Participants

Mimi Kong; Director of Investor Relations and Corporate Development; Backblaze Inc

Gleb Budman; Co-Founder, Chief Executive Officer, Chairperson of the Board; Backblaze Inc

Frank Patchel; Chief Financial Officer; Backblaze Inc

Victor Chiu; Analyst; Raymond James Financial Inc

Ethan Widell; Analyst; B. Riley Securities

Jason Ader; Analyst; William Blair

Bruce Goldfarb; Analyst; Lake Street Capital Markets LLC

Presentation

Operator

Hello and welcome to the Backblaze first-quarter 2024 conference call. (Operator Instructions)
As a reminder, this conference is being recorded. I would now like to hand the call to Mimi Kong, Director of Investor Relations and Corporate Development. Please go ahead.

Mimi Kong

Thank you. Good afternoon, and welcome to Backblaze's first-quarter 2024 earnings call. On the call with me today are Gleb Budman, Co-Founder, CEO and Chairperson of the Board; and Frank Patchel, 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, use of our IPO proceeds, results from new features and offerings, the impact of price changes, partnerships, and sales and marketing initiatives, 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 filed 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, and end gross customer retention rate.
Before I turn the call over to Gleb, I'd also like to mention that in the latter portion of our call, as in prior calls, we will be addressing questions from investors that we gathered through the Say Technologies platform. Thank you for joining us, and I would now like to turn the call over to Gleb.

Gleb Budman

Thanks, Mimi. Good afternoon, everyone, and thank you for joining us today. We had a record start across our key financial metrics.
This quarter, revenue grew at 28%, eight percentage points better than last year. We achieved an adjusted EBITDA margin of positive 6% versus negative 12% a year ago. And finally, cash usage this quarter was only $600,000, a dramatic improvement from the $13 million of cash used the same period last year.
Not only have we delivered accelerated business growth and improved efficiency, but we have also delivered product innovations that serve our mission of supporting customers and partners with the best storage cloud.
Before diving into our business results, I want to speak to a customer trend that we're already benefiting from today and which we see accelerating a few months ago, we conducted a survey of more than 400 IT decision-makers.
A majority of the respondents indicated that they prefer to choose from best of breed solutions when selecting vendors. And yet the cloud landscape has been historically defined by cloud one data where a few diversified cloud providers aimed to lock customers into their platforms and takeaway customer choice.
You may have heard that Google Cloud, AWS and Azure recently announced free egress for their customers. They may have done this to modify regulators because the cloud one data model is a walled garden by design. But this move does not at all address what customers actually want because it only applies to customers who leave those platforms completely.
What customers really want is to freely use their data with multiple cloud services. These fake free egress announcements are only three exit, not free egress and underscore that cloud window just doesn't work that way.
Businesses want cloud to-do, an open cloud ecosystem or businesses can use their data wherever and however, they want to it's better for them, better for innovation and ultimately better for the broader economy. And Baclblaze is built for cloud to data. First, our egress is actually free, allowing customers to use their data without fear of crippling bills or limits on who they work with.
Second, we have a robust partner ecosystem, which gives customers easy access to the best-of-breed platforms they need. Third, we provide a trusted, durable platform that provides strong performance. And last, we continued to deliver innovation that support customers in using the best-of-breed services. They want a great example of this.
Last point is our newest innovation called event notifications. Event notifications gives customers the ability to build automated workflows across different best-of-breed cloud providers. For example, a customer can upload a video to be to cloud storage and event notifications will automatically trigger a compute process at another provider that prepares the file for streaming currently similar offerings in the market only trigger actions with in one platform or require complex and restrictive workarounds to work with other providers.
We designed event notifications to be platform-agnostic, empowering customers to build workflows from the services. They want cutting out significant inefficiencies and costs in the process. The product launched in private preview just three weeks ago, and we already have over 100 organizations that are requested to join the early release event.
Notifications was also recognized as Product of the Year for cloud computing and storage at the National Association of Broadcasters conference, a major trade show for the media and entertainment industry. I'm very encouraged by the early reception and the potential for our services to become increasingly strategic for our customers.
Including event notifications back, which has announced four major releases over the past six months from the shard Stash performance upgrade to enterprise control for business backup to our powered by backwards program.
I am proud of our team for delivering features that differentiate us and strategically position us as the de facto cloud storage provider for the Open Cloud in Q1. We also made significant progress in our compliance and security programs, including state ramp and the Motion Picture Association's trusted partner network.
Focusing on compliance and security is another key element in our effort to make our services as easy to adopt as possible in this case for the state and local government and educational industries and the media and entertainment industry at the same time, we continue to expand and enrich our partner network.
Recently, Barclays and Cara soft, which is one of the largest privately held IT software and services companies in the world announced that we've been added to their mass both value points contracts, which eases the procurement process in government and education.
Our partners also continued to help us facilitate and win deals with larger customers. Recently, the media team of one of the world's largest retailers needed a Trusted Location to hold their creative work. Their preferred reseller recommended adopting back blades, our performance, ease-of-use and affordability won the deal.
In addition, our sole focus as a best-of-breed provider for cloud storage means that this retailer doesn't need to worry about any conflicts of interest with a vendor like Amazon, that obviously wouldn't be the case.
Additionally, a number of meaningful partners have already joined our powered by Barclays program, which we announced last quarter. One of the most recent companies to join powered by Axel AI. Their new axle AI cloud leverages our cloud platform to deliver AI powered media search tools in the broader AI space. We're seeing a growing number of partners and customers utilizing the value of B-to-cloud storage for AI workflows.
Since the beginning of 2023, the number of AI companies using BE2 for data storage has doubled with a wide range of use cases such as wildfire management and monitory manufacturing optimization, satellite data analysis and much more. I'm very proud of what the team has achieved to not only reach our record financial results, but you also deliver our platform and product innovations. I believe this put us in a strong position to deliver the transformational power of Cloud 2.0. I love seeing what they can do after we help to free their data from legacy platforms.
Before I hand off the call today, we announced that our CFO, Frank is planning to retire this year. A search for a successor is already underway, and Frank intends to remain with us to help ensure a smooth transition to our new CFO.
We're off hugely thankful for everything Frank has brought to the team, but will save our gratitude and celebration of his many accomplishments for the departure of later this year. Until we hire and onboard his replacement. Frank will continue to help us drive great results. I'll pass the call to Frank to review our financial results. Frank?

