Backblaze, Inc.

Good afternoon and welcome to the Backblaze Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. 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 one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to James Kistner, Vice President of Investor Relations and Financial Planning. Please go ahead.

Thank you. Good afternoon and welcome to Backblaze's second quarter fiscal year 2023 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 about our future financial results, use of our IPO proceeds, results from new offerings, partnerships and sales and marketing initiatives, our ability to compete effectively and manage our growth, our strategy to acquire new customers and retain and expand our business with existing customers, and our efforts to hire and retain key personnel. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those described in our risk factors that are included in our annual report on Form 10-K and 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, not as a substitute for, our GAAP results. Reconciliation of GAAP to non-GAAP results will be found in our earnings release, which was furnished with our Form 8K 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. 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 Say Technologies platform. This will be moderated by our new Director of Investor Relations, Mimi Kahn. I would now like to turn the call over to Gleb. Gleb?

Thank you, James, and thanks to all of you for joining us. We continue to execute on our growth strategy this quarter. Total company revenue grew 19% year on year with strong 39% year on year growth for B2 cloud storage and 7% growth for computer backup. I want to start with two business highlights. First, our increasing success in moving up market. I'm proud of our team for executing on larger customer deals for both computer backup and B2 cloud storage. I'll go into the numbers in more detail later, but we're seeing success in moving up markets both among paying customers and in our sales pipeline. Second, I'm happy to report that we are well on our way to our previously announced goal of approaching adjusted EBITDA breakeven in the fourth quarter. Frank will provide some insight on why we believe the company is well positioned to return to being cash flow positive without needing to access equity capital markets. I'm excited by the cloud storage opportunity ahead by supporting customers in the direction they want to head with the cloud. As leading advocates for the value of an open cloud ecosystem where customers can use the combination of clouds best suited to their needs, we believe customers need to be able to store and use their data any way they see fit. Additional cloud service providers are walled gardens that charge customers egregious fees to move data out of their clouds. And yet, customers' desire for best-of-breed solutions and the high prices of traditional cloud providers are driving customers toward an open cloud ecosystem being enabled by providers like Backblaze. And as these customers discover our ease of use, our openness to other technical platforms, and our low-price leadership, They tend to grow their usage and adoption of open cloud solutions, as is evidenced in the customer story I'll share later. As a reminder, we have two cloud service offerings. The first is our computer backup business, and the second is our B2 cloud storage service. I'd like to first give an update on our computer backup business. Computer backup is our more mature business representing about 56% of revenue this quarter. While the majority of our investments have been focused on our B2 cloud storage service, computer backup continues to be a good business for us. In Q2, we closed our largest computer backup deal in company history with one of the most well-known social media companies in the world. This customer chose Backblaze to protect all of their employees' data because of the speed and ease of deployment of our solution. And as we worked with them, they gave our technical and support teams special recognition for their outstanding service. We see a significant opportunity to address the needs of more businesses with our computer backup solution. For B2 Cloud Storage, we continue to execute on our growth strategy, which includes the following key elements. Number one, optimizing our self-serve go-to-market motion. Two, expanding our sales-assisted go-to-market efforts. Three, leveraging partnerships. And four, cultivating application storage use cases. I'll briefly touch on the progress we are making on these elements of our strategy. Self-serve remains highly efficient for us as we continue to find opportunities to enhance the self-serve funnel. We overhauled our website infrastructure with an entirely new backend that provides a giant step forward in our ability to rapidly test and improve the user experience and to ultimately drive higher conversion rates. Also on the self-serve front, we launched a more targeted and personalized onboarding process to continue our focus on making it easy for customers to use our cloud. We're encouraged by the early results from this more intuitive customer onboarding experience. Moving on to our sales-assisted efforts, the number of customers with ARR greater than $50,000 increased materially to 74 in Q2 versus 48 a year ago. We don't plan on sharing this statistic every quarter, as it may be variable and thus not necessarily meaningful on a quarter-over-quarter basis. But we believe there is a tremendous opportunity for Backblaze to move up market. We also began engagements with a number of large potential customers. While there's no guarantee that these opportunities will all close, we are encouraged that more and more larger customers are bringing us into their consideration sets. Now, let's talk partnerships, the third key element of the growth strategy I mentioned. For B2, partnerships are strategically important. Recall over one-third of our B2 revenue is from customers identifiably using our joint solutions with partners. One recent example of a new joint solution with a partner is the announcement of Cloud Instant Business Recovery, or Cloud IBR, by our partner, Continuity Centers. They built Cloud IBR using Backblaze B2 as the storage cloud to pursue opportunities in the disaster recovery as a service market, which is forecast to be $23.5 billion in 2027. Now, businesses of any size can use this new Cloud IBR service to get enterprise-grade disaster recovery capabilities. Another important aspect supporting our partner and channel efforts is trade shows. This quarter, we exhibited at BMON and NAB major conferences for data backup and the media industry respectively. We are encouraged to see an almost three-fold increase in pipeline from these shows as compared to last year. Finally, a recent win came through our partnership with technology partner Fastly, an edge cloud platform. which resulted in a petabyte scale deal with one of the world's largest video game companies. Together with the Fastly team, we were able to quickly satisfy this customer's requirements. This mutually beneficial arrangement with Fastly is a great example that provides a better solution for the customer and creates opportunities for both open cloud companies. Moving on to the final key aspect of our growth strategy, application storage customers. Recall, we define application storage customers as businesses that use Backblaze V2 as the infrastructure for their SaaS or internet businesses. We've entirely rebuilt and launched a new developer documentation hub on our website to make it even easier for developers to build applications using our storage cloud. This revamped documentation hub makes many aspects of their onboarding easier, especially when working with our API. The new hub is already driving higher user traffic, and we have plans for additional enhancements, including more how-to videos, API test environments, and documentation. Making it easier for developers to onboard facilitates both self-serve and sales-assisted customers to adopt our storage cloud faster. As I mentioned earlier, I'd now like to share a customer story that hits on why Backblaze's low-cost leadership, open cloud partnership program, and ease of use is compelling to SaaS and internet businesses. A rapidly growing consumer video app startup received free AWS credits to start. Once those were used up, they found AWS pricing to be prohibitive for them to scale. They came to us because they recognized that we were dramatically cheaper than AWS, and they were able to switch to Backvoice in just two weeks, in part because Backvoice provides Amazon S3-compatible APIs. The customer initially chose Backvoice for their archival data, but realized that Backvoice would also be ideal for all of their application data, and they migrated the rest of their data to us effectively doubling their storage with us. They also switched their network provider to reduce their infrastructure costs, which was enabled because we don't charge egress fees to customers using our open cloud technology partners. This is just but one of many examples of how transformational the open cloud ecosystem is for a company's business model. Before handing the call over to Frank, I'd like to touch on two topics of note to investors. First, I'd like to talk about Backblaze's move to a single class share structure. On July 6th, all outstanding Class B stock converted to Class A on a one-to-one basis. The elimination of the company's dual class share structure provides all shareholders equal voting rights and underscores Backblaze's commitment to good corporate governance and being a shareholder-friendly company. And second, I'd like to share a personal update with respect to my selling of BackWay shares, which is that I have canceled my 10b51 trading plan. I'll now turn the call over to Frank, who will review the financial results in more detail.