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spk01: Good afternoon, ladies and gentlemen. Thank you for standing by. And welcome to Back Place first quarter of fiscal year 2022 earnings conference call. At this time, all participants on the list are on remote. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-down telephone. If you require offer assistance at any time, please press star, then zero. I would now like to turn the conference over to your speaker host, James Kisner, Vice President of Investor Relations.
spk00: Please go ahead.
spk08: Thank you, and good afternoon, and welcome to Backblaze's first quarter of fiscal year 2022 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. Statements on this call include forward-looking statements that include our future financial results, use of our IPO proceeds, results from new product and partner announcements, 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 are included in our Form 10-K for the year ended December 31st, 2021 and their 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 file today with the FCC. 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 from non-institutional or retail investors that we gathered through the SAIT Technologies platform. We're also pleased to announce that Backblaze is planning to participate in the Stock Perks Program, which rewards individual shareholders who hold a minimum amount of shares for a specified period of time with exclusive gifts. Stay tuned in the coming weeks for additional details. I would now like to turn the call over to Gleb. Gleb?
spk09: Thank you, James, and thanks to all of you for joining us. We had a great start to 2022 with 27% year-on-year revenue growth to $19.5 million, reflecting higher growth in the business compared to 24% growth in Q1 of 2021. Our B2 cloud storage business grew a strong 48%, comprising 36% of total revenue, and our computer backup business grew 18% year-on-year. ARR for the company reached $79 million, with B2 comprising over $28 million and computer backup comprising approximately $51 million. As the leading independent cloud for data storage, at Backblaze, we continue to make it astonishingly easy to store, use, and protect data. As a reminder for those on the call that may be newer to the story, we have two cloud service offerings that operate on our storage cloud. First, our B2 cloud storage service provides developers and IT personnel a public cloud storage service that is dramatically easier and one-fifth the price of Amazon Web Services S3 and others. And second, our computer backup service provides unlimited cloud backup for laptops and desktops for companies and individuals. While the computer backup business remains the larger of our two cloud service offerings at the moment, our strategy and increasing investments center around capitalizing on the roughly $100 billion total combined 2025 addressable markets for B2 cloud storage as projected by IDC. I want to start by highlighting three key recent product and platform enhancements. Number one, universal data migrations. Across the world, there are approximately 50 trillion gigabytes of data stored across cloud providers and on-premise storage. Customers of diversified cloud providers often want to leave, but have been locked in through the complexity of getting their data out and excessive ECOS fees. Customers with data on-premise often want the benefits of cloud storage, but migrating their data from legacy systems has been complex and time-consuming. To help prospective customers, we were excited to launch our Universal Data Migration Program, which is a set of integrated services that make it easy and free for eligible customers to move data from a wide variety of sources, including other cloud storage providers and all the common on-premise storage solutions. We also cover the costs of the punitive egress fees to free customers from their vendor lock-in. We also announced the partnership with the SaaS company SOTA that is aimed squarely at this challenge. SOTA specializes in helping businesses move their data from on-premise to the cloud while ensuring customer data is secure in transit and structured exactly as needed in the cloud. We developed a solution that manages SOTA services giving customers the security and support they need to move their data over. With universal data migration, customers can easily and freely migrate data from where it may be locked in today and immediately start getting the benefits of B2 Cloud Storage, including ready access to all data, a dramatic cost savings over alternative offerings, and the ease of use of our platform. Number two, B2 Reserve. Customers love our B2 cloud storage, but some are not set up to purchase in a pay-as-you-go consumption model. Backblaze B2 Reserve is a strategic new offering that provides predictable, capacity-based pricing. B2 Reserve is attractive to customers who are more accustomed to paying for storage on an annualized basis, such as in an on-premise offering, or those that just want more predictable pricing. B2 Reserve also makes it easier for channel partners to include B2 when they sell backup storage or other products that work well with B2. Additionally, B2 Reserve offers new benefits including our universal data migration service to help customers move their data into B2 Cloud Storage, premium support, and more. Number three, Partner API. Customers have been able to use B2 Cloud Storage inside of our Alliance partner products for years. A reminder, Alliance Partners are named for the independent software vendors, also known as ISVs, who integrate our storage cloud into their solutions. Additionally, those partners have expressed interest in being able to offer the benefits of our cloud storage directly to their customers. Our new partner API empowers those partners to easily integrate and manage B2 cloud storage seamlessly within their offerings. By unlocking an improved customer experience for these alliance partners, our partner API allows them to easily build additional cloud services into their product portfolio, which in turn drives increased demand for Backways B2 as the cloud storage backend for those services. I also want to share an update on cloud replication. We previously announced that we intend to ship this functionality in June, and we remain on track to do that. we recently hit a key