Technology Conference. Hopefully, everyone's finished their lunch by now. I have the pleasure of having Backblaze's Marc Suidan, the CFO of the company. We're going to run through some slides, and then we'll open it up to an extended Q&A session today. Thank you for being here with us today, Marc. I'll let you take it away. Thank you, Russ, and thank you for hosting us. It's a great conference. Marc Suidan, I joined as CFO about six months ago. My background, I spent most of my career I was a senior partner at a firm called PwC, leading M&A and transformation. I've done over 100 deals in the tech sector. Prior to that, I was a public accountant with that CPA background, and I've done my share of stints in co-founding startups and selling them. I was a public company CFO before joining Backblaze. With that, let me jump in. I mean, there's these standard forward-looking statements and disclosures I'll let you all look at. All our filings are up to date. We released our earnings last week, and we'll be releasing our 10-K shortly. With that, let me just say our mission is to make it astonishingly easy to store, use, and protect data. As I dive into the presentation, you'll quickly get a sense of why and how we make it easy and how that drives our business model. Quickly, for those that don't know us, a few numbers. We're in a really big TAM, data storage. There's data analytics. There's a lot of things relating to data. This is purely data storage. This is the public cloud infrastructure storage. It's expected to grow to $118 billion by 2028 and grows at 18% a year. We just reported our Q4 numbers, and our ARR was $137 million, growing 22% year over year, and that's predominantly recurring revenues. We have 500,000 customers in 175 countries. Our business is made up of cloud storage and backup. are two offerings, so I'll be talking about both along the way. The cloud storage is called B2. It has an NRR of 123%. Both the revenues and the ARR in Q4 grew 22% year over year. Our adjusted EBITDA in Q4 was 14%, more than double what it was a year before that. We have had five quarters of consistent positive and improving EBITDA. A quick overview of our two businesses. The cloud storage, most people are familiar with AWS, Azure, Google Cloud. Those hyperscalers are the dominant players in that space. We have an innovative and disruptive solution that delivers the comparable storage component, not compute, the storage component, at 80% less, roughly speaking. We also have a computer backup business. The cloud storage B2 started in 2016, and it is our growth component. The Computer Backup is the one that was with the legacy of the company, started in 2007. That's built up to have 400,000 customers. Computer Backup for consumers, which is predominantly what ours is, is in a secular macro decline. That's no longer our growth business. Our growth business at this point is the cloud storage. I talked about the market TAM earlier, growing to $118 billion. If there's any consistent thing, it is data's growing everywhere. There's a big proliferation of data. Companies, a lot of them, are holding on to a lot of data, both for legal reasons, like legal hold, but also because it's their digital asset. If you think about the amount of sensors and cameras proliferating everywhere, they're just collecting more and more unstructured data. The whole power of AI, and we'll talk about that, is how they make sense out of that data and draw intelligence out of it. When you compare us to the hyperscalers, when I say our value prop is really, how do we price this at 80% lower, it's an incredible value proposition, right? If a company is looking to use such services, they typically look for three things. Number one is what we call in our industry durability, the 11 nines. They want to make sure if they're putting their data with us that they could access their data when they need it in an integral way. We provide 99 times a whole bunch of nines of uptime and integrity around that data, and we have a 17-year track record around that. That helps a lot in this industry. That is critical because nobody wants to endanger that data. Number two is performance. They run a lot of tests through us, and we have very performant platforms. Number three is value for money. It is hard to beat this kind of value for money. The other big trend that is happening in this industry is what we call the open cloud. The early innovators around this were the hyperscalers, but that has typically become a very well-gardened environment where they lock you up and they handcuff you, and it costs money to take data out if you want to work with another solution. In this Cloud 2.0 era, it is all about the specialized open cloud. You see us and many other players thriving where data can move between us. We have developed a lot of partnerships. What we are known for is zero egress fees. If you look up, Google the pain of egress fees, you'll notice it's kind of a hidden cost out there that a lot of cloud engineers and IT leaders and departments are really getting frustrated with. That's the opportunity for us. Backing up to our Q4 earnings that we just announced last week on Tuesday, I started, like I said, six months ago. Our Chief Revenue Officer, oddly enough, he's in the room too. I got him here with me, Jason Wakeam. We both started last summer. Pretty quickly from there, we launched a go-to-market transformation. We shared some really good results around that. I'll walk through them shortly. AI is turning out to be an incredible tailwind to us. I mean, we're pretty much picks and shovels of the AI industry, and I'll walk through that. The other thing that's really important about where we're going is what we said is we just grew that B2 business 22%, and our aim is to grow it 30% by end of year in Q4. Likewise, for free cash flow margins, we just finished a quarter where it was minus 13% free cash flows, and we committed to getting that to zero by Q4 of 2025. Some really big year-over-year improvements. All right. On the go-to-market transformation, there are three big things we've launched there. One is upskilling the team. Two is deepening the partnerships. Three is executing to some core sales plays. On the upskilling the team, we spoke about a new Chief Revenue Officer. He's recruited a pretty solid leadership underneath him, including new field leadership, new customer success, new channel, and strategic alliances, and then really enabling and training the team underneath that