I'll say I'll say again, thank you for being a customer and thank you for integrating with our platform I love It.
Gleb Budman: I am surprised that you found that the experience was more difficult than you expected. We have – it sounds like you may have been using the prior B2 API. We have since also introduced an S3-compatible API so that it is a drop-in replacement for any service that is compatible with Amazon's S3 offering. We have also created a whole new documentation section on our website that we launched mid-last year, which has been very popular and provides examples and samples of code snippets and more.
Gleb Budman: I am surprised that you have.
Gleb Budman: The experience was more difficult than you expected.
Gleb Budman: We have it sounds like he may have been using the prior between API. We have since also introduced an S. Three compatible API. So that it is a drop in replacement for any service that is compatible with Amazon's S. Three offering we've also created a whole new Doc.
Gleb Budman: Section on our website that we launched.
Gleb Budman: Mid last year, which has been very popular and provides examples in samples and.
Gleb Budman: The code snippets and more.
Gleb Budman: And what I'll say is that we also would love feedback. So if you have feedback on what that experience was, what you would like to see different, please email productfeedback at backblaze.com, and we would love to hear it.
Gleb Budman: And what I'll say is that.
Gleb Budman: We also would love feedback so.
Gleb Budman: If you have feedback on what that experience was what you would like to see different.
Gleb Budman: These email product feedback add back please dot com and we would love to hear it.
Mimi Kong: Now, as the final question, I'm going to hand the call back to MJ.
Speaker Change: That was the final question I'm going to hand, the call back to en Jane.
Gleb Budman: Thank you, Mimi. At this time, we don't have any more questions in our queue, and this will conclude our question and answer session. So I'd like to turn the call back over to Gleb Budman for closing remarks.
MJ: And Jay Thank.
MJ: Thank you Mimi.
MJ: This time, we don't have any more questions in our queue and this will conclude our question and answer session. So I'd like to turn the call back over to Galore Butman for closing remarks.
Operator: I want to say thank you to everybody for joining the call. Thank you for hearing about our quarter and the innovations that we had there, and we will look forward to seeing some of you at the conference tomorrow and next month and the rest of you on this call next quarter. Thank you so much. The conference has now concluded. Thank you for attending.
Gleb Budman: I wanted to say, thank you to everybody for joining the call. Thank you for hearing about our quarter and the innovations that we had there and we will look forward to seeing some of you at the conference Tomorrow and next month and the rest of you on this call next quarter. Thank you so much.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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