Frank Patchel

Thank you, Glenn, and thanks, everyone, for joining us today. As Glenn mentioned, I'm planning to retire once we've identified might be placements and completed the onboarding process. There will be time for good buys when we get there, but until then, it will be business as usual.
And I'm happy to turn to the record business results we have to share today. As a reminder, unless otherwise noted, I will be referring to non-GAAP metrics and the growth rates mentioned are year on year. We remain focused on two key metrics, revenue growth and adjusted EBITDA, which is defined in our earnings release.
As Glenn mentioned, we have made significant strides in strengthening our financials from a year ago. This quarter compared to last year, we accelerated our growth rate while expanding our adjusted gross margin, significantly improving adjusted EBITDA margins and meaningfully reducing cash usage.
The tremendous strides made over the year were positively impacted by the operating leverage inherent in our business, we have continued to execute and build a strong and consistent track record as a public company. Our Q1 revenue totaled $30 million, an increase of 28% year over year versus 20% the same period last year. Be two cloud storage revenue was $14.6 million, reflecting 47% growth. Computer backup revenue totaled $15.3 million, reflecting 14% growth.
Turning to our net revenue retention or and our total Company NRR was 112% with BE two cloud storage at 126% and computer backup at 101%, which continued to show quarter on quarter improvement.
Breaking down the P&L, adjusted gross margin increased about 500 basis points year over year to 77%, reflecting the price increase we put in place in Q4 of last year and further operating efficiencies at our data centers this quarter adjusted EBITDA was a positive $1.9 million or 6% of revenue, reflecting a substantial 18 points higher than the same period last year.
Over the past year, we have significantly grown revenue while carefully managing expenses and increased operating efficiencies. This quarter, we also had slower headcount additions, which was offset by an increase in payroll taxes related to the recent stock price appreciation.
Turning to the balance sheet, cash and short-term investments, including restricted cash, totaled $32.8 million at the end of Q1 2024 versus $33.4 million at the end of Q4 2023, reflecting just $600,000 in cash usage.
Even after removing the benefit of options proceeds, cash usage for the quarter was about $4.9 million compared to $13.7 million in Q1 of last year, an almost $9 million improvement. The reduction in cash usage benefited from the price increases we've put in place last quarter and operating expense discipline.
Moving onto our guidance for the second quarter, we expect revenue to be in the range of $30.7 million to $31.1 million. We expect Q2 adjusted EBITDA margin between 6% and 8% for the full year 2024. We are reiterating revenue guidance of $126 million to $128 million and adjusted EBITDA guidance range of 8% to 10% for year end 2024. We continue to project having at least $20 million in cash.
So to wrap it up, we are very pleased with our Q1 performance. We had a record start to the year where we accelerated growth and continued to drive more operating leverage. I will now pass the call back to Gleb.