milestone launching the beta of cloud replication. As a reminder, cloud replication makes it easy for customers to keep a copy of their data geographically distributed to support disaster recovery, compliance objectives, or to help move the data closer to end users for faster access. These product and platform enhancements add value not only for our customers, but for our partners as well. Our partner ecosystem continues to grow, which I'd like to underscore by describing two new partnerships in addition to the joint solution with SOTA I mentioned earlier. The first partnership is with Catalogic. Catalogic provides immutable backup protection and instant recovery for virtual machines and Kubernetes. Kubernetes is a leading open source platform that developers use to build and deploy applications efficiently. And immutability is a feature that prevents data deletion over a specified period of time, frequently used to protect against ransomware attacks. CataLogic now integrates Backboys B2 to provide customers, particularly developers, with data backups that are designed to be impervious to cyber criminals. Another recent partner announcement was our joint solution with Cetera. Cetera offers cloud-based network-attached storage. or NAS for short, and uses Backblaze v2 as the storage cloud underlying the offering. CTERA is trusted by the world's largest companies, including McDonald's, GE, Unilever, and Live Nation, as well as the U.S. Department of Defense and other government agencies worldwide. This joint solution benefits small and medium enterprises looking to adopt cloud-based NAS and by allowing them to safely and securely move their on-premise file system to the cloud. Carrying Cetera's enterprise file services platform with Backblaze B2 provides customers a path to cloud adoption without the painful step of rebuilding their data structures and workflows in the cloud. You can learn more about these platform enhancements and our new partnerships at backblaze.com slash blog. Before handing over to Frank, there are two customer stories I want to share with you that demonstrate the value that B2Cod storage can bring for businesses. Many of you are likely familiar with Fortune Media. When Fortune Media spun out of its parent company, Meredith Corporation, to become an independent enterprise, it needed to set up a new technology infrastructure that could avoid the limitations of its predecessor and serve the company well into the future. Most people think of Fortune Magazine when they think of Fortune Media. But one of Fortune's most valuable assets is its extensive video archive, which includes conference recordings, executive interviews, panel discussions, and more. Over the years, Fortune has amassed hundreds of thousands of hours of video that they store for future use. Fortune Media needed a place to keep these extensive video archives cost-effectively. They previously used a cold storage solution from a legacy cloud storage provider. but it included significant limitations when it came to accessing and finding historical content. This was a major pain point for Fortune because repurposing historical content was becoming a significant revenue source. By switching to Backblaze B2, Fortune Media was able to store those hundreds of thousands of hours of video on a storage platform that enabled them to quickly access any footage thus eliminating multiple layers of their previous archiving system, reducing their storage costs by almost two-thirds, and dramatically reducing the need for IT support. This is a great illustration of how our ease and affordability uniquely empower major brands to do more. The second success story I'd like to share features a developer customer, Big Cartel, and demonstrates several aspects of the strength of our platform for developers, Big Cartel's mission is to make it simple for artists and creators to build a unique online store and sell their work. They've helped artists sell $2.5 billion of their work to date, and they count Etsy and Shopify among their competitors. In the past, Big Cartel used Amazon S3 for storage and Fastly for their content delivery network. But given their mission to support independent business owners, they felt ethically conflicted about using Amazon for obvious reasons. Further, Amazon S3 had recent service outages that caused the company to worry about having Amazon S3 as a single point of failure for storing customer content. After learning about Backblaze and our partnership with Fastly, which includes free egress to them, Big Cartel recognized an opportunity to adopt an alternative to Amazon that fit Big Cartel's ideals and ethos as well as their use case. So now when a customer uploads content, it gets stored in both Amazon S3 and Backblaze B2. Then Fastly preferentially delivers that content to the customer sites from Backblaze B2. It's a multi-cloud use case with Backblaze B2 as the primary. As a result of the partnership between Backblaze and Fastly, Big Cartel's infrastructure costs have gone down even as they doubled their storage footprint. Even better, they were able to transfer all of their data in a single day with our data migration service, an example of why our new universal data migration service is so valuable. Big Cartel is now saving 50% in operating costs by adding Backblaze B2 for origin storage versus using Amazon S3 alone. This is a wonderful example of how our open partner ecosystem, ease of use and our trusted status as an independent provider makes us a powerful alternative to legacy solutions. As we outlined during our IPO back in November, we see our large market and our opportunity as the leading independent cloud for data storage. We are executing on the strategy we laid out by investing significantly in our product and platform and in our sales and marketing efforts. I want to take a moment to thank our talented and dedicated team of employees who make all of this possible. Based on their feedback, Backboys was certified as a great place to work this February. As we continue to hire new team members to help drive our growth, our culture remains a differentiating factor and a competitive advantage in attracting the best talent, and we look forward to welcoming many more people to our team. I'll now turn the call over to Frank Patchell. who can review the financial results of the quarter in more detail. Frank?
