Earnings Call Transcript - BLZE Q1 2025

Operator, Operator

Thank you for standing by. My name is Gail, and I will be your operator for today's call. At this time, I would like to welcome everyone to the Backblaze First Quarter 2025 Earnings Call. It is now my pleasure to turn today's call over to Mimi Kong, Head of Investor Relations. Please go ahead.

Mimi Kong, Head of Investor Relations

Thank you. Good afternoon, and welcome to Backblaze's First Quarter of 2025 Earnings Call. On the call with me today are Gleb Budman, Co-Founder, CEO and Chairperson of the Board; and Marc Suidan, Chief Financial Officer. Today, Backblaze will discuss the financial results that were distributed earlier. Statements on this call include forward-looking statements about our future financial results, the impact of our go-to-market transformation, sales and marketing initiatives, cost savings initiatives, results from new features, the impact of price changes, our ability to compete effectively and manage our growth and our strategy to acquire new customers, retain and expand our business with existing customers, the impact of changes to global trade policies and third-party attempts to generate negative news regarding the company regardless of accuracy. 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 quarterly report on Form 10-Q 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, gross customer retention rate, ARPU and adjusted free cash flows. We will be participating in Needham's Tech Conference on May 13 in New York and the Craig-Hallum Conference in Minneapolis on May 28. Looking forward to seeing some of you in person. Thank you for joining us. And I would now like to turn the call over to Gleb.