Gleb Budman

Thanks, Frank. I'm proud of our record financial results and technology innovation. Thank you to our employees, customers, partners and investors for joining us on this journey as we help lead the industry shift to cloud 2.0, I'm excited to see many of you at the Oppenheimer Conference tomorrow, and the Needham and Craig-Hallum Investor conferences later this month. And with that, I'd like to open it up for questions.
Operator?

Question and Answer Session

Operator

(Operator Instructions)
Simon Leopold, Raymond James.

Victor Chiu

Hi, guys. This is Victor Chiu in for Simon. I wanted to follow up on the on the egress, the a comment that you guys made. You had a technology that Google and AWS. three, quote-unquote, egress has a number of strings attached to these move at least slightly alleviate concerns from customers is primary. Your concern was vendor lock-in and maybe you can close the gap slightly universes that waste went, you know, considering your groceries.

Gleb Budman

Victor, this is Gleb. Thanks for the question. So the short answer is no. And so that what they've really done is three exits, not free egress. And the thing about it is that in the past before, these customers could exit clouds and some of us as open cloud vendors would actually cover the costs of having them leave. Those are traditional cloud providers.
But what customers really want is to be able to actually use their data. So the barrier that they have put in place for what they're doing is you have to fully 100% stop using their platforms. That's not what these customers are trying to do they're trying to actually use their data.
And so an example, I think I've shared in the prior earnings call was a customer that had previously been entirely on AWS had some outages and wanted to use multiple cloud services to improve durability.
They actually added back. Les made us the primary made AWS, the secondary and the and decreased their cost in half overall because of the because our partnership with one of the cloud CDNs enabled them to transfer data for free and therefore they could double their durability, decreased their overall costs in half and improve the overall infrastructure. So that's the kind of thing that the customers want. These three exit moves don't help with that with that at all for customers.

Victor Chiu

Okay.
Got it. So the full, you know that the kind of migration away was never really an issue anyway, was kind of what you're saying. Is that correct?

Gleb Budman

Because okay, on an end I just wish.

Victor Chiu

Okay. Can you give us an update on I don't know if you spoke about this in your prerecorded comments around the AI. focused solutions that you mentioned last quarter that you guys are working on and developing. Can you give us an update around that and kind of your progress around that?

Gleb Budman

Sorry, Victor, I'm not sure about an AI solution we talked about developing, but what I'll tell you is that we were focused on helping customers with their AI use cases and okay, so we shared some of the examples like the wildfire and example and the and in the satellite navigation example that I mentioned on the call. Just to give maybe a little more color on those.
So as the customers are building their AI workflows, they need a place where the data itself lives, the foundational data platform for all that information and more and more customers are coming to back ways to have back with the that foundational data platform.
So I gave a couple of examples of that on the prior earnings call that in the case of our customer that does wildfire analysis. What they're trying to do is we'll take camera footage to look at all the potential large wildfires out there and then triage them using AI and the data for all that underlying analysis is on back plays.
What the satellite navigation company is trying to do is help create better global navigation, and they're using AI to make the models better, especially in places where tall buildings and other things get in the way of creating those models using AI to make those models better. And they're using Backblaze as defense foundational data platform for there by AI workloads.
So that's what we're doing. We're providing that really high performance, highly durable, highly available platform, which supports them in building these workflows because of the our support for the open cloud ecosystem.

Victor Chiu

Didn't you mention some specific focus. I'm sorry, kind of like, I think last quarter you said the head of sales. Now I will turn its focus to a initiatives recur and to help support customers in Medica. So okay, so so that's what you referred on it. It wasn't a specific time lines, we'd probably.
Okay, got it.

Gleb Budman

Right. So as that as we bring on a new head of sales, our current head of sales anyway will be stepping into the role focused on our AI initiatives, 101 by AI initiatives, I would I would I don't mean as far as product launches, what I mean yet, again, the opportunities in the AI space that we have to help customers because we do think that there there are plenty of opportunities that we can help. There are many customers who are already doing it. And we would like him to take on the role, really understanding how we can further help more customers with it.