spk07: Thank you, Gleb, and thanks, everyone, for joining us today. Turning to our Q1 financial results, unless otherwise noted, I will be referring to non-GAAP metrics and the growth rates mentioned are year-on-year. We remain focused on two key metrics, revenue growth and adjusted EBITDA. Adjusted EBIT is defined as earnings before interest, depreciation, amortization, stock-based compensation expense, and other expenses or benefits that are non-cash or that we deem non-recurring. Our Q1 revenue totaled $19.5 million, an increase of 27% year-on-year. Backblaze B2 contributed sales of $7 million, reflecting 48% growth. Computer backup revenue totaled $12.3 million, reflecting 18% growth. In Q1, B2 cloud storage represented 36% of total revenue, continuing its upward trend. Computer backup continued to benefit from the price increase we implemented in the last month of Q3 2021. Recall, since most backup customers are on an annual or two-year subscriptions, This increase, which was from roughly $6 per month to $7 per month, will continue to phase in as they renew across the next two years at the higher price. Our retention metrics remain strong. We track two key metrics, net revenue retention, NRR, and gross customer retention. These metrics are defined in more detail in our earnings release and filings. But basically, NRR is the growth of the recurring revenue for an initial set of customers, while gross customer retention measures retention of customers. Both metrics are trailing four-quarter averages. Total company NRR was 112%, with B2 cloud storage at 129% and computer backup at 104%. Gross customer retention was 91% overall, with 90% for B2 cloud storage and 91% for computer backup. These NRR and gross customer retention metrics were all within one or two points of the values for Q4 2021. Working down the P&L, adjusted gross margin, which excludes non-cash expenses of depreciation, amortization, and stock-based compensation, was 76%, improving from 75% last quarter and in line with our expectations. Adjusted EBITDA was a loss of $3 million, or 15% of revenue, down from the positive 2.1 million, or 14%, in quarter one of 2021. This reflects planned expenses from higher investments in both sales and marketing and R&D as we continue to increase investments pursuing the large market potential for B2 cloud storage, as well as increased G&A expenses chiefly related to public company costs. Turning to the balance sheet, cash, cash equivalents, and short-term investments totaled $99.1 million as of March 31, 2022. Now, I'd like to provide our outlook for Q2. For the second quarter, we expect revenue to be in the range of $20.2 to $20.6 million. We expect Q2 adjusted EBITDA margin of negative 19% to negative 15%. We expect a Q2 2022 basic share count of approximately $31 to $33 million. I also want to make a general comment on our current expectations for our business mix in 2022. While we do not guide revenue by product, we would like to provide some additional texture on our expectations for B2 cloud storage growth in the near term. While overall revenue growth has remained steady in Q1, we are seeing some softness in data growth. Consequently, we want to be cautious considering very high inflation and various other headwinds, particularly for the mid-market. As such, we think for modeling purposes that looking at the average absolute dollar growth of the last four quarters sequentially is a reasonable estimate of growth for B2 cloud storage for quarter two. Our full year 2022 revenue guidance range remains unchanged at $83 to $86 million. Turning to 2022 EBITDA margin guidance, We continue to expect a full year 2022 adjusted EBITDA margin of negative 18% to negative 14%. This guidance continues to reflect a plan to materially increase our investments in 2022 to address our significant market opportunity and with the aim to accelerate our long-term growth. I will now turn the call back to James.
