I'm Mike Cikos. I cover cybersecurity infrastructure software. I'm very pleased to say as part of the Needham Growth Conference or Needham Technology, Media, & Consumer Conference, we have with us Backblaze CFO Marc Suidan, as well as Frank and the new CRO Anuj in the audience. Thank you to you guys for joining us. I have some questions on my side we'll go through, but please, if you have any questions, lob them up here. We'll make this as interactive and as productive for you guys as possible. With that out of the way, Marc, thanks for joining us.
Thanks for having us here, Mike.
I think just to set the stage for everybody who's in the audience, if we could just walk through a quick history of the company. What is its founding vision/mission? What are you guys looking to accomplish on behalf of your customers?
Thank you, Mike. We wanna make it really easy for anybody who wants to innovate to store their data so that we could unleash them in any other possible way of what they wanna do in this AI-enabled world. We got about $150 million in ARR. 60% of that comes from our cloud storage business that's growing at about 24% year-over-year, and 40% comes from the legacy business, which is a computer backup business that's flattish, slightly declining year-over-year.
Excellent. You're already stealing the thunder. That's great. Let's hit on the highlights from the most recent quarter, right?
Yeah.
B2 Cloud growing revs 24%, ARR 28%. Can you just talk about the demand drivers that you guys are seeing out there? We'll touch on the go-to-market too, 'cause I think that's an important catalyst here. What are you guys seeing from a market demand perspective that's enabling that kind of growth?
Yeah. Go-to-market execution is a big part of it, and we'll talk about it later, as you said. The other piece is obviously there's an explosion in demand for data storage. You could see it in the memory makers are sold out for the next two years. The hard drive makers, everybody's sold out in the business. It's an incredibly hot market with explosive growth. 35% of our wins, our bookings win in Q1, were AI-related companies, up