Gleb Budman, CEO

Thank you, Mimi, and welcome, everyone, to the call. We delivered strong results this quarter and are building towards a strong year overall. In Q1, revenue and adjusted EBITDA margin beat the high end of guidance. Overall, company revenue grew 15% over the same period last year. B2 Cloud Storage, which is now the largest part of our business, continued to gain momentum with organic growth accelerating for the second consecutive quarter and achieving 23%. We're not only driving growth, but also the bottom line. Our adjusted EBITDA margin tripled over the same period last year to 18%, and we've made substantial progress on improving our adjusted free cash flow from negative 13% in the fourth quarter to negative 6% in the first quarter. By combining B2 revenue growth and adjusted free cash flow margin, in a single quarter from Q4 to Q1, we've moved from 9% to 17%, a great step towards becoming a Rule of 40 company. Looking ahead, we continue to be on track to accelerate B2 growth each quarter, reaching at least 30% by Q4 of this year and to achieve adjusted free cash flow positive in Q4 as well. In a moment, I'm going to talk about AI and why we're excited about Backblaze's ability to continue to deliver superior services for its customers and superior performance for its investors. But first, I think we need to take a moment and talk about a recently published misleading report that relied on false claims by two disgruntled former employees, one of whom was fired for poor performance and the other for gross misconduct. We believe reports like this are part of a common market manipulation scheme in which short positions are taken ahead of issuing a deceptive and distorting report, which when published, is intended to push the share price down, allowing a market manipulator to profit at the expense of everyone else. The claims in that report alleged the company's financials were untrustworthy. Those claims were false when they were made last October in self-serving lawsuits by two disgruntled employees, and they were still false when this report repeated them. Following industry best practices, the Audit Committee previously retained an independent law firm and a forensic accounting firm to review the financial claims. Those reviews confirmed there is no wrongdoing or issues with the financials. We have also since filed two fully audited annual financial statements, which are publicly available on our Investor Relations site and the SEC website. Market manipulation schemes hurt retail investors, pension funds and others. That's why accurate information is so important to investor decisions. We are building a great company, and these false claims won't derail Backblaze's growth story. Now let's focus on why we're excited about our company, starting with the overall business and with our success in AI. I've previously said that Backblaze is a great platform for AI use cases because we provide a high-performance, low-cost storage platform that supports the open cloud, thus enabling customers to leverage the best GPU providers and other AI services out there rather than being locked into and limited by a walled garden. That value proposition continues to resonate. Our AI customer base grew by 66%. Their data with us grew by 25x, and AI use cases represented the fastest-growing piece of our business in the first quarter. We are leaning into our long-term growth opportunity by delivering new products and forging key partnerships. On the new products front, I'm excited about the recent announcement of our new offering, Backblaze B2 Cloud Storage Overdrive. Driven by customer interest, Overdrive offers very fast performance optimized for large data sets and high-performance throughput. This offering is great for use cases, including AI, machine learning, high-performance compute, origin store for content delivery networks, analytics and more. Now I want to highlight something significant about Overdrive. Building on Backblaze's history of cost-leading innovation, Overdrive achieved remarkable speeds made possible by our underlying platform, which allowed us to do this without the need for massive R&D investment. This efficiency highlights the significant and often underestimated value of our differentiated IP. Overdrive is a prime example of how we are strategically leveraging our existing assets to unlock greater value for our broad range of customers and for Backblaze. Now let's discuss our go-to-market transformation, which focuses on three key areas: upskilling, partnerships and sales plays. On upskilling, we are building on great momentum here. I'm pleased to share that in Q1, the team more than doubled bookings year-over-year, which was driven by strong sales execution and growing existing accounts. This achievement highlights the added rigor we put in place. This quarter, we completed building out our sales team and expanding our sales capacity, and these new hires are halfway through their ramp-up period. We also invested behind the customer experience by hiring a VP of Customer Success to improve onboarding and post-sales support. With partnerships, I'm pleased to share a number of new technology alliances to support AI workloads and media and entertainment workflows. For AI workloads, we are building upon our Overdrive announcement by working with high-performance compute providers such as PureNodal, a powered by Backblaze partner. As AI companies seek flexibility to send their data to best-of-breed solution providers, Backblaze is a foundational platform, which empowers them to achieve their goals with high performance and value. In the media and entertainment space, we're seeing strong momentum around modern cloud-first workflows and our partnerships with companies like Suite Studios and iconik are central to that strategy. These collaborations enable creative teams to break free from traditional heavy iron infrastructure and embrace remote work-from-anywhere pipelines that are both powerful and cost-effective. By combining iconik's intelligent media asset management and Suite Studios virtual file system with Backblaze B2 cloud storage, teams can ingest, index and stream content directly from the cloud no matter where they are. This kind of seamless access and real-time collaboration used to require significant on-prem investment. Now it's achievable at a fraction of the cost, making high-performance media workflows accessible even in an era of tightening budgets. These partnerships enable customer success and position Backblaze as an increasingly strategic partner. Building these relationships today will significantly benefit our team's results in 2026. And finally, sales plays. Last quarter, we outlined our four key sales plays. We've revamped our marketing efforts to align with these key plays with dedicated landing pages and a more focused content strategy and targeted demand generation efforts. We have also further optimized our content to improve search performance, responding to zero-click AI results. We have restructured the team, onboarded our new VP of Demand Generation, added customer insight tools to our marketing tech stack and more. We're certainly not done, but are making good progress in establishing a robust, scalable, upmarket-focused go-to-market machine. One proof point of our go-to-market transformation success is our ability to sign larger deals. I am pleased to announce that we signed our largest TCV deal ever, a multimillion-dollar contract over a multiyear period. This customer offers a popular application and first became a customer a year ago with a smaller initial contract. Less than a year later, they decided to migrate their entire data set from AWS to Backblaze. This is another powerful validation of the unique blend of value and performance that Backblaze offers. As you may remember, last quarter, we shared a chart of our growth outlook for B2, which would accelerate each quarter and exit the year at over 30%. While some customers are taking more time to make decisions in the current business environment, we continue to see progress on our go-to-market transformation and thus remain confident that we're on track to achieve our accelerating growth targets, including reaching over 30% B2 growth and positive adjusted free cash flow in Q4. Key additional factors driving this include our strong self-serve business, our sales bookings, which more than doubled and the customer value we deliver, which underpins our consistent recurring business. In summary, we delivered strong Q1 results. The launch of B2 Overdrive underscores the strength and differentiation of our platform. Our go-to-market transformation is gaining traction as evidenced by our reported results. We are excited about where we've come, and we're even more excited about our path forward. Thank you, and I would like to hand the call over to Marc.