spk08: Operator, we are now ready to take questions from analysts.
spk01: Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, please press the start and the one key on your touch-tone telephone. Please stand by while we compile the Q&A roster. Now, first question coming from the lineup. It's Aikidron with Oppenheimer. Your line is open.
spk03: Thanks. Hey, guys. Maybe I'll start before we finish. Frank, can you unpack the growth, softness and data growth Is there any color you can give us around this? When in the quarter have you seen this? And what type of customers are you seeing this? And when you talk to customers, what is the reason they give for it?
spk07: Well, just to reiterate, we don't guide for V2 growth, but we wanted to be transparent about what we were seeing so that everyone could understand V2 growth and your models could be accurate in that regard. What we've seen is something that happened in first quarter, to answer the first part of your question, and it really was in the growth of data being added by our customers. Now, we're looking at that to reflect that the best way we can is to start looking at the sequential growth of what we've been doing as a better way of modeling that. So it's certainly not, we don't want to be overly concerned about it, but we want to just point out what we actually are seeing.
spk03: Okay. But, Frank, I mean, it sounds like, to be clear, you don't have a good reason as to why there is a softness, it sounds like.
spk07: Well, we presume that, and in line with what we're seeing from other peers, that the pressures of inflation and interest expense, et cetera, do affect mid-market companies quickly and maybe more than others, and we suspect that's the reason.
spk03: Okay. And given inflation, there isn't a company on the planet, no matter what vertical it is, that isn't raising prices. You have raised in your computer backup, clearly. But is there any plan to raise prices in B2? Help me think about that for the next 12 months.
spk07: There isn't. We're really committed to being a great value. And as companies do have pressures on expenses, we hope they look to us as a way to save on their storage costs. So we really want to keep as economical as possible there.
spk03: Okay. So how should I think about gross margin? Because I'm sure your cost of billing your data centers, that is rising on a peer-to-peer basis.
spk07: We've had, we're doing fine there. Our gross margin is okay. It's actually up a little bit from the prior quarter, 1%. The reason being is that we're not seeing on the cost of capital of the infrastructure. We're not seeing a great deal of increase there yet. We're monitoring it very closely, but we're okay, you know, for the first half of all of our purchases this year. And there is a labor margin, too, and our labor rates remain in line with expected. So we are, you know, doing fine as far as that goes.
spk03: Okay, very good. Last one for Gleb. Gleb, I want to talk about the universal data migration. It sounds like a very interesting plan. Maybe you can talk about it. You said that this plan is available to someone who's eligible, so perhaps you can clarify who would be eligible for something like this, and what are the terms by which they migrate, meaning if you do this for them, what is it that they do for you, meaning are they committed to a 12- or 1-, 2-, 3-year relationship? How do you get those dollars back on the back end?
spk09: Yeah, it's a good question. And like you said, universal data migration is a good benefit for customers who are locked into either other cloud providers where they feel like the EOS fees are excessive or they're locked into on-premise storage that they want to get out of and move to the cloud. For eligible customers, what that means is they need to be migrating at least 10 terabytes of data to us. and the commitment is that they keep the data with us for one year. So the nice thing for them obviously is that during that one year, there's no additional fees. They'll actually be saving money off of their storage because we're one-fifth the price of most of the competitive offerings out there. So it's free from our perspective for what we offer for the customers. It's free for the customers to get their data out of the other providers because we will subsidize those fees. And by switching to us, it will actually be lower cost for them to keep the data for that 12-month period. Got it. Very good. Cool. Thanks, guys.
spk03: I'll jump back in queue. Thank you, Chris.
spk01: Our next question coming from the line of Simon Leopold with Raymond James. Your line is open.
spk05: Hi, guys. This is Victor in for Simon. Last quarter, you noted that you were going to increase investments in sales and marketing. Can you speak about some of the specific actions that you've taken and what your plans are for the balance of 2022?
