Operator: And then in terms of competition, have you seen competitors, have they kept the rates stable or have they also rolled out price increases?
Gleb Budman: So I would say that some of the competitors have rolled out price increases. A number of them have kept their rates the same. But when we talk about the same, the traditional Cloud 1.0 providers like Amazon, Google and Microsoft, their default rates are 3, 4, 5 times our rate for storage. And on top of that, they charge a lot more transaction fees. And then on top of that, they charge egregious egress fees. So while they may not have raised rates, their rates are much, much higher than ours.
Bruce Goldfarb: And then are you still do you still anticipate cash generation by mid-’25?
Frank Patchel: Yes, that’s right. At the end of 2024, we said that we have at least $20 million and that we will have total cash flow breakeven or approaching that by mid-2025.
Operator:
Mimi Kong: First question is for Frank. This investor would like to know, I would really like to see dividends. Are there any in the future?
Frank Patchel: We’re not planning dividends for the foreseeable future. And the reason is, is that we are in a $50 million market that’s underserved and small and midsized companies. So we really are investing in our growth and we think that’s best for our investors.
Mimi Kong: The next question is for Gleb. Does Backblaze have a plan to attract younger clients like university or secondary school students, granting them special fee thus then Backblaze would have them for years to come?
Gleb Budman: So as far as keeping customers for years to come, I think it’s a good point. Because of the high retention, Frank talked about 91% gross customer retention, which means customers stay with us for something like a decade. Certainly, having customers join the platform is great as they stay on for a very long time. In terms of university and secondary schools, our products and platform work really well for them by default. In part, that’s because on the computer backup side, it’s unlimited, so it’s just easy and they don’t have to worry about it. On the B2 side, we actually provide a free tier. So they can start with a limited amount of data and just use it for free and it’s very, very inexpensive to use it at their scale typically. So it’s actually a great set of services specifically for their use cases as it stands.
Mimi Kong: Next question is also for you, Gleb. Will there be any plans this year to pioneer any revolutionary strategies that will put Backblaze ahead of its competitors?
Gleb Budman: So I think in terms of revolutionary strategies, I think one of the things we’ve talked about is this trend to Cloud 2.0 and how we facilitate that. So I think most of the traditional competitors are still aiming for that walled garden approach. And the reality that we see is that more and more customers want to use an open cloud with best of breed providers and get all the benefits that that entails. And so that strategy and the things that we’re doing to support that, and they talked about event notifications, which enables customers to create automatic workflows between these different providers, is a great way of helping to lead that shift. So I think that’s probably the one I would mostly highlight. Other than that, I think as the strategies that we’re pursuing are enabling us to already grow faster than the market and take market share.
So I think between the go-to-market motions that we’re doing and the product innovations that we’re coming out with, I think we’re well positioned to do that.
Mimi Kong: And, again, what are the most important goals for the next 12 months?
Gleb Budman: So in terms of goals, I guess, first with financial. So financial goals, we want to continue driving revenue growth. It’s like Frank said, it’s a $50 billion market. We believe there’s a lot of opportunities and so driving revenue growth is key. The second part is continuing to drive efficiency and that’s reflected in our positive EBITDA growth. And the third financial one is driving towards that total cash flow positive stature, so that the business is just running on its own steam. So that’s on the financial side. On the business side, continue to drive that upmarket growth. So with the new sales executives that we’ve hired in Q1 with a new head of sales that we’re in the process of hiring right now, driving that upmarket growth.
The second is continuing to drive the overall go to market motion and the channel motion. And then the last one is really taking those innovations that we’ve shipped and getting them into the hands of more and more customers. I think those are probably the main ones that I would like to highlight.
Mimi Kong: The next question we have is a follow-up from last quarter. Last quarter, my question received an incorrect answer. Backblaze cannot backup files synced by OneDrive due to reparse point flags assigned by Microsoft. Will Backblaze develop a solution such as a B2 integration to backup OneDrive cloud to cloud? Or are we left with the safe versus synced files?
Gleb Budman: So that’s probably a nuanced question for an investor call, but I very much appreciate both the person asking the question being a customer, that’s key for us and for digging in as well. So what I’ll say is we don’t have, on our road map, some a plan to develop a one cloud drive integration directly. We do have partners that do that, and we would love for you to use one of our partner products along with B2. It’s part of the whole open cloud approach that we’re working toward. It’s supporting a broad ecosystem of partners with our B2 cloud storage. The computer backup service itself, which sounds like the one that you’re primarily using, computer backup service is really designed to back up all of the data on the laptops and desktops that customers are using, so people can just sleep peacefully at night that those machines and the data on them are protected. B2, with our partner ecosystem, supports all of the potential other use cases.
Mimi Kong: Next question for Gleb. Do ongoing developments in AI present any opportunities for Backblaze?
Gleb Budman: So I think I touched on that a little bit, earlier. But yes, the short answer is I think that AI is a multiyear, possibly multi decade opportunity for Backblaze. When you’re working with AI used cases, you’re working with a lot of data and analysis and use of that data. You need somewhere to put that data where it is durable, where it’s available, where it’s performant, and where you can afford to do that. And then you want to use that data with all of the myriad other best of breed services being developed for AI and there’s a variety of them constantly coming out every single day. And so by being a leader in the open cloud movement and providing a great storage platform, I think we have a great opportunity to do that.
I’ll mention also another company that I talked with recently, they’re in the process of coming out with a service to that’s going to create video, AI videos at scale. They’re talking to us about leveraging the Backblaze platform, because it provides efficiency, connectivity within CDN providers that it would distribute that video to. I talked with, about another customer with one of our folks this morning that they do web scale data analysis, for an AI company, and they’re leveraging Backblaze as the underlying foundational platform for all of that data that they’re capturing. So I think that the number of use cases and opportunities here are just endless.
Mimi Kong: Next question is, what is the decision threshold to compete for larger clients, meaning companies above 1,000 employees?
Gleb Budman: So we absolutely have customers that are above 1,000 employees. Our target that we focus on is customers below that in large part because that we think it’s the most underserved part of the market, where we can have a good velocity of solving and addressing many of their, many of those customers’ needs. Having said that, we do help customers larger than that, particularly ones that have a lot of data and use cases that are, well suited to an easy to use affordable storage platform. We don’t actively try to compete for the Fortune 500 companies or the federal government because of the complexity of the features and functionality that they need, which are not those same features and functionality that the mass market or mid market companies need. So we believe we’re really well suited for customers below 1,000. We are well suited for many of the customers above 1,000 and we will work to address, to solve those customers’ needs when it’s a good fit.
Mimi Kong: And at what point is the risk of hiring more sales and customer relations staff worth the reward?
Gleb Budman: So I mentioned that in Q1, we actually hired a number of new account executives on the sales team, specifically because we see the opportunity of closing more upmarket deals with additional people. So we’re constantly evaluating our go-to-market motions and determining what’s working and what can be improved. In general, that evaluation is what drives when we invest further in those areas.