Marc Suidan, CFO

Thank you, Gleb, and good afternoon, everybody. As Gleb noted, we're very pleased to report a strong first quarter with both revenues and adjusted EBITDA exceeding the upper end of our guidance. Additionally, adjusted EBITDA margin tripled over the same period last year. Moving on to the specific results for the quarter. Total revenue came in at $34.6 million, representing a 15% increase over the prior year. B2 revenue growth accelerated to 23% on a year-over-year basis compared to 22% in the previous quarter. This marks the second consecutive quarter of increased organic growth. We define organic growth as the underlying growth of our business, excluding the 2023 price increase impact to help provide a more meaningful comparison. Our organic growth in Q3 2024, factoring out the 2023 price increase was 19%. The increase in revenue growth is driven by improving our direct sales execution, better customer retention and the ramp-up of a large customer. The Computer Backup business grew 8% from the prior year, primarily driven by the 2023 price increase. Now let's turn to net revenue retention, or NRR. For the quarter, our overall NRR is 113% compared to 112% in the prior year. For our B2 segment, NRR continues to be strong at 117%. The decrease from last year's 126% is mainly due to the lapping of the price increase. In our Computer Backup business, NRR is 108% compared to 101% in the prior year. This metric continues to benefit from the price increase implemented in 2023, which will taper off in Q2. On gross customer retention, this remains consistently strong at approximately 90% across both our B2 and Computer Backup segments as our customers continue to demonstrate high customer loyalty and retention. Turning to profitability. Our GAAP gross margins for the quarter were 56% compared to 53% in the prior year. Adjusted gross margin improved to 79% from 77% in the same period last year. This improvement is a result of increased efficiency in our data center infrastructure operations. Also, looking ahead, we see additional benefits to our GAAP gross margin given the useful lives of our hardware. We evaluated the usage of our fixed assets during Q2 and are finding our hardware is lasting six years. We plan to implement the new depreciation schedule in Q2, and that would benefit gross margins by 200 to 300 basis points. Now I'd like to address the potential impact of tariffs. While tariff policies are still evolving, we want to share perspectives that can help for modeling purposes. If there were to be a 10% tariff placed on all U.S. imports, such as storage hardware, that would increase our cost of sales by approximately 1.5%. However, this will not be instantaneous. This would take six years of the life of the asset to fully roll through. Tariffs would have to be meaningfully higher to have a significant impact on our gross margin. We are monitoring it carefully, but for the time being, it is not a significant impact on our business. Additionally, we source from multiple countries, which provides a hedge against supply chain risk. Moving on to operating expenses. We saw benefits from the restructuring that we implemented in Q4. Both R&D and G&A expenses were in line with our expectations, while sales and marketing expenses came in lower than expected. This was primarily due to slower hiring of our new sales personnel and the shifting of marketing campaigns into the second quarter. We also plan to participate in additional marketing conferences that take place in Q2, which are important to demand generation. So we anticipate sales and marketing to increase in Q2 by approximately $2 million over Q1. Moving further down the income statement, our net loss margin improved significantly by 1,000 basis points from the prior year, improving from a loss of 37% to 27%. Adjusted EBITDA margin tripled to 18%, up from 6% in the prior year, driven by strong growth and our ability to hold expenses steady. Looking at the balance sheet, we ended the quarter with $53 million in cash and marketable securities, a decrease of $2 million from the prior quarter. Next, I'd like to discuss the equity dilution and how we plan to reduce it. As our free cash flows improve, our aim is to reduce equity dilution from our employee equity awards. We have numerous tools that we may deploy over the coming year and beyond. For instance, we just started to settle executive tax withholdings in cash on a net share settlement basis instead of selling their shares in the open market to cover the tax withholdings. We also plan to gradually shift from issuing our annual bonus in equity to cash. This means they will be issuing fewer shares. Once again, reducing our equity dilution will be a key focus in the coming years. Finally, our adjusted free cash flow margin improved significantly from negative 17% to negative 6%, an 1,100 basis points improvement over the course of one year. This was driven by revenue growth and the operating leverage that we have achieved through the Q4 2024 restructuring and our commitment to be adjusted free cash flow positive in Q4 of 2025. On the discussion of adjusted free cash flow margin, we believe that this is a more relevant measure of profitability as opposed to adjusted EBITDA margin. As an Infrastructure-as-a-Service company, the associated capital investments in both hardware and software are captured in the adjusted free cash flow margin. Ultimately, our goal is to be both free cash flow and GAAP net income positive. I would like to take a moment to talk about SOX. I am very excited to announce that our 2024 annual 10-K report confirmed the complete remediation of SOX material weaknesses. Since becoming a public company, addressing these issues has been a priority, and we're proud to have successfully resolved them. We've also previously filed an 8-K disclosing the appointment of Deloitte & Touche as our new auditors as we prepare to be 44B(b) compliant. Deloitte & Touche offered us strong capabilities and cost savings. And we extend our sincere gratitude to BDO for their valuable partnership over the last several years as a public company. Looking ahead to our guidance, we expect our Q2 2025 revenues to be in the range of $35.2 million to $35.6 million, which represents B2 revenue growth in the range of 23% to 25% and reflecting the seasonal factors noted earlier, adjusted EBITDA margins in the range of 14% to 16%. We remain confident in the underlying strength of our business, the tangible benefits of our transformation and our ability to execute on our strategic priorities. Based on these circumstances, we are maintaining our full year revenue guidance of $144 million to $146 million and are raising our adjusted EBITDA margin guidance from the range of 16% to 18% to a range of 17% to 19%. Now I would like to turn it over to the operator so we can open it up for questions.

