Backblaze, Inc. Q3 FY2024 earnings call

• Gleb Budman highlighted strong third quarter results with 29% revenue growth, 39% growth in B2 Cloud Storage, and a record adjusted EBITDA margin of 12%. • Jason Wakeam is leading a go-to-market transformation focusing on upskilling, partnerships, and sales plays, with early signs of impact like record pipeline and multiyear deals. • Marc Suidan discussed a zero-based budgeting exercise leading to a year-over-year run rate cost reduction of over $8 million, including a 12% reduction in force. • Announcement of a new data center region for Canada and partnership with Opti9, the largest Veeam Managed Service Provider in Canada. • AI customers' data stored with Backblaze more than doubled year-over-year, with three AI customers contributing over $0.5 million in annual revenue run rate.

B2 Cloud Storage revenue was $16.2 million, representing a 39% increase year-over-year. Computer Backup revenue totaled $16.4 million, reflecting a 20% growth. B2 Cloud Storage contributed a significant portion to the overall revenue growth, with its 39% increase being a key driver.

• Q4 total revenue expected to be in the range of $33.5 million to $33.9 million. • Full-year 2024 revenue on track to be $127 million to $128 million. • Q4 adjusted EBITDA margin expected to be in the range of 12% to 14% (excluding one-time restructuring costs). • Full-year 2024 adjusted EBITDA margin expected to be 9% to 11%. • Aim to be free cash flow positive in Q4 of 2025 and exit 2025 with an adjusted EBITDA margin of approximately 20%.

Q: On the B2 side, talk about churn and upmarket potential.

A: Gleb Budman said some early quarter churn but strong NRR and gross customer retention; no specific limit to upmarket potential with multiple exabytes of storage and significant multiyear deals signed.

Q: Clarification on revenue growth acceleration.

A: Marc Suidan said leading indicators like record sales pipeline will translate to revenue, with B2 being the long-term growth play.

Q: Details on 12% workforce reduction.

A: Marc Suidan said it's part of zero-based budgeting, across the board with marketing over-indexing on payroll and shift to demand generation budget.

Q: Confidence in go-to-market transformation.

A: Gleb Budman said early indicators like pipeline growth and closed deals give confidence, with investment in sales capacity.

Q: Impact of Canada data center on gross margin.

A: Gleb Budman said no meaningful impact to gross margin as colocations and hardware leasing blend in over time.

Q: Opti9 partnership and SAM expansion.

A: Gleb Budman said Opti9, as an MSP, uses Backblaze for data storage for their customers, facilitating regional and partnership expansion.

Q: Sales team build-out balance with cost efficiency.

A: Marc Suidan said $8 million+ in cost savings will be reinvested in sales rep expansion to accelerate growth.