and putting a lot more process and rigor to improve their productivity. You'll see on the right-hand side, we've doubled the sales productivity year over year. Deepening partnerships, really picking fewer and going deeper with them is key to our strategy. You'll be hearing a lot more about that throughout the year. Core sales plays. Really, when we step back and look at, listen, where's the best market for us to go focus on and have the biggest wins, we found there's a few areas, including application storage, AI, backup, media, and entertainment. Those are the four big ones. Going really heavy there in an integrated sales play from how you position your marketing, your landing pages, your publications. Early proof points are really good on that front. Coming out of Q4, we said we've had two quarters of record sales booking. Off to a really great start. I mean, we're early stages. Usually, go-to-market transformations take a year and a half to two years. Already two quarters into this, we're showing some really good early proof points, double sales productivity. In Q4, the team exceeded their quota and more than made up for whatever they were late in the year to finish the year ahead of quota as well. We've been talking about going up market with $50,000-plus ARR deals. We've announced $3 million-type deals. We're off to really pushing up market as much as possible, and you'll be seeing more about that. Our B2 business ARR grew $5 million in Q4 sequentially, the largest increase when you factor out the price increase that we did a year before that. AI, AI is going really strong with us. Three out of our top 10 customers are AI. We have hundreds of AI customers using our platforms. Year over year, they increased data usage by over tenfold. Really, really a nice story on that front. This is our B2 growth journey, right? When you step back and you look at this business that was growing much faster, there was a deceleration in the growth. The light gray is the growth that was driven by a price increase. If you factor that out and you just look at the dark blue, you could see that deceleration happening. In Q3, it hit a low point. In Q4, we had a 300 basis points improvement in that growth rate. What we set out to do in this coming year is get this growth rate back up to over 30%. I would say, if there's any measure of success we got to be monitored on and be held accountable to, it's this measure and our free cash flow margin. Because if you take this measure, and if we take Q4 2024 as an example, 22% less, minus 13%, which was our free cash flow margin in Q4, on a Rule of 40 basis, that's 9. That's not really strong. Fast forward a year, if we get this to 30% plus and a 0% free cash flow margin by then, that would take us from 9% to 30% in a year on a Rule of 40 basis. That is how we are measuring ourselves to get to Rule of 40. Eventually, this B2 business becomes the majority of the revenue, and the Rule of 40 would then apply to the whole business as the 30% should keep increasing. This 30% becomes the overall business growth rate. Our operating margin, once we cross Q4 of 2025, our operating margin is $0.75 on the dollar. Every incremental dollar of revenue, 25% is variable cost. The rest flows to the bottom line. I just covered the revenue growth. On the left-hand side here, you have the adjusted EBITDA margin. In 2024, we had the first year since IPO of being EBITDA positive at 10%. The two previous years were negative. You could see that journey. We have committed to finish Q4 2025 at over 20%. The adjusted free cash flow margin, given we have quite a bit of CapEx in our business, we felt it was really important to start disclosing adjusted free cash flows. You could see that journey as well and how we are planning to turn it positive with an eyesight. With that, Russell, great, some questions from you in the audience. I'll be selfish for a moment and ask some of my questions since you guys just reported a great Q4. One of the things that was not factored into your forward-looking guidance, but is a big initiative for you, is what you are doing on the partnerships and alliances front. Taking a step back first, what are the actions you are taking on that front? Two, what will it take for you to sort of say, that is fully activated? We can bake that into our guidance. How significant do you foresee that to be, knowing that it is still early on? Yeah. Thank you, Russ. I mean, good question, right? We break that down into channel and strategic alliances. On the channel front, we've already been seeing the pipeline from the channel improve, and we're working to increase the deal sizes. The channel for us story is really about picking fewer and going deeper with them and being a channel-friendly business. Being channel-friendly is definitely part of our strategy. We felt like you got to foster some relationships and ecosystem for that to really work in our favor. We're seeing good early results there. That takes time. That's why we didn't bake it into the heavily for the guidance for this year. The strategic alliances, those are even bigger to work on. As we announced on the call, I mean, that's like if you go deeper there and build a solution together and then market it together and deliver it together, that could be really nice as well. Because if you build something together, then you're making it easier for the end consumer to assume a specific use case with ease. You're removing all inertia from decision-making, and you're putting a lot of skin in the game also for the channel, rather the SI and the strategic partner. I think there'll be really fruitful two channels for us, route to markets, rather say. I'd see that more kind of at the later of 2025 and really kicking into 2026. OK. Understood. Makes sense. One more, understood, the focus is going to be on the B2 organic growth. You mentioned the consumer business is in a secular decline. I think on the business backup side, there are some trends perhaps that could be providing some benefit to that business. Is that something you could share about in terms of cyber resilience and ransomware prevention? I think those are still areas of market tailwinds. Yeah. I mean, listen, backup in the world of businesses is really critical, and they have data sitting in different places. In the case of endpoint devices, backing those up is important for them. We do see that as an opportunity to grow. We started because that was only launched a few years ago. As we launch more