Operator, Operator

Your first question comes from Jeff Van Rhee with Craig-Hallum Capital Group.

Jeff Van Rhee, Analyst

So several. I mean, congrats on the quarter. Curious on the AI side. Can you put a little finer point on that? I mean anything you can share in terms of, I don't know, targets as a percent of revenues, where it is now or context as to the magnitude of impact on the pipeline?

Gleb Budman, CEO

Thank you for the question, Jeff. We're really excited about the AI opportunity, which was the fastest-growing segment in Q1 and has become a significant part of our overall business. Our largest customer is now actually an AI company, highlighting the momentum we have in this area. There are a variety of use cases emerging, and we have customers engaged at every stage of the AI pipeline, from data creation and labeling to modeling and inference, including those working on autonomous vehicles, industrial automation, robotics, and drug discovery. Additionally, we recently launched Overdrive, an offering aimed at supporting these AI use cases, especially in response to the growing demand for larger throughput. We're enthusiastic about the potential in the AI space.

Jeff Van Rhee, Analyst

Yes, that's helpful. Regarding the B2 segment, could you discuss the progress you've made in establishing a repeatable enterprise sales strategy? What has been validated so far, and what areas are still in development?

Gleb Budman, CEO

The go-to-market transformation is definitely underway. And I think you can see that because we've accelerated organic growth for the second quarter, and we've doubled sales bookings. We do have still a path to go. So I think the direct sales efforts are going well. We've still got more work to do on getting the partner and channel and some of the demand generation side of things working. We're seeing progress on those, but I think there's still a lot of opportunity there. And it's a $100 billion market. So we feel like we've got a lot of opportunity to try and drive more awareness and more demand generation.

Jeff Van Rhee, Analyst

Yes. Great. Maybe just one last one, if I could sneak it in for Marc. On the numbers, you mentioned dilution, love the initiatives to keep the dilution down. What do you think we should assume for the next year or two in terms of actual dilution? And then while we're on numbers, just your thoughts on software capitalized software for the rest of the year.

Gleb Budman, CEO

Yes. Thanks, Jeff. Good questions. So first of all, I mean, on dilution, we started the journey. So I think we will aim to share more on what it could look like, not ready to do it yet. But definitely, it's a big priority for us to tackle. And we started in Q1 because if you look at our statement of cash flows, you could see a line for us settling the tax in cash instead of shares. On your second question, listen, the way we look at R&D is if you take our R&D expense on the P&L plus the capitalized R&D, that's really our all-in expense together. We hit a high of 60% of revenue in Q1 of '23. A year ago, that was 44% and this quarter was 40%. So we're holding that investment relatively steady in absolute dollars. And as a percentage of revenue, we'll keep benefiting from scale there.

Operator, Operator

Your next question comes from the line of Mike Cikos with Needham.

Mike Cikos, Analyst

Congratulations on the quarter. It's impressive to see the record TCV deal you're signing over multiple years with this customer. I wanted to take a moment to discuss this. You mentioned signing with them about a year ago, and now you're receiving the complete contract. I am curious about the negotiation process. Did they put it out to bid, or did they decide to work with you after experiencing Backblaze? I would like to know how that process unfolded from your perspective.

Gleb Budman, CEO

Thanks for the question, Mike. To start, this was a shift from AWS, and we're thrilled that it demonstrates our success in securing major deals, especially in the upmarket. This was the largest total contract value deal we've ever signed. We began discussions with them a few years ago when they were still using AWS and exploring their infrastructure options. Last year, we secured a six-figure deal in which they transitioned part of their infrastructure to us. As they became more acquainted with our platform and recognized its performance, value, efficiency, and the superior customer service compared to what they experienced with AWS, they chose to fully migrate their data to us. Consequently, this quarter, it evolved into a multimillion-dollar deal.

Mike Cikos, Analyst

Great. And I guess the follow-up, I know that you guys only announced the B2 Cloud Storage Overdrive last week. Was that in any way a deciding factor for this customer or maybe the visibility into the roadmap? I'm just curious if that came into play as well.