Victor Chiu

I see. It's like a marketing initiative to help customers better understand, you know, that plays its role in being able to accomplish those things. That's more of what you're referring to.

Gleb Budman

It's a two-sided. Yes, it's both inbound and outbound. So it's both going out and helping educate more customers and also understanding what their use cases and needs are and bring more of that insight into the organization. So we can evolve with their with their needs.

Victor Chiu

Got it. That's helpful. Thank you.

Gleb Budman

Thanks, Victor.

Operator

Zach Cummins, B. Riley Securities.

Ethan Widell

Hi, this is Ethan Widell calling in for Zach Cummins. Thanks for taking my questions. On start, could you maybe speak a little bit to the different levers that you can possibly pull to sustain your strong growth in the B to cause of storage?

Gleb Budman

Sure. Happy to touch on some of those. So the the first one is just go-to-market. We when we went public. We talked about that 80% of all of our revenue was self serve. So customers show up to the website prospects show to the website they enter anyway, a password.
They enter a credit card and they sign up and go they don't ever talk to a human and 20% was with our sales assisted motion and those customers were about 20 times bigger. And so at IPO, we said we wanted to lean into that sales in motion in addition to continuing to optimize our really efficient self-serve motion. So we've we've added resources and investment to the self-serve side.
We've done things like for him or her. We are optimizing the way the website works, and we continue to do that to drive more self-serve business. And we've seen year on year growth quarter on quarter with the number of paying customers.
On the self-serve side, we believe we continue to have opportunity for that we also have built up the sales motion and we've done that with sales people. We've brought on some additional salespeople this quarter for some of the upmarket emotion and the channel side. So we've last year we kicked off an initiative to build out our channel efforts. And so we've been starting to lean more into that. So the go-to-market motion overall is one way to drive growth.
And then the other is the innovation side. So I highlighted on the call cards dash enterprise control powered by and now event notifications. Those are all innovations, which help us expand into new markets, expand our opportunity with existing market and also upsell to our existing customer base.

Ethan Widell

Thank you.
That's really helpful. And then can you speak to maybe if there's been any uptick or downtick in churn?

Frank Patchel

Yes, hi, this is Frank.
I can speak to that because we're really pleased about the churn statistics that we've seen, we think of as customer retention, our customer retention, it has remained at 91% overall in net considers the fact that we did do a price increase in quarter four. So it's been very, very strong and we also look at it and we are at our renewal rates. Our backup customers are continuing to renew at very strong rates actually a little stronger than we thought. So it's actually kicking up our deferred revenue nicely and the customer retention there is quite strong as well.

Ethan Widell

That's good to hear. Thank you.

Operator

Jason Ader, William Blair.

Jason Ader

Yes, thank you, and good afternoon, guys. Just a few questions. First, just maybe some commentary on the macro environment and how it might have changed or not since last quarter? And then just a quick questions for you, Frank, just on the on the numbers. So 14% growth in computer backup.
What is driving that? Is that just the price increase, but it's definitely a better growth rate than what we've seen over the last four quarters. And then on the B to growth rate, it's a little bit worse than what we saw last quarter.
And then also last year ago quarter on 49 and 47, this quarter was 43. So just what's going on there, how come we've seen some deceleration on and on cloud and why we've seen some acceleration on computer backup?

Gleb Budman

Jason, I'll start with the first piece of it, and then I'll let Frank address the questions you ask them for to him directly.
So on the macro side of things, we aren't seeing anything massively different. What I will say is that I think we've all seen that the Fed has has kept interest rates where they are bulk of our focus in terms of our customer base is the small to mid-market customers who are certainly sensitive to the macroeconomic environment. And so we're being cautious about where that's headed. But we haven't seen anything too significant one way or the other with customers, we continue to sign up customers. Obviously, we had a strong quarter overall, and that's that's driven by customers continuing to stay with us and continue to sign up.

