Backblaze, Inc.

Good day and welcome to the Backblaze's fourth quarter and fiscal year 2023 earnings 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 a touch-tone 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, Investor Relations and Corporate Development. Please go ahead.

Thank you. Good afternoon and welcome to Backblaze's fourth quarter and 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, faculty 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 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. Please also see our press release or presentation for definitions of additional metrics such as NRR, gross customer retention rate, number of customers, and ARPU. 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. Thank you for joining us. and I would now like to turn the call over to Gleb.

Thanks, Mimi, and thank you, everyone, for joining us today. We are very pleased with our Q4 results. We delivered new product features and accelerated revenue growth, with B2 Cloud Storage having particularly strong growth of 47% year-over-year. We also demonstrated continued financial strength as we reached adjusted EBITDA profitability for the first time as a public company, and dramatically reduced cash usage. In addition, we are reiterating our forecast to exit this year with at least $20 million of cash on hand. I want to take a moment to highlight some key results. First, we delivered significant innovations. Second, we've continued to move up in the mid-market. Finally, we've accomplished this while dramatically improving our financial position. We've accelerated our overall growth rate to 25% in Q4, while at the same time improving our profitability and cash usage. We achieved adjusted EBITDA of 6%, beating the high end of our prior guidance of 3%. And we used just $2.4 million of cash, which is about $6 million less than we used in the prior quarter. These three achievements provide a strong foundation for the year ahead. positioning us to take advantage of a shift we're seeing in the market. I want to take a moment to talk about that shift. We're seeing larger businesses come to us because they want to build using the cloud providers that best suit their needs, instead of being forced to stay in the traditional closed cloud platforms. For some of these businesses, it's about unique functionality. They're able to optimize with specialized solutions fitted to their use case. For others, it's financial. They can achieve massive savings by migrating away from expensive and complex traditional cloud providers. And for some, it's about trust, that providers won't compete with them indirectly. These are some of the reasons companies are increasingly wanting to use best-of-breed providers in an open cloud ecosystem. together with other cloud companies were well positioned to help drive that open cloud ecosystem, which is defined by interoperability, best of breed functionality, affordability, and the free movement of data. I want to share a great customer story that highlights the value companies are seeing with this open cloud approach. The customer is a media streaming service with over 22 million global users. Their previous solution, was built on top of AWS, which was constraining their growth due to technical limitations and excessive download fees. Download fees, which are referred to as egress fees in our industry, are one of the restraints that traditional cloud providers use to keep customers from leaving their platforms. Our commitment to free egress, our scalable and performance storage platform, and our easy integration with CDN partners convinced this customer to switch to Backblaze B2. By switching to Backblaze, this customer was able to develop and deliver features to their end customers that the previous platform couldn't support. Even more impressively, with Backblaze, they were able to save over $800,000 on egress a year. That's $800,000 each year that they can invest back into their business, grow their customer base, and in turn, grow the data stored with Backblaze. Turning to innovation, we are focused on providing the performance and functionality businesses need to move away from legacy solutions. For over 16 years, the Backboys team has excelled at innovating on cloud storage by finding greater performance and greater efficiency in hardware and software. In Q4, we launched ShardStash for Backboys B2, which enables upload speeds up to 30% faster than Amazon S3. Also in Q4, we introduced free egress, up to three times the amount of data stored for every B2 cloud storage customer. furthering our commitment to the open cloud. We are the only cloud storage provider of scale that is offering this to customers without hidden fees or gotchas. We believe Backblaze is uniquely positioned to be the de facto storage platform at the center of the open cloud ecosystem as we support customers to use their data where and how they choose. We also recently launched computer backup enterprise control. This is a feature set that gives businesses greater administrative tools for an additional $2 per computer per month. With enterprise control, IT admins have the ability to meet their compliance requirements and easily manage backups for hundreds or thousands of computers. We're only a few weeks into availability, but we're encouraged by the early feedback we've received from customers. I'm really proud of what our team has done But I'm even more excited for what's next. Our team continually improves the performance of our platform and enhances our products to serve new use cases. For instance, while a number of AI companies are already succeeding with us and we're integrated with leading GPU compute providers, our team isn't resting on that success. We continue to innovate on our storage architecture to better serve the increased demand and evolving workflows of AI-related storage. We are also excited about the addition of David Ngo as our new Chief Product Officer. David is the former CTO of Metallic at Commvault and brings over 25 years of experience in the data storage and protection industry. David is coming aboard to help lead the team to bring even greater innovation and strategic leadership for our customers and partners. So we've delivered significant innovation and set ourselves up for more. Next, I'd like to talk about moving up market. First, we continue to build our channel program. Working with our channel partners helps to both increase our velocity on smaller deals and to identify and close larger deals. A great example of the latter is a $100,000-plus deal that we closed in Q4. One of our channel partners identified an NFL team that was looking to update their approach to data storage. As many of you probably watched the Super Bowl last weekend, you can imagine the incredible amount of video and other data generated during professional football games. Working together with our channel partner, we helped this customer simplify and improve the way they work with all of that data. Second, on the partnership front, we just launched our new Powered by Backblaze program. Powered by lets businesses add B2 cloud storage to their product offerings without any of the hassle or complexity of managing cloud storage infrastructure. For example, early Powered by customers include an edge compute platform provider and a transcoding cloud service provider. I'm excited for these types of partnerships because they help businesses expand their offerings, make it easy for their customers to get access to best of breed cloud storage, and provide back boys with access to new distribution channels and customers. Finally, as I've discussed, we have been successfully winning deals with larger customers, and we are delivering the features and the performance larger customers are looking for. As the company takes the next step toward winning these customers at scale, we're updating our sales approach accordingly, including growing headcount and adding a new sales commission program. We will also be hiring a new SVP of sales. Neelay Patel, our current VP of sales, helped build the go-to-market for B2 Cloud Storage from the ground up and led the efforts to open up the use cases we currently serve Nealey and I agreed that now is the right time to pass the baton as the company charts its path beyond $100 million. An executive search is underway during which Nealey will continue to lead the sales organization to ensure a smooth transition. Once a new head of sales is on board, Nealey will turn his focus to our AI initiatives, which are aimed to help support customers in managing the explosive growth of AI data and its use cases. I'm very proud of what we've accomplished in 2023. By continuing to innovate, moving up market, and enhancing our go-to-market approach, Backboys is in a great position to help our customers reap the full benefits of the open cloud. At the same time, we have dramatically improved our financial position as we accelerated revenue growth, achieved adjusted EBITDA profitability for the first time as a public company, and dramatically reduced cash usage. I'll pass the call to Frank now to review our financial results.