spk09: All right, nice to meet you. Thanks for stepping in. So we said that we would increase the investments in sales and marketing, and we've done exactly that. We have scaled up the outbound sales effort. So as you may know, we were primarily in inbound and self-serve motion for years before. In early 2021, we started our outbound sales effort to complement those models. We found that it takes several quarters to see the results of those, or at least to start reading the benefits of those. We hired up an outbound sales team in the first quarter of this year primarily. So it's early. We just scaled up that team in Q1. But we are seeing pipeline scale. We are seeing some early traction from the investments from earlier last year. And I continue to be enthusiastic about our opportunity there. We also continue to do paid advertising, and testing, and optimizing, and scaling that. We brought on a developer evangelism. That team has published key content for how to use B2 with a variety of use cases, including with our partners Cloudflare, Fastly, and Ultra. And we're hosting our own developer meetup this month. We're sponsoring and participating in a developer-focused GlueCon event coming up. And then the other item that we highlighted last quarter was our partner marketing team. So we started that team, and in the last few months that team has already done a plethora of joint press releases, webinars, blog posts, case studies, and events with our other partners, including Beam, Catalogic, Cetera, and others. So overall, we've been investing in scaling sales and marketing, and we continue to invest and scale those efforts.
spk05: That's helpful. Can you speak some about the competitive environment? And if you've observed any adjustments from peers to their pricing strategy recently that might affect the value proposition from Backblast?
spk09: So I don't think that much has changed in the competitive landscape. We continue to see the diversified cloud vendors, Amazon, Google, Microsoft out there. We continue to take customers from them that want to switch, and as part of the universal data migration focus is helping those customers that want to switch to an easier and lower cost provider. And as I mentioned with the big cartel at KC, we also see customers moving over because they want to be with an independent platform that allows them to have access to other best of breed providers. So we haven't seen too much on that front. There are a variety of smaller end companies that offer cloud storage, and sometimes new ones pop up. But I wouldn't say the competitive landscape has materially changed since last quarter. Great. That's helpful.
spk05: Thank you very much.
spk01: Mm-hmm. Our next question, coming from the lineup. with JMP Securities. Your line is open.
spk10: Yeah, thanks for taking the question. I want to follow up on the slowing growth in data. What do you think those customers are doing? Is the data that they're storing just slowing, or what are they doing with the data if they're not storing it at Backblaze?
spk07: Just to reiterate, I just want to say that our V2 business and our B2 product growth is really very good. I mean, 48% is still very rapid. We're seeing slightly slower data growth. So what we're thinking that is, is that the customers are not creating as much data for storage. It's not that we think they're placing it someplace else. There's no reason for them to do that. But it's really that. And the reason that would happen is if they were pulling back on some of their work because they're concerned about maybe the inflationary pressures they're under or the added expenses they might be incurring because of higher interest rates or things like that. So that's what we're attributing it to right now.
spk10: Do you have any reason to believe AWS is seeing a similar trend?
spk07: It appears they're seeing a similar trend. AWS is very diversified with a whole lot of products. It's not quite the same. And, of course, they're in a different market than we are, the very up market. And we, of course, are in mid-market. So I don't really look at what they're doing in relation to all of that.
spk10: Okay. Then last question on the data migration service. How much upfront spend do you think that will take on the part of Backblaze to migrate those customers. Can you give us any sense on how much do you think that's going to take from a cash usage perspective?
spk07: It's not a robust amount because we have very good economics there. And also, so the cash flow is very manageable.
spk09: Just to also clarify, Eric, we don't outlay some large amount of cash preemptively. It's as each customer decides to migrate data, we help each customer migrate data. And so the usage is just per customer that migrates. The other thing to note is that some of the things that we have done are to optimize the way in which egress is done out of these different systems that significantly lowers our cost of migrating their data much below what it would have cost the customer to do that on their own.
spk10: What would be an example of how you can reduce the egress cost?
spk09: So an example of that is that we've bundled together multiple clients and set up direct connect systems where it would be complicated and likely not cost-efficient for them to do that on a one-off basis. Okay, great. Thank you.
spk01: Our next question coming from the line of Eric Martinuzzi with Lake Street Capital. Your line is open.
spk02: Yeah, I wanted to revisit the gross margin. The 76% was slightly ahead of what you had guided. I believe last call you talked about 74% to 75% range for FY22. I assume that you're reiterating that. What takes that fact down in Q2s 3 and 4? I couldn't hear any of it.