and more features to make that backup solution more business-friendly, a business needs to know if they have 1,000 employees, if they all back it up, when was the last time it was backed up, can they force a backup, force restoration. There are a lot of things they need. That is what we are focused on there. I think as you see that come out, we have even signed a few partnerships of recent. They will start turning into growth. Plus, if you think about the B2 client business, that creates a really fertile ground to cross-sell backup into it. I think as you see both building the features and the fertile ground to cross-selling, we'll start communicating more about where that's going. Yeah. That's a great point. I'll open up to the audience for any questions that you may have. I don't know if you've given this, but when do you foresee the crossover from legacy or from new to growing market and legacy? Actually, we just did in Q4. This quarter that just passed was the first quarter where the B2 cloud storage was larger than the backup business. I guess longer term, what do you want that ratio to be? Yeah. I mean, listen, if you assume one is relatively flattish and the other one is growing at well over 30%, it should become in two and a half, three years, at least three quarters of the business. On the AI front, do customers store their large language model at Backblaze? Or what AI data is there? And what portion of your content or data do you think in three or five years will be AI-generated content? On the first question you asked, which is what sits on our platform, I think most of them are either scraping or collecting or licensing data. That is a very large volume of data that comes in. We see some of them bring in some really big volumes of data. They run that data through their algorithm to develop their LLMs via GPU farms. In our case, it is really serving as a place where they could figure out where they want to go work with which GPUs. The data sits with us, both for training and inference purposes. It is usually that underlying data. I mean, what is interesting about AI is I do not think there is going to be any let-up, right? This is not a one-year blip. This is easily a 10-year go forward model. This could easily keep growing at a really high velocity. I think just to be prudent as it relates to the guidance we just gave, given in three months we went from AI not being in our top 10 customers to being three, we did not want to get ahead of ourselves and say, great, we think we are going to finish the year with seven. Here is how this bakes into growth. There should be some nice upside there. We did not want to, since it is so nascent, a lot of these companies did not even exist two years ago. We took it a bit more with a bit more prudence there. Just to expand on that question, on the AI front, I think you've cited that the success you've seen there is with kind of digital cloud-native startups expanding there. Do you foresee an opportunity to maybe start with smaller use cases with larger organizations as you sort of drive more up market? What's interesting about the larger organizations, Russ, is first of all, almost all of them now have a digital media division. I think eventually they'll all have either an AI division or a way to monetize your data. I think the answer is yes, because we're already seeing it on the media front, right? I mean, a large retailer is going to have a pretty active website with digital streaming data. Likewise, they'll start putting tags on everything from the things they sell and collect that data and then figure out, are they going to monetize it or monetize it with somebody else? I think all this stuff creates opportunity on both fronts. That's great. Any concern with tariffs on purchasing new hard drives or things of that nature? Just wondering how meaningful is that? Just that sort of material. Yeah. I mean, the topic is tariffs is an important one. We monitor it daily. Good news to date, we haven't seen any impact to us. Our supply chain does have a heavy US component. Drives in general are heavy Thailand, Taiwan. We haven't seen those enter the fray of the trade war or be impacted by what goes live on April 2. We got to monitor that really closely because it changes fast. Just to piggyback off that one, I think you've talked about sales playbooks. In the context of your new regional data center, I think you've talked about there's kind of a playbook you have there, which I think is pretty interesting. Could you talk about how you use sort of anchor clients with that approach? Yeah. I mean, the way we just expanded to Canada, we do line up a large anchor client because that softens our ability not to go CapEx heavy and front-loaded and damage our margins. I mean, I think we get a lot of clients, US-based also, that say, listen, we got workloads. We got a heavy volume. We want to do an X region. I'd say anywhere where we secure a good commitment, we would definitely, there's good flexibility to expand. Our expansion model is not that intensive if there's business coming with it. We do not build our own data centers. We rent a portion of the data centers. Then we start utilizing that capacity. You create flexibility where how you upsize it over time and not get too aggressive. It is a pretty flexible model. Great. Last one for me, I think there's always questions about the competition. We know who they are. It's the cloud storage providers and the alternative providers. I remember from our last conversation, you kind of said that's not who you see as sort of the biggest competitor. I think that's an interesting perspective to share with the audience. Yeah, it is. I mean, it is once we create the awareness and create an opportunity, our win rate from there is incredibly high, higher than what you'd expect the industry average standard is. If you're not winning, it's typically because IT departments or decision-makers said, you know what, I'm not ready to do this. I'm going to stay where I am now, which could be another cloud provider. It's not losing to somebody else. There is a third category of you lost to somebody else, and that's typically fragmented across the board. It is a very powerful value proposition, and you see it in that win rate. It is all about creating enough awareness up front to flow more throughput through the conversion cycle. Yeah, it's an incredible story. Awesome. I think that takes us to time. Thanks so much, Marc. Thank you, Russ. Thank you, everybody.