Backblaze, Inc.

Welcome to the Backblaze third quarter 2024 earnings 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 touchtone phone. And 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 Ms. Mimi Kong. Head of Investor Relations. Please go ahead, ma'am.

Thank you. Good afternoon, and welcome to Backblaze's third quarter 2024 earnings call. On the call with me today are Gleb Budman, co-founder, CEO, and chairperson of the board, and Mark Sweetan, 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, the impact of our go-to-market transformation and cost-saving initiatives, use of our IPO proceeds, results from new features, 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 quarterly report on Form 10Q 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 file 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, and adjusted free cash flows. Thank you for joining us. I would now like to turn the call over to Gleb.

Thank you, Mimi, and welcome everyone to the call. We had strong third quarter results. Revenue grew 29% with B2 Cloud Storage growing 39%, and adjusted EBITDA margin came in at 12%, our record since going public. Over the past few quarters, I've shared product innovations that we have delivered, and I feel very good about the unique value proposition we provide and the product roadmap we have in place. But today I want to focus on two new major initiatives. The first to drive revenue growth, particularly around B2 cloud storage, and the second to drive cost efficiencies. In our prior call, I introduced two new executives that we brought on, Jason Wakeham as Chief Revenue Officer and Mark Sweetan as Chief Financial Officer. They joined us with a clear mandate, grow revenue faster and accelerate our path to being free cashflow positive. I'll share details about the new go-to-market transformation that Jason is spearheading, and Mark will speak about aggressively tightening our cost structure. On the go-to-market front, Jason has hit the ground running and has brought a new sense of energy to the team. He's focused on three critical areas to drive greater growth, upskilling, partnerships, and sales plays. First, upscaling. We identified that the team lacked a structured approach to qualify leads and execute larger deals. In response, Jason set up a repeatable process that gave the team clear objectives and focus. While still early, we've seen an immediate impact. The team booked a record amount of annual contract value wins in over a year, We also signed two multi-year deals, each totaling approximately $1 million, and built a record pipeline, including the most seven-figure opportunities in our history. Second, partnerships. We previously did a good job signing up resellers, but we realized that we spread ourselves too thin across unproductive partners. Jason prioritized the resellers with the most value, and we are focusing on those relationships. As a result, pipeline opportunities coming from our reseller partners have more than doubled quarter over quarter. Third, sales plays. Jason, along with our marketing team, are aligning on a core set of sales plays to streamline the activities and drive repeatability. The go-to-market transformation includes restructuring our marketing team. We appointed a new internal leader and are focusing the team on driving more large opportunities into the pipeline while returning to our roots of driving efficient brand awareness via our content and community flywheel. The combination of the changes we're making are focused on driving higher sales productivity, which enables us to deliver more rapid yet efficient growth. We're moving fast in transforming our go-to-market approach. We expect this transformation to be substantially completed by the end of Q1, with revenue growth accelerating out of Q2. I'll plan to share more of our progress and new initiatives in our next earnings call. In addition to driving revenue growth, we are aggressively driving efficiency, with Mark leading a robust expense management process to maximize ROI and improve our operating leverage. As a result, we have accelerated our path to profitability and intend to be free cash flow positive in Q4 of 2025. Through a combination of this focus on accelerating revenue growth and driving free cash flow, we aim to become a Rule of 40 company over time. Now, turning to business highlights. First, we've announced the opening of a new data center region for Canada, which complements our existing regions in the U.S. and Europe. This is an exciting next step in Backblaze's growth story as it opens Backblaze services to customers wanting to keep their data in Canada and to serve Canadian customers' data sovereignty requirements. we expect this new data region will be live and available for customers in Q1. In concert with the opening of this data region, I'm excited to announce that we have joined forces with Opti9, the largest Veeam managed service provider in Canada. Opti9 helps customers with managed cloud services that include security, backup, and disaster recovery, and Backboys will support the cloud storage needs for those use cases. Another highlight I want to mention is around AI, At the end of the quarter, the amount of data stored with us by AI customers has more than doubled year over year. Three AI customers recently migrated to Backboys and are paying us a total annual revenue run rate of over half a million dollars. These customers came to Backboys because we provide a cost-effective solution to store their data and simultaneously allow them to use that data with any specialized GPU cloud they wish. we believe we're providing the best underlying platform for the Gen AI industry. One of these large AI customers said, and I quote, Backblaze is an amazing solution for AI training data. We looked at a number of options, and Backblaze is seriously the best. In closing, I'm incredibly excited for our future. The changes underway are driving us to better capture the $55 billion cloud storage opportunity in front of us. Now, I will turn it over to Mark Sweden, our new CFO. Mark?