Backblaze, Inc.

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 telephone keypad. To withdraw from the question queue, please press star, then two. As a reminder, this conference is being recorded. I would now like to hand the call to Mimi Kong, Director of Investor Relations and Corporate Development. Please go ahead.

Thank you. Good afternoon, and welcome to Backblaze's first quarter 2024 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, 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 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. Thank you for joining us, and I would now like to turn the call over to Gleb.

Thanks, Mimi. Good afternoon, everyone, and thank you for joining us today. We had a record start across our key financial metrics. This quarter, revenue grew at 28 percent, eight percentage points better than last year. We achieved an adjusted EBITDA margin of positive 6 percent versus negative 12 percent a year ago. And finally, cash usage this quarter was only $600,000, a dramatic improvement from the $13 million of cash used this same period last year. Not only have we delivered accelerated business growth and improved efficiency, but we have also delivered product innovations that serve our mission of supporting customers and partners with the best storage cloud. Before diving into our business results, I want to speak to a customer trend that we're already benefiting from today and which we see accelerating. A few months ago, we conducted a survey of more than 400 IT decision makers. A majority of the respondents indicated that they prefer to choose from best-of-breed solutions when selecting vendors. And yet, the cloud landscape has been historically defined by Cloud 1.0, where a few diversified cloud providers aim to lock customers into their platforms and take away customer choice. You may have heard that Google Cloud, AWS, and Azure recently announced free egress for their customers. They may have done this to mollify regulators because the Cloud 1.0 model is a walled garden by design, but this move does not at all address what customers actually want because it only applies to customers who leave those platforms completely. What customers really want is to freely use their data with multiple cloud services. These fake free egress announcements are only free exit not free egress. And underscore that Cloud 1.0 just doesn't work that way. Businesses want Cloud 2.0, an open cloud ecosystem where businesses can use their data wherever and however they want to. It's better for them, better for innovation, and ultimately better for the broader economy. And Backboys is built for Cloud 2.0. First, Our egress is actually free, allowing customers to use their data without fear of crippling bills or limits on who they work with. Second, we have a robust partner ecosystem, which gives customers easy access to the best of breed platforms they need. Third, we provide a trusted, durable platform that provides strong performance. And last, we continue to deliver innovations that support customers in using the best of breed services they want. A great example of this last point is our newest innovation called Event Notifications. Event Notifications gives customers the ability to build automated workflows across different best of breed cloud providers. For example, a customer can upload a video to B2 Cloud Storage And event notifications will automatically trigger a compute process at another provider that prepares the file for streaming. Currently, similar offerings in the market only trigger actions within one platform or require complex and restrictive workarounds to work with other providers. We designed event notifications to be platform agnostic, empowering customers to build workflows from the services they want. cutting out significant inefficiencies and costs in the process. The product launched in private preview just three weeks ago, and we already have over 100 organizations that have requested to join the early release. Event Notifications was also recognized as Product of the Year for cloud computing and storage at the National Association of Broadcasters Conference, a major trade show for the media and entertainment industry. I'm very encouraged by the early reception and the potential for our services to become increasingly strategic for our customers. Including event notifications, Backblaze has announced four major releases over the past six months, from the Shards Dash performance upgrade to enterprise control for business backup to our Powered by Backblaze program, I am proud of our team for delivering features that differentiate us and strategically position us as the de facto cloud storage provider for the open cloud. In Q1, we also made significant progress in our compliance and security programs, including StateRamp and the Motion Picture Association's trusted partner network. Focusing on compliance and security, is another key element in our effort to make our services as easy to adopt as possible. In this case, for the state and local government and educational industries and the media and entertainment industry. At the same time, we continue to expand and enrich our partner network. Recently, Backblaze and Kerasoft, which is one of the largest privately held IT software and services companies in the world, announced that we've been added to their NASPO value point contract, which eases the procurement process in government and education. Our partners also continue to help us facilitate and win deals with larger customers. Recently, the media team of one of the world's largest retailers needed a trusted location to hold their creative work. Their preferred reseller recommended adopting Backblaze. Our performance, ease of use, and affordability won the deal. In addition, our sole focus is a best-of-breed provider for cloud storage means that this retailer doesn't need to worry about any conflict of interest. With a vendor like Amazon, that obviously wouldn't be the case. Additionally, a number of meaningful partners have already joined our Powered by Backblaze program, which we announced just last quarter. One of the most recent companies to join Powered by is Axel AI. Their new Axel AI cloud leverages our cloud platform to deliver AI-powered media search tools. In the broader AI space, we're seeing a growing number of partners and customers utilizing the value of B2 cloud storage for AI workflows. Since the beginning of 2023, the number of AI companies using B2 for data storage has doubled with a wide range of use cases, such as wildfire management and monitoring, manufacturing optimization, satellite data analysis, and much more. I'm very proud of what the team has achieved to not only reach our record financial results, but to also deliver our platform and product innovations. I believe these put us in a strong position to deliver the transformational power of Cloud 2.0. I love seeing what businesses can do after we help to free their data from legacy platforms. Before I hand off the call, Today we announced that our CFO, Frank, is planning to retire this year. A search for his successor is already underway, and Frank intends to remain with us to help ensure a smooth transition to our new CFO. We're all hugely thankful for everything Frank has brought to the team, but we'll say our gratitude and celebration of his many accomplishments for his departure later this year. Until we hire and onboard his replacement, Frank will continue to help us drive great results.