Backblaze, Inc.

Good day and welcome to the Backblaze third quarter 2023 earnings conference call. All participants will be in 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 touchtone phone. 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 Mimi Kong, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Backblaze's third 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 features and offerings, and 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. 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 financial 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 is 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. Please also see our press release or presentation for definitions of additional metrics such as NRR and gross customer retention rates. 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 were gathered through SAFE Technologies platform. Thank you for joining us, and I would now like to turn the call over to Gleb. Gleb?

Thank you, Mimi, and welcome, everyone, to the call. We delivered a strong Q3. First, we believe that we're at an inflection point with higher revenue growth expected in Q4 and 2024. Second, we've made great progress on our financial performance, particularly adjusted EBITDA and cash, as Frank will detail later. And third, our team continues to innovate on our storage cloud, delivering a dramatic increase in upload performance and making our B2 cloud storage up to 30% faster than Amazon Web Services' storage offering, while continuing to be just one-fifth the price. Before Frank talks about the financials, I'd like to share some observations on the industry's continued shift toward the open cloud. We hosted our third annual Tech Day a few weeks ago. Thousands of IT administrators, developers, and other cloud architects attended Tech Day, which we co-presented with CoreWeave, Fastly, and Snowflakes. The event demonstrated how B2 Cloud Storage works with other specialized providers to power a successful open cloud strategy. This strategy gives customers the power to break free from the constraints and high costs of traditional cloud providers. For AI use cases, we presented a session with CoreWeave, a specialized cloud provider of large scale GPU accelerated workloads. to show how pairing our services supports AI workflows, which consume and generate data at an exponential rate. B2 Cloud Storage is an ideal cost-effective storage solution for AI workflows and processes, including the AI model, training, and inference data. With Fastly, the presentations showcase how to secure edge workflows and serve up data from B2 Cloud Storage. And with Snowflake, we shared how their analytics platform efficiently works on data stored within B2, demonstrating how Backblaze's interoperability allows users to put industry-leading platforms like Snowflake to work on data within our storage cloud. The thousands of technical decision makers participating in TechDay further confirms that customers are more and more interested in moving toward the open cloud. where they have the freedom to build the best solutions for their needs at a fraction of the cost. Turning to our growth strategy, we focus on making it easier for customers to adopt and grow on B2 Cloud Storage while continuing to expand the ecosystem of partners and resellers. As we've discussed before, this strategy includes self-serve, sales-assisted, and partnership efforts, along with focusing on cultivating application storage use cases. I'll touch on some highlights for each of these. For self-serve, we have completed overhauling our website infrastructure and have seen encouraging results with increased year-over-year growth in new customers. Our sales-assisted motion continues to add and grow larger customers. For example, one such large customer started with 400 terabytes of data earlier in the year and has since fully leaned in, increasing their data stored by 5x. which translates to over $100,000 in ARR. This is a trend we see often, where customers start small and move more data to B2 once they realize the full extent of B2 Cloud Storage's cost savings and ease of use. Moving on to our partnership initiatives, we announced new and expanded partnerships with Haiku and Kencode. The Haiku partnership helps extend our reach within the multi-billion dollar data protection as a service market. And the CanCode partnership adds an additional B2 cloud storage distribution point for media production customers. We also continue to make progress with our channel partner program. In Q3, we signed our largest multi-year B2 reserve deal with an upfront $1 million commitment. And finally, I'd like to share a developer story which highlights our ability to serve innovators in the AI space and illustrates how we continue to make headway within our application storage initiative. One of our joint customers with CoreWeave is an application developer using AI to reinvent how 3D motion capture works. With this customer's SaaS offering, there's no need for special environments, clothing, or sensors Creators can simply capture human movement and their AI translates it into usable 3D animation. But they needed a cloud storage provider that could scale with their ambitious growth plans while also providing free egress for them to easily migrate their data into Coreweave to run AI workloads and archive those results. After considering other traditional providers, they found that Backblaze could best serve their needs. This is a great example of how AI use cases require both powerful servers for processing large volumes of data, as well as affordable, accessible object storage. Next, I'm excited to share a recent important innovation in our storage platform, which we call Shard Stash, that led to a significant performance improvement for B2 Cloud Storage. Small file uploads, which we define as uploads smaller than one megabyte, make up the majority of upload activity for B2. For this type of upload, Backblaze is now up to 30% faster than Amazon S3. This breakthrough increases efficiency for customers and helps free up resources for other tasks. B2 cloud storage continues to be one-fifth the cost of the traditional cloud providers, while delivering more value to customers across our platform. Additionally, for computer backup, we launched version 9.0, which features improvements to performance and usability, as well as a highly requested new local restore experience. As we announced in August, we're looking forward to continued improvements with our advanced groups administration, which delivers features to free enterprise IT managers from the burden of complex and expensive endpoint workstation backup solutions. Now, I'd like to share some of the feedback we received from the price changes and product upgrades we announced in August, which became effective in October. While it is still early, churn was generally in line with our expectations. Our customers appreciate our continued investments in the platform and valued our recent upgrades and improvements to popular features, such as complimentary one-year extended version history for our computer backup service, and three times free egress for B2 Cloud Storage. As we have shared previously, we believe an open cloud will serve customers best, and our free egress helps make that a reality. Following our announcement, we saw new customers engage with us directly because high egress fees charged by other providers are a major pain point for them. offering free egress cut through the noise and spoke to what customers really cared about, the freedom to choose best of breed solutions for how they want to store and use their data. And before I hand the call over to Frank, I'm excited to welcome Chris Opat, our new Senior Vice President of Cloud Operations to Backboys. Chris is a customer-centric leader with over 25 years of industry experience in edge computing, data center management, and multi-cloud enablement at companies like StackPass and CloudReach. Chris oversees the strategy and operations of our global cloud storage platform. Having already seen Chris's impact on accelerating the deployment of the performance improvements I mentioned earlier, we're all very excited to have him aboard. Now, I'd like to turn the call over to Frank. Frank?