spk09: Eric, I'm going to repeat your question. Frank didn't hear the last bit of it. What Eric was asking was with our slightly higher gross margin this quarter and with 74 to 75 huge costs for fiscal year 2022, does that imply that we're going to have lower gross margin in the further quarters of the year?
spk07: Oh, no, not necessarily. We had said that Our gross margin was increasing very slightly over time, and that was simply because the expenses for headcount and other areas of the data centers were not growing as fast, and that's likely still the case.
spk02: Okay, so do you want to, you know, when all is said and done for FY22, what do you think the gross margins finish out the year at?
spk07: Yeah, we really don't guide the margin for the whole year, but you should think of it in the range that we've been talking about just now.
spk02: Okay, I'm going to run with 74 to 76. Expense-wise, you talked about some of the investments that you've been making in sales and marketing and R&D. I know you had given a numeric expectation for employee growth for the full year, and that was an expansion of going to about 450 employees up from 270 where you finished out the prior year. And I just wanted to know, is this, you know, on average you've got to be adding about 40 to 50 employees per quarter. Are we on that track, on that pace?
spk07: Yes. Yes, it's slightly slower. It's always a challenge to hire the technology people, and also we always evaluate. We're constantly evaluating, but, yes, we're on that pace.
spk02: Got it. Thanks for taking my questions.
spk01: Our next question, coming from the lineup, Jason Ader with William Blair. Your line is open.
spk06: Hey, guys. This is Billy Fitzsimmons for Jason Ader. Glenn, maybe I'm expanding on Simon's question from before. I know you said the competitive landscape hasn't really changed, but maybe digging a little deeper. I know AWS made some changes to their egress policies a couple months back. And then second, CloudFlare is obviously a very important partner for you guys, but they announced their R3 solution back in September. Can you speak a little bit to if those dynamics are kind of coming up in competitive conversations and what kind of the impacts are?
spk09: Yeah, thanks for joining, Billy. There hasn't been anything that's really different. And what I mean by that is certainly AWS announced that they were going to be lowering some of their EOS fees prior to our last earnings call. And we talked a little bit about it then that it's a very, very small change. to their eGRIS plans. Frankly, I'd be happy if they dropped them completely. It would make it easier for customers to migrate away from AWS. That's why they keep the eGRIS fees up. So we haven't seen anything material from that because it was such a small change to their pricing. On the Cloudflare side, we continue to work with Cloudflare and we have customers in partnership efforts that continue to move forward on that front. We haven't seen anything new other than the original announcement that they had put out back last year.
spk06: Got it, got it. And then maybe another one for you, Gleb. I know you guys called out the data growth dynamics on the B2Cloud side, but I also think it's important to remember that it's important to not forget that some of the upside of the quarter came from the computer backup side. Can you maybe just expand on some of the dynamics that helped drive that? I know you guys only give the customer count annually, but if you had to attribute it to factors, would you say it was that maybe you originally anticipated. I'm curious for your thoughts there.
spk09: Let me make sure that I correct your question. You're asking how did we accelerate growth up to 27% versus 24% in the prior year's quarter?
spk06: Yeah, just trying to get at, you guys put up some good numbers for the computer backup business and wondering if you can kind of dig deeper on something like that and help drive that.
spk09: Got it, yeah. Yeah, the computer backup side, we continue to grow that business through acquiring more customers, but the acceleration and growth there is driven in a strong part by the price increase that we did last year as it continues to roll through the entire base.
spk06: Perfect. Thank you.
spk01: Our next question coming from the lineup, Zach Cummins with B Riley. You want to stop in?
spk04: Yep. Hi, good afternoon. You're taking my questions and I apologize if you've kind of gone over some of these dynamics already, but I was curious of what you've been hearing from customers and in your conversations with their stations with them in recent months. I mean, just given all the different macro headlines, What's the overall sentiment that you're seeing across your customer base, whether it be spending plans or kind of what they are thinking about from strategic initiatives perspective?
