Backblaze, Inc.

Welcome everyone to today's Backblaze fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Mimi Kong, head of investor relations. Mimi, please go ahead.

Thank you, good afternoon, and welcome to Backblaze's fourth quarter and full year 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, sales and marketing initiatives, cost-saving initiatives, results from new features, the impact of price changes, 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 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, ARPU, and adjusted free cash flows. We'd also like to inform you that we will be participating in the Oppenheimer Emerging Growth Conference tomorrow on February 26th and the Citizens J&P Tech Conference on March 3rd and 4th. We hope to see you there. Thank you for joining us and would now like to turn the call over to Gleb.

Thank you, Mimi, and welcome everyone to the call. Revenue grew 18% over the same period last year, and B2 Cloud Storage grew 22%. B2 Cloud Storage, our fastest-growing solution, is now over 50% of the business in Q4. An adjusted EBITDA margin came in at 14%, doubling over the same period last year. I'll talk more about the quarter in a moment, but first I wanted to take stock of where we've been and where we're going. In the last four years, we have more than doubled both the revenue and adjusted a bit of margin. We transitioned from a company selling primarily to SMB customers to a self-serve model to one that also supports enterprises with a direct sales and partnership model. We also doubled our number of data regions and launched a host of innovations to provide customers and partners with more value. As we look to the next few years, we are focused on becoming a Rule of 40 company, delivering both growth and profitability and continuing to build the leading storage cloud for the Cloud 2.0 era. Now let's talk about our recent results. During our last earnings call, we shared two key initiatives, a go-to-market transformation focused on driving B2 growth and our plan to be adjusted free cash flow positive by Q4. First, I'll share details about our go-to-market transformation, and then Mark will provide an update on our path to becoming adjusted free cash flow positive. I am pleased with the impressive progress our team has made on our go-to-market transformation, as we are already seeing strong early signs ARR win rates were up significantly and sales productivity in Q4 doubled year over year, leading the team to meaningful beat quota for the quarter and the full year, despite being behind quota when Jason, our new chief revenue officer, arrived in July. Not only did we increase sales productivity across the sales team, But we also signed a significant expansion for an existing customer for over $1 million based on annual contract value. We had a record sales booking quarter, which was greater than the prior three quarters combined. B2 Cloud Storage had net new AR sequential growth of $5 million, a record outside of that driven by the price increase. These are excellent early signs that the go-to-market transformation is working. As a reminder, due to the nature of us being and as a service business, there is generally a lag before these leading indicators translate into revenue. However, we do believe that the low point in organic growth was behind us in Q3, and we are already seeing an acceleration in B2 growth. Mark will go into more details later on in the call. Now, how have we achieved these results and acceleration to date? We've done that through the three main focus areas we talked about last quarter, upskilling, partnerships, and sales plays. First, on upskilling the sales team, Jason is moving at lightning speed and has an outsized impact in a short period of time. He has implemented robust training and a more rigorous and repeatable process to help ensure that the team is set up well to continue to move upmarket. In the last few months, we also hired field sales leadership and additional experienced quota-carrying reps to increase sales capacity, along with a VP of demand generation to help fill the pipeline. Second, on the partnerships front, we are making a significant headway. Last quarter, I spoke about the changes we made with our channel program. I'm happy to share that the average deal sizes of the leads coming in from the channel in Q4 has nearly doubled year over year. Next, I'd like to talk about how we are meaningfully uploading our alliance strategy. This program is now structured along a co-build, co-market, and co-sell strategy. To co-build, we are currently working on joint solutions with key technology partners. As examples, we're working with two partners to create a joint solution for AI-powered media workflows, and with another partner to create a joint solution to support compute and storage needs around large AI datasets. Third, for sales plays, we are focusing on four key plays to drive repeatability and efficiency. These are application storage, IT backup, media and entertainment, and powered by Backblaze, which is our white label offering. Our marketing efforts are becoming more tightly aligned with these sales plays to ensure we have the right positioning, collateral, programs, and more to drive greater sales efficiency and market awareness. On market awareness, I'll note that we were recently recognized by G2, a popular software review site, as the best object storage solution for fastest implementation, ease of use, and high performance. Turning to our business highlights for the quarter, we continued to add a number of larger customers in a diverse range of industries. Just a quick sampling, we found a company that provides an application developer platform for over $100,000 in AR. This customer chose Backblaze because they were looking for a cost effective solution to archive data from their data warehouse. A large Japanese social media company committed to Backblaze for over $50,000 in ARR, recognizing that we were an affordable and hot archive solution for their content. And a digital music media company signed a deal for about $50,000 in ARR and is using Backblaze as their origin store for their streaming content. In addition to signing a number of larger customers, our customers also continue to expand with us. As an example, in Q4, three existing customers in the surveillance, gaming, and AI industries each expanded their usage to an additional $100,000 in AR run rate. It's a pattern we've seen where customers often start small and lean in as they see the significant value our platform provides at scale. And I'll highlight a customer who signed a significant expansion in Q4 for over $1 million in annual contract value. They chose our Powered by Backblaze offering, thus enabling them to offer cloud storage to their customers. Three things to note. First, Our white label powered by a backlight solution launched in Q1 of last year. We've already signed a number of channel and technology partners to offer this innovative capability, including this latest $1 million plus ACV deal. This speaks to our ability to innovate and drive growth from our R&D investments. Second, this customer chose Backblaze in part because our platform's ability to deliver high performance and affordability, a rare combination, and for our free egress, which was key to their business. And third, this demonstrates our continued progress in being able to move up market. Next, I'd like to address the seismic shift taking place in the AI industry. A few weeks ago, the major announcement of DeepSeek illustrated that AI innovation is happening rapidly and everywhere. Thus, it is increasingly clear that companies need flexible AI tech stacks that can adapt to this dynamic environment and leverage data effectively. We believe that those who can freely flow their data to where innovation is happening as they can with Backblaze will be the best positioned to win in this evolving AI landscape. And those who are constrained by the walled gardens of the traditional cloud providers may struggle to keep pace. We believe this need for flexibility and data mobility is a big factor in why we're seeing such strong momentum in our AI customer segment. We now serve hundreds of AI customers This has translated into nearly a tenfold increase of data stored by these companies with three out of our top 10 customers as of December 2024 now being AI companies. Because we focus on the storage layer, we are not burdened by the massive CapEx investments being made in GPUs, but we still benefit from AI tailwinds. Recently, Another AI customer gave us a glowing endorsement, and I quote, we looked at all of the cloud providers you would expect. Backblaze delivered the right combination of price and usability, and we didn't have to change anything on our site to make it work. Our opportunity at Backblaze to power the AI revolution is exciting, and I expect AI will be a major growth driver for many years to come. Finally, 2025 is a pivotal year for Backblaze, as we expect to accelerate B2 revenue growth, target being adjusted free cash flow positive in Q4, move toward being a Rule 40 company, and continue to build the ideal cloud storage platform for the open cloud. Now, I will turn it over to Mark.