Backblaze, Inc.

Thank you for standing by and welcome to the Backblaze 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, James Kisner, Vice President of Investor Relations. Please go ahead, sir.

Thank you and good afternoon, and welcome to Backblaze's fourth quarter and fiscal year 2021 earnings call. On the call with me today are Gleb Budman, co-founder, CEO, and chairperson of the board, and Frank Patchell, chief financial officer. Today, Backblaze will discuss the financial results that were distributed earlier this afternoon. Things on this call include forward-looking statements that include, but are not limited to, our future financial results, use of our IPO proceeds and investments in our business, our ability to compete effectively, acquire new customers and retain and expand our business with existing customers, hire and retain key personnel, and effectively manage our growth. These statements are subject to risks and uncertainties that could cause actual results to differ materially. In particular, those described in our risk factors that will be included in our Form 10-K for the year ended December 31st, 2021, and our other financial filings. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by law. Our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to, and not as a substitute for, our GAAP results. Reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC. You can also find a slide presentation related to our comments in the webcast, which will also be posted to our investor relations page after the call. Before I turn the call over to Gleb, I'd also like to mention that in the latter portion of our call, we will be addressing questions we have gathered from non-institutional or retail investors. We're very excited to be able to engage more broadly with retail investors and look forward to a robust dialogue with all of our investors. I would now like to turn the call over to Gleb.

web thank you james and thanks to all of you for joining us given that we have a number of investors new to the backboys story i want to briefly review what backboys does backboys is building the leading independent cloud for data storage we provide two easy and affordable cloud storage services on our purpose-built storage cloud our b2 cloud storage service provides developers and IT people a public cloud storage service that is dramatically easier and one-fifth the price of Amazon Web Services, S3, and others. Backboys can scale to any size, but we are optimized for the underserved mid-market, which we define as companies with less than 1,000 employees. We also offer our computer backup service that provides unlimited cloud backup for laptops and desktops for companies and individuals. This service is especially beneficial as remote work accelerates. Now to the business highlights. We had a strong Q4 to finish off a great year and grew overall revenue 28% year on year to $18.7 million with continued robust growth of 56% for our B2 cloud storage business and 16% growth in our computer backup business. ARR for the company reached $75 million and our high-growth B2 cloud storage crossed over one-third of the entire business, reaching ARR of approximately $27 million. Importantly, we achieved these results with essentially no benefit from investment of our IPO proceeds. The Backboys team continues to work toward being the leading independent cloud for data storage. Our strong Q4 results support our plan to increase our investments at a faster rate than we previously planned just a few months ago. Frank will offer more detail, but broadly we intend to increase our sales and marketing investments by over 100% in 2022, or about $10 million more than our prior internal plans. I'll now share detail on four ways we're scaling the business in 2022 and beyond. First, outbound sales. We began last year with no outbound sales team. We believed we could grow Backblaze by reaching out to businesses that would benefit from our cloud services, and we started a small initiative. As the program showed signs of success, we started scaling the team. By the end of Q3 2021, we had increased the number of outbound sales reps to five. Today, we are at 13, and we intend to continue scaling up that team. Second, paid advertising. Before going public, we focused on optimizing our significant organic inbound traffic. With proceeds, we are investing to raise brand awareness among our key go-forward markets, namely developers and IT admins. We launched our BlazeIt advertising campaign, which is reaching millions of video viewers. While the campaign is still ongoing, initial data suggests that brand awareness is a significant opportunity area for us to drive new interest in our offerings. Third, partnerships. Our partners represent tremendous and efficient growth opportunities for Backblaze. We regularly announce new partners, and a recent example is the expansion of our Veeam partnership to include their Kasten offering. Kasten is a leader in Kubernetes data protection. For those not familiar, Kubernetes is a leading open source platform that developers use to build and deploy applications. Custom customers can designate Backblaze B2 as their storage destination to protect their Kubernetes environments from loss or ransomware attacks while also supporting regulatory compliance. Providing storage for Kubernetes data is just another way we are carrying out our strategy to be the independent provider of storage for developers. We're also excited to announce that we'll be accelerating our partner-driven revenue through the launch of a new partner marketing team, We believe the creation of a dedicated partner marketing team will bring the focus necessary to better build both our existing partner relationships and bring new partners on board. As part of this effort, we've already hired a great leader for that team. Fourth, developers. Developers are a strategically important group for Backblaze, and our efforts on this front are bearing fruit. B2 cloud storage ARR from developer accounts roughly doubled in the past year, and this customer group boasts an NRR of nearly 150%. And so in 2022, we are increasingly focusing our go-to-market and engineering efforts on engaging and growing with developer customers. To support our momentum, we recently established an evangelism team and recruited key members from the developer community. We believe we are well-positioned to become the cloud storage of choice for the developer community, aided by our strong relationships with developer partners, such as CloudFlare, Fastly, and HashiCorp, and as well as our commitment to ease of use, interoperability, and straightforward value. I'll highlight a developer customer that demonstrates several aspects of the strength of our platform and marketing efforts for developers. Cantharkphoto is one of the earliest stock image and video sites. They provide royalty-free images, photos, digital illustrations, clip art, and videos to their customers. They have roughly 70 million photos alone, and their 106,000 contributors add roughly 30,000 new files every day. CanStock Photo was an early adopter of Amazon S3 when it launched in 2006. While Amazon S3 worked for them at first, it became increasingly expensive. To minimize cost, CanStock started to use Amazon S3 Glacier, but the retrieval delays and complicated pricing tiers increasingly frustrated the CanStock team. As their business grew, they also worried about vendor lock-in. Because of Amazon's egregious egress fees, if they ever wanted to leave, the cost to switch providers would only grow steeper over time. In the case of Camstock, the CEO happened to use Backblaze computer backup to protect his personal computer, and his DevOps staff were fans of the popular DriveStats series on our blog. If you aren't familiar with our blog, it is much loved and read by about 3 million people per year. If you're interested in learning about storage or our company, I recommend you visit backblaze.com slash blog. While Camstock wanted to switch to Backblaze, they worried about the complexity of leaving Amazon. But with our migration service, we make it point and click easy for customers to unshackle themselves from the major diversified cloud vendors. And we cover our customers' costs to egress their data out of those providers. The CEO of CanStock said that it was literally like flipping on a light switch. It was that easy. Finally, while storage is at the core of businesses like CanStock, they also use other cloud services to run their infrastructure. Our partnerships enabled CanStock to move the rest of their cloud infrastructure out of AWS as well. By freeing them from the walled garden of AWS, we enabled CanStock to dramatically decrease the cost and complexity of their cloud infrastructure while getting the benefits of best of breed independent cloud services. Obviously, this is just one customer example, but we believe it epitomizes how our marketing efforts and product offering work synergistically to attract developers and other customers. As we outlined during our IPO, we see a large market and the opportunity to become the leading independent cloud for data storage. We are executing on the strategy we laid out by investing significantly in our sales and marketing efforts, including scaling up our outbound sales, paid advertising, partnerships, and developer focus. And we continue to invest in the products and platform. One example is our cloud replication feature, which we are on track to make available by the end of the first half of 2022. We do this to ensure we provide our customers an incredibly easy to use, affordable, trusted storage platform for all their data needs. I will now turn the call over to Frank Patchell, who can review the financial results of the quarter in more detail. Frank?