spk09: Yeah, it's a good question, Zach. The fundamental thing we continue to hear from customers is that they are trying to run their businesses, and running their businesses for most of them means they have their own digital initiatives Some of them are to get their systems into the cloud. Some of them are to just streamline the way that their infrastructure works. Some of that is that multi-cloud setup. So they continue to want to run their businesses. They're paying attention. to the macro trends. They're paying attention to how are things with COVID. They're paying attention to things around inflation. They're paying attention to the Russia-Ukraine situation. But in the face of all that, they're trying to run their businesses. And so to the extent that they're continuing to try to run their businesses, we are trying to help them with their different initiatives. But it's certainly on people's minds. And there's, I would say, the inflation aspects are something that certainly is concerning some of the customers. They're certainly paying attention to it. But they're also trying to continue to run their business as they can.
spk04: Understood. And just another question for me is really around your cloud reputation product. It sounds like it's in the beta at this juncture. I mean, can you give any sort of incremental update of maybe the feedback you've received from any customers that have used the product thus far? And kind of are you still on that same timeline to get this fully launched in the second half of this year?
spk09: We're actually on the timeline of getting it launched in the first half of this year, which was our target before, and we're still on track to do that. Customers are using it. We've put out a request for customers who were interested in the beta. We had a lot of customers that signed up for that, and they're experimenting with it. So far, all signs are positive, and we continue to plan to get that launched and available to customers before the end of June.
spk04: Great. Thanks for taking my questions. I appreciate it, and best of luck with the rest of the quarter. Thank you. Appreciate it.
spk09: Thanks for all those great questions from the sell-side analyst community. I would now like to read questions that came from non-institutional investors. I want to thank those investors that submitted questions. It does look like a few of those questions have already been answered. We're going to address a handful of the more popular questions in the time that remains. The first one is for Gleb. Gleb, where do you expect the company to be in two years' time? James, thanks for the questions from the non-institutional community. For those that submitted questions and voted on them, I really appreciate it. It's great to hear the engagement from the broad base. In terms of the company in two years' time, we have to continue to grow the company with both of our cloud offerings and with a particular focus on B2 cloud storage and our opportunity there. We believe that data is the digital world's most precious resource. And our storage cloud and our role as the leading independent cloud for storage enables us to continue in our mission to make it astonishingly easy to store, use, and protect that data. And we'll continue to do that over the next years to come. Okay. Michigan is also going to be fled.
spk08: um during these tough ongoing macroeconomic conditions why did the founders leadership team decide to proceed not push back the timeline with the planned sales 20 of their total shares a few months post IPO and the share price is already suffering tremendous things it's a fair question and we like to be proactive and transparent
spk09: So we put a detailed explanation of our motivations in a post on our blog a few weeks ago. I encourage everyone to read that at backwards.com slash blog. The important thing to understand is that this plan was designed to be a low-impact, longer-term diversification plan for some of the founders' personal holding. Also keep in mind, we put this program in place back in February, knowing it wouldn't even start for many months. And the idea is to do small sales each day to minimize impact and to avoid any appearance of attempting to time the market or the stock price. And even after this plan completes in a year, we'll remain large holders of the stock and are still very positive on the long-term outlook for the business.
spk08: This one is for Frank. How is your 2022 trajectory looking given the current volatility in the markets?
spk07: Well, we just reported good Q1 results. We're at the very top of the range at $19.5 million in revenue. And we did deliver a bit above our Q1 guidance range. And as you commented, we've seen some slower data growth, like some of our peers. And we're cognizant of the world we live in right now, which is unprecedented inflation and the potential risk because of that, especially for medium-tier business customers. But overall, I think you saw the press release. We are reiterating our guidance for the year, and we're continuing very strong growth.
spk09: The next one is for Glenn. Will the company be releasing any products to back up network storage or servers that could be used on a different price tier to meet the needs of the business and commercial industries? So we're continually releasing new products, such as our announcements recently around universal data migration, B2 Reserve, and the partner API, and our upcoming cloud application features. To be specific about backing up network storage and servers. So I assume this question may be coming up from users of our computer backup service, which supports laptop and desktop backups for businesses. Our B2 cloud storage offering already supports businesses for these needs and so much more. B2 Cloud Storage actually came about in part because so many businesses came to us saying they loved our laptop, desktop, computer backup service and they wanted us to help them with their other storage needs. B2 helps thousands today by being the cloud storage where network storage and server backups are stored. We work with partners such as Synology, QNAP, TrueNAS, and Netgear to back up their network storage devices. We work with partners such as MSP360 and Retrospect for server backup. We work with Veeam, Commvault, and Catalogic and others for virtual machine backups. And these and hundreds of other Alliance partners today enable customers to protect their network, server, and virtual machine data with backlinks. And our object lock functionality enables us to help these customers protect their data from ransomware with a number of these partners as well. So today already thousands of our customers use computer backup for laptop desktop backup, and B2 cloud storage for the network and server backup needs. And being able to use this makes it easy and cost-efficient storage available for both types of use cases. Okay, this one's for Frank. What growth rate are you targeting for B2 in the next five years? And when do you expect it to overtake the personal backup offerings?