Frank Patchel

I'm not going to talk about the growth rates of the product side. So but actually, we're pleased with our growth rates at the first one is that in computer backup. It is 14% this quarter, which is very strong. That is due to the price increase, but it's also due to what I was referring to before, which is very high renewal rate because remember every month we have more and more customers renewing off with their one year and two year contracts. So those renewal rates have been particularly high for the full year, we did see 10%. We said that we have remaining at that amount. So we do see are still thinking in that double digits. One of the things that's starting to contribute to the revenue side is the one e., which is our enterprise version, that is an upsell version for existing accounts, and we're seeing some uptake there already, even though it's just been introduced. And also we have some new customers coming in on B. one y. as well. And we're very excited about that and note that enterprises really aimed at larger companies as we move upmarket. So some good things there.
On computer backup, it's I mean, excuse me, I'd be to the growth there at 47% this quarter and revenue was a bit higher than we thought. That's why we were at the top of our range. We are pleased with that. It is due to the combination of some of the price increase and the new business. But you're right, as we move through the year, we're saying that our total growth for the entire year will be about 40%. And the reason for that is in our quarter four, we'll be lapping our price, our price increase. So there's a little bit less growth.
There's less growth there in that quarter. But overall, we do like what we see.

Jason Ader

Yes, sorry, I misspoke. I meant the two cloud ARR growth was lower than last quarter is 43%. I believe 49% last quarter and then 47% a year ago. So so that's what I'll caveat on that.

Frank Patchel

But I think the ARR. is that it's not a great it's a perfect predictor for our business because of the ups and downs in the calculation of wobbles a bit. We calculated off of the last month of the of the quarter. So when you have a lot of higher month because you have so much pay-as-you-go revenue that every day is important. So it wobbles a little bit based on the calculation methodology, but we're still think that our growth rates there are well above the market or the growth rates of the markets that were weak do feel good about it.

Jason Ader

Thank you.

Operator

Bruce Goldfarb, Lake Street Capital Markets

Bruce Goldfarb

Greg, congratulations on the great results. Thanks for taking my questions on in terms of the market second, look segments, can you compare midsize company demand with SMB demand where you're saying?

Gleb Budman

It's an interesting question.
Stroke guide. Yes, it's an interesting question, Bruce, and thanks for the question. That what I'll say is that we've been doing the smaller size of the mid-market for a while and we have volume there, right? We have about 100,000 customers overall are using B. two. So we have volume there on the larger end of the of the mid-market. It's a upmarket momentum that we've been doing more recently. And so I think it's harder to gauge the Amcast statistical significance of the number of deals in that part of the market to be a strong indicator of overall market demand. I think what we are seeing is that customers in upper market are interested in the value proposition we provide, which is part of why we decided to put more focus there. The platform provides a lot of value as for a larger customer because they have more data, they have more needs around that data and they have the opportunity to optimize their platform further by using backplanes. So I think that whilst it's hard to draw statistical significance from what we're seeing to the broader market trends, I think we're pleased with the interest engagement that we're seeing in the upper mid-market.
And just to just to make sure it's clear when we talk about moving up market, this is not Fortune 500 and the federal government that these are companies that are up to about 1,000 employees.

Bruce Goldfarb

Thank you for that. And then that does that does. Thank you. And then in terms of competition. Have you seen competitors have they kept their 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 on number of them have kept their their rates the same. But when we talk about the same in the traditional cloud window providers like Amazon, Google and Microsoft, their default rates are three, four, five times our rate for storage. And on top of that, they charge a lot more in transaction fees. And then on top of that, they charge I think Gary, just egress fees. So while they may not have raised rates, their rates are much, much higher than ours.

Bruce Goldfarb

Thank you. And then and then are you still do you still anticipate cash generation by mid mid 25?

Frank Patchel

Yes, yes, that's right. At the end of 2024, we said that we'd have at least $20 million and that we will have total cash flow breakeven or approaching that by mid 2025.

Bruce Goldfarb

Okay, great. Thank you and congrats again on the results.

Ethan Widell

Thank you. And thanks, Bruce.

Operator

Thank you.
I would now like to turn the call over to Mimi for some questions gathered off the line.

Mimi Kong

Thank you. And Jay, first question is for Frank. This investor would like to know now I would really like to see dividends. Are there any in the future?

Frank Patchel

We're not planning on dividends for the foreseeable future. And the reason is that we are in a 50 billion market that's underserved in this and small and midsize companies. So we really are investing in our growth, and we think that's best for our investors.

Mimi Kong

Next question is for Glenn and backlogs have a plan to attract younger clients like university or secondary school students granting them a special fee. This then Becklean, we'd have them for years to come as far as keeping customers for years to come.

