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Backblaze Inc (BLZE) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...

GuruFocus Research
·4-min read

  • Revenue Growth: 28% increase year-over-year.

  • Adjusted EBITDA Margin: Improved to positive 6% from negative 12% last year.

  • Cash Usage: Reduced to $600,000 from $13 million in the same period last year.

  • B2 Cloud Storage Revenue: $14.6 million, up 47%.

  • Computer Backup Revenue: $15.3 million, up 14%.

  • Net Revenue Retention (NRR): Total company NRR at 112%, with B2 Cloud Storage at 126% and Computer Backup at 101%.

  • Adjusted Gross Margin: Increased by approximately 500 basis points to 77%.

  • Q1 Adjusted EBITDA: $1.9 million or 6% of revenue.

  • Cash and Short-term Investments: $32.8 million at the end of Q1 2024.

  • Q2 Revenue Guidance: Expected to be between $30.7 million and $31.1 million.

  • Q2 Adjusted EBITDA Margin Guidance: Projected between 6% and 8%.

  • Full Year 2024 Revenue Guidance: Reiterated at $126 million to $128 million.

  • Full Year 2024 Adjusted EBITDA Guidance: Range of 8% to 10%.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Backblaze Inc (NASDAQ:BLZE) reported a 28% year-over-year revenue growth, outperforming last year's growth rate.

  • Adjusted EBITDA margin improved significantly to a positive 6% from a negative 12% a year ago.

  • Cash usage was dramatically reduced to $600,000 this quarter compared to $13 million in the same period last year.

  • The company launched several new products, including event notifications, enhancing its competitive edge in cloud storage solutions.

  • Backblaze Inc (NASDAQ:BLZE) expanded its partner ecosystem, adding significant partners like Barclays and Carahsoft, which facilitates easier procurement for government and education sectors.

Negative Points

  • The CFO, Frank Patchel, announced his retirement, introducing potential uncertainty in the financial leadership.

  • Despite overall growth, the B2 cloud ARR growth rate showed a slight deceleration compared to previous quarters.

  • The company faces intense competition from major cloud providers like Amazon, Google, and Microsoft.

  • There are no immediate plans for dividend distribution as the company focuses on growth investments, which might concern income-focused investors.

  • Some customers and analysts expressed concerns about the complexity and integration challenges with Backblaze Inc (NASDAQ:BLZE)'s B2 API.

Q & A Highlights

Q: Can you give us an update on the AI-focused solutions that you mentioned last quarter that you guys are working on and developing? A: Gleb Budman, CEO of Backblaze, clarified that while they are not developing specific AI solutions, they are focused on supporting customers with their AI use cases. He mentioned examples like wildfire analysis and satellite navigation, where Backblaze provides the foundational data platform for AI workflows.

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Q: What are the different levers that you can possibly pull to sustain your strong growth in the B2 cloud storage? A: Gleb Budman highlighted several growth strategies including enhancing go-to-market efforts, both in self-serve and sales-assisted motions, and continuing product innovation with features like Cards Dash, Enterprise Control, and Event Notifications to expand market reach and improve customer retention.

Q: Could you maybe speak a little bit to the different levers that you can possibly pull to sustain your strong growth in the B2 cloud storage? A: Frank Patchel, CFO of Backblaze, discussed the financial strategies, emphasizing the focus on revenue growth, improving adjusted EBITDA margins, and achieving cash flow positivity by mid-2025. He also mentioned the importance of operational efficiency and disciplined expense management.

Q: Have you seen any uptick or downtick in churn? A: Frank Patchel addressed customer retention, noting that overall retention has remained strong at 91%, even after a price increase. He highlighted that renewal rates for backup customers are robust, contributing positively to deferred revenue.

Q: What is the decision threshold to compete for larger clients, meaning companies above 1,000 employees? A: Gleb Budman explained that while Backblaze targets primarily companies below 1,000 employees due to the underserved market, they do cater to larger companies when there is a good fit, particularly those with extensive data needs that can benefit from Backblazes storage solutions.

Q: Do ongoing developments in AI present any opportunities for Backblaze? A: Gleb Budman affirmed that AI presents significant long-term opportunities for Backblaze, especially as AI involves extensive data analysis and usage. He mentioned that Backblazes platform is well-suited to support AI workflows due to its performance, durability, and cost-effectiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.