spk07: Well, we don't guide growth by product line, but we do expect B2 to grow faster than computer backup. And remember that most of our investments are going to B2. So given that B2 has a very high revenue per user, very high revenue retention rate, and the overall growth rate is very high, we do expect B2 to eventually overtake backup as the larger business in the coming years.
spk09: Okay. Will the products through management be overhauled in a way that can be used for the MSP or IT industry with a better management and better deployment automation that can be used in commercial spaces that easily can be used in the residential? I think that question is getting at whether we'll make our products more attractive to managed service providers and to companies' IT departments. So for those not familiar, five years ago, we launched Groups. Groups is a functionality which made it easier for MSPs, managed service providers, and for companies, IT departments, to manage multiple users, companies, or departments. And it allows them to set up not only multiple users, but to have each person have access to both computer backup and B2 cloud storage, have multiple administrators, get notifications and reports, and view all of this to a central dashboard with central buildings. Over the last few years, we have also added single sign-on functionality to integrate with Google and Microsoft authentication services, support for mass deployment of our computer backup service across any number of laptops or desktops, and support for endpoint device management tools such as Jamf and others. We continue to innovate to make it even easier for managed service providers and mid-market IT organizations to handle their storage needs. Is the goal of a company to maintain focus on home and residential user groups with continued development and storage back end available through S3, or will the company move into a shared marketplace, both residential and commercial? So I think that that's asking if we're focusing more on consumers or businesses. Our computer backup services serves both businesses and individuals. B2 Cloud Storage is primarily focused on supporting businesses and developers. Both our computer backup and B2 businesses are growing rapidly, and we're putting significant resources behind each. With the broad range of use cases and the large market opportunity, and as Frank said, the higher revenue per user, higher dollar retention, we are putting increased energy behind our B2 Cloud Storage offerings. Another one for Bob here. How do you plan to bring more value to your company's products? Fundamentally, we believe there's just tremendous value in data. And so as much as we continue to make it easy to store, use, and protect that data, we continue to innovate and offer new features and benefits just as we showed this quarter with the announcements today. to serve that mission by investing in sales and marketing to bring those features and benefits to more customers. As we add value to our products, which adds value to our customers, that results in value for Backways. Does Backways currently compete for any large government contracts? Backways can support any type of company or organization. And we have both governments and Fortune 500 companies as customers. But large government contracts are not a focus for us. We focus primarily on serving the 60% of the market that's represented by the underserved mid-market. Okay, last one, again, for Glenn. Is that the same in any major acquisitions or partnerships in the next quarter? So we don't pre-announce acquisitions for a number of reasons. Generally, we're focused on our significant organic opportunities, but we keep an open mind to anything that can accelerate our strategy. And just as with the SOTA, Catalogic, and Cictera announcements that we've just made, we continue to look for new partnership opportunities that benefit our customers. Thank you, Bevan, for those answers.
spk08: Before handing back to Gleb, I'd just like to mention that we'll be attending investor meetings hosted by Oppenheimer in Boston and New York on May 8th and 19th. We'll also be attending the B-Riving Institutional Investor Conference on May 25th and 26th in Los Angeles. Additionally, we are attending the William Blair Growth Conference in Chicago on June 8th and visiting investors in Minneapolis in meetings hosted by Lakeshore on June 9th.
spk09: I will now turn the call back to Gleb for closing comments. Thanks, James. And thanks again to all of you for your interest and participation, and we look forward to updating you again on our progress in just a few short months. Operator, you may now end the call.
spk01: Ladies and gentlemen, that's the conference for today. Thank you for your participation. You may now disconnect.
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