Gleb Budman

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 as great as they stay on for very long time in terms of university and secondary schools, our products and platform worked really well for them by default. And in part, that's because on the computer backup side, it's unlimited.
So that's just easy and they don't have to worry about it. On the B2B 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 expensive to use that 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, but will there be any plans this year to pioneer any revolutionary strategies that will put back lays ahead of its competitors, both in Group terms, revolutionary strategies?

Gleb Budman

I think one of the things we talked about is this trend to cloud to auto 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, IT, 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. And other than that, I think we have the strategy that we're pursuing. Our enabling us to already grow faster than the market and take market share. So I think between the go-to-market motion 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 financials, financials, we want to continue driving revenue growth. It was like Frank said, it's a $50 billion market. We believe there's a lot of opportunity in terms of driving revenue growth is key. The second part is continuing to drive efficiency, and that's reflected in our 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 its own steam. So that's on the financial side on the business side, continue to drive that up market 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 are driving that upmarket growth.
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 backwards cannot backup File Sync by one drive due to republish point flags assigned by Microsoft will backlogs develop solutions such as AB. two, integration to backup one drives cloud to cloud or are we left with safe versus synced files?

Gleb Budman

So that's probably an nuanced question for a for an investor call, but I very much appreciate both the in the first half and the question being a customer, and that's key for us and for the and for digging in as well. So what I'll say is we don't have on our roadmap. It is a plan to develop one cloud drive integration directly, and we do have partners that do that. And we would love for you to use one of our partner products along with B to it's part of the whole open cloud approach that we're that we're working toward is supporting a broad ecosystem of partners with our B. two cloud storage, the computer backup service itself, which sounds like the one that you're primarily using the computer backup source is really designed to backup all of the data on the laptops and desktops that customers are using. So people can just be peacefully at night that those machines and the data on them are protected. The two with our partner ecosystem supports all of the potential other use cases.

Mimi Kong

Next question for Glen. Do ongoing developments in AI presented any opportunities for Barclays?

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 backwards. Obviously, when you're working with air use cases, you're working with a lot of data and analysis and use of that data. You need some work to put that data where it is durable, where it's available, where it's performance 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 business 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 two that's going to create video AI videos at scale. They're talking to us about leveraging the backbone platform because it provides efficiency connectivity within their CDN providers that it would distribute that video to I talked with another customer with one of our folks this morning that they do web scale, data analysis and for for a company. And they're leveraging backwards as the underlying foundational platform for all of that data that the caption. 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 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 a easy-to-use, affordable storage platform where we don't actively tried to compete for the Fortune 500 companies or the federal government because of the complexity of that features and functionality that they need, which are not those same features and functionality that the mass market of mid-market companies need. So we believe we're really well suited for customers that are below 1,000. We're well suited for many of the customers above 1,000, and we will work to address and to solve those customers' needs when when it's a good fit.

Mimi Kong

And at what point is the risk of hiring more sales and customer relations staff or 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.
Yes, with additional people. So we're constantly evaluating our go-to-market motions and determining what's working and what the what can be improved would be in general. That evaluation is what drives when when we invest further in those areas.

Mimi Kong

And this is our final question.
As a software engineer back leases B to API. was much more difficult to integrate than I would expect from a company that both the simplicity of its developer experience, what our back leases plans to improve developer experience and maybe to adoption by the average developer easy.

Gleb Budman

So if I as I say, again, thank you for being a customer and thank you for integrating with our platform. I love it, but I am surprised that you found that the experience was more difficult than you expected and we have it sounds like you may have been using the prior B to API. We have since also introduced an S3 compatible EPA so that it is a drop-in replacement for any service that is compatible with Amazon's S. three offering. We've also created a whole new dock section on our website that we launched mid last year, which has been very popular rides and samples and samples and those the code snippets and more. And what I'll say is that we also would love feedback. So if you have feedback on what that experience was, what you would like to see different, please e-mail product feedback at barclays.com.
And we would love to hear the final question.

Mimi Kong

I'm going to hand the call back to N. J & J.

Operator

Thank you, Mimi. At this time, we don't have any more questions in our queue, and this will conclude our question and answer session. So I'd like to turn the call back over to Rob Bodman for closing remarks.

Gleb Budman

I want to say thank you to everybody for joining the call. Thank you for hearing about our quarter and the innovations that we had there. And we will look forward to seeing some of you at the conference tomorrow and next month. And the rest of you on this call next quarter. Thank you so much.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.