Gleb Budman, CEO

The specific customer did not require Overdrive for their use case. However, we developed Overdrive in response to customer feedback, particularly from those impressed by our performance who expressed a desire for even more capability. There has been significant demand, notably from some AI customers but not limited to them. In exploring opportunities within our platform, we recognized the potential to optimize our offerings without incurring substantial research and development costs. As a result, we enhanced both our software and hardware and fine-tuned our platform to support this new product, building on a strong foundation from years of previous R&D. Although it's only been a week since our launch, numerous Fortune 500 companies have already reached out to us to learn more about Overdrive, indicating positive early interest in the offering.

Mike Cikos, Analyst

Great. I appreciate the color. And maybe one more, if I could. Marc, really appreciate you calling out some of the dynamics around tariffs, especially with the uncertainty that's out there in the market. Just to bring it back to the lead gen for a second. I know you guys are talking about some pretty impressive statistics. But if I think about top of funnel activity from a demand gen standpoint or new leads coming into the pipe, has there been any change at the margin there? And again, really just trying to get a temperature check as far as what might be playing out in real time given how things feel almost week-to-week at this point?

Marc Suidan, CFO

Yes. I would say that the changes in demand generation are more related to our internal adjustments rather than market dynamics. To explain, back in the fourth quarter, we undertook a restructuring of the entire marketing department and budget, shifting towards increased outbound spending instead of internal payroll. From January to February, the team was adjusting to these new plans, and it was in March that we began to significantly increase our outbound efforts. This is why we anticipate more spending in the second quarter. Referring to Gleb's comments on the go-to-market transformation, we are focusing heavily on ramping up demand generation and awareness since our win rate is quite high; we simply need to funnel more opportunities through. The impact of tariffs and similar issues has not notably affected our demand side.

Gleb Budman, CEO

Operator, are there more questions in the queue?

Mimi Kong, Head of Investor Relations

So I'll handle this one. Zach, I'm going to put you up next. I'm going to unmute you. Actually, I can't unmute. Hold on, let me find what's going on.

Gleb Budman, CEO

Operator, are you there? Operator?

Operator, Operator

Your next question comes from the line of Zach Cummins with B. Riley Securities.

Ethan Widell, Analyst

Yes, this is Ethan Widell calling in for Zach Cummins. Looks like you've got nice growth in B2, but a little downtick in NRR. Is that just from lapping the price tailwinds? Or is there anything else there? Can you maybe talk a little bit about the dynamics you're seeing there?

Marc Suidan, CFO

Zach, this is Marc. Our net revenue retention remains quite strong. The effects of the price increase are what you're observing. I would say it will be around that level for a few quarters as it reflects a rolling trailing four-quarter average. As we progress in generating higher revenue growth for B2, you will start to see improvements from that point onward.

Ethan Widell, Analyst

Got it. Appreciate that color. And then just touching on some of the tailwinds you're seeing from AI demand and the Overdrive solution. It seems like good early traction there. I guess in terms of the use cases that you spoke to, it seems like there's a lot of different use cases, but are there any in particular that are driving outsized interest so far?

Gleb Budman, CEO

Well, I'd say that the two kind of core ones that people talk about, right, the model building and the inferencing are two of the larger ones. So on the model building side, we have customers who are either generating data. So for example, they're indexing the Internet or they're taking imagery from satellites and other types of locations where they're capturing data that is being used to train models or they already have large data sets that they're then repurposing in different ways to help the AI models being built. So that whole category is a fairly large aspect for us. And then we have lots and lots of customers that are doing a variety of different inferencing type use cases. Some of the ones I shared around autonomous vehicles and automation, industrial automation, robotics and drug discovery and others are ones where they're heavy inferencing type workloads. But the overall flow, right, where you collect the data, you label it, you create the models, you do inferencing on them and then you retrain, we have people doing each part of that. And a number of these are going to be doing multiple pieces of that pipeline as part of their core AI workflow.

Operator, Operator

Your next question comes from the line of Maxwell Michaelis with Lake Street Capital Markets.

Maxwell Michaelis, Analyst

Solid quarter. I want to revisit the record contract here. When considering why they switched to Backblaze, aside from customer service and better performance, what specific aspects of the product's performance led them to move their entire infrastructure to Backblaze?

Gleb Budman, CEO

Yes. I mean I think if you look at it, they are a company that's an application storage company. They have an application where they have many, many end customers that use it. They store a lot of data for their customers. They need to have that data not only be stored, but then delivered out to their customers. And so they needed to work quickly in getting that content out to their customers as well. So it's the performance of getting the data out to their customers wherever they happen to be as well as the cost and value of both storing the data, using it and then distributing it.

Maxwell Michaelis, Analyst

Okay. And then I want to shift over to AI here. It seems like you guys have solid demand around the AI portion of the business. Maybe in terms of numbers, maybe from like a new business standpoint, maybe what percentage of new business coming into Backblaze has some sort of AI aspect attached to it?

Gleb Budman, CEO

So we're not sharing specific subdivision numbers on that. But what I will tell you is that it was the fastest-growing part of our Q1 business. So it's a material part of the growth at this point.

Maxwell Michaelis, Analyst

Okay. And then in terms of B2 Overdrive pricing, like how similar is that to just your typical B2 product?

Gleb Budman, CEO

So B2 starts at $6 per terabyte per month. B2 Overdrive starts at $15 per terabyte per month. So it starts at 2.5x the price point. One of the things that I'll mention on the competitive side of things is if you took, for example, a 10-petabyte customer that wanted to send that 10 petabytes out 3x each month somewhere to the customers to a GPU cloud to another partner, that would cost about $1.7 million per month on AWS. It would cost about $150,000 on Backblaze B2 Overdrive. So it's 2.5x our price point for B2, but it's still about 90% less expensive than the alternatives that customers have to do the same type of workloads.

Operator, Operator

Your next question comes from the line of Jason Ader with William Blair.

Jason Ader, Analyst

Gleb, can you elaborate a little bit on the comment where you said, 'While some customers are taking more time to make decisions in the current business environment.' What did you mean by that? Are you actually seeing that play out in Backblaze's business? Or are you just making kind of a broader comment and sort of hedging against the sort of macro headwinds that could emerge here?

Gleb Budman, CEO

Yes, Jason, thank you for your question. We have noticed that some customers are taking longer to make decisions. This is not merely a precaution regarding the overall macroeconomic situation; rather, some customers are indeed pausing as they navigate their own internal business challenges influenced by the macro environment. On a positive note, our self-serve business continues to grow without interruptions. We've doubled our sales bookings for the quarter. As Marc mentioned, we believe we have more control over our actions than the external macro factors. However, I did want to highlight that we have observed some customers taking additional time.

Jason Ader, Analyst

Got you. Okay. So you're still confident on that 30% exit growth rate.

Gleb Budman, CEO

Yes, we're still confident about that. What we shared last quarter was that we would accelerate growth for B2 quarter-over-quarter this year and exit the year at 30% plus. We remain confident in achieving that growth and exit rate.

Jason Ader, Analyst

Okay. And so you're balancing the, call it, a handful of customers that are maybe a little bit slower in the decision-making with the momentum that you had in Q1. Is that the right way to think about it?

Gleb Budman, CEO

Yes, the momentum that we have in Q1 plus the other early indicators that we have in our business.

Jason Ader, Analyst

And the month of April was sort of fair to say that was kind of in line with your expectations and consistent with Q1 demand?

Marc Suidan, CFO

Yes. Jason, this is Marc. Yes, that's exactly right. It's been pretty consistent. And the good thing is, I would say, the diversity of our customer set, right? We still have, I mean, an incredible amount of upselling that occurs to existing customers. On the self-serve front, we still have a lot of customers every quarter by the thousands that are showing up and starting. So we haven't seen any change in momentum on those fronts. So when you combine the changes we've done on the go-to-market stuff, and we're not fully done there yet. I'd say yes, we feel pretty confident about getting to that 30% B2 growth in Q4.

Gleb Budman, CEO

Yes, exactly. And again, thank you for your continued support.

Operator, Operator

And that concludes the question-and-answer session. And I will now turn the conference over to Gleb Budman for closing comments.

Gleb Budman, CEO

Thank you. So we've delivered a strong Q1, beating both top and bottom line guidance. We accelerated B2 organic growth again, and we're on track for over 30% growth in Q4. We're winning with AI use cases. We've launched this high-performance offering with B2 Overdrive. So I'm really excited about where we are, where we're going, and I want to thank our employees for delivering these results, our customers and partners for working with us, our investors for continuing to support us. And I want to thank all of you for joining us today. We'll see some of you at the Needham Conference in New York next week. We'll see some of you at the Craig-Hallum Conference in a couple of weeks, and we look forward to seeing everyone in our next earnings call. Thank you.

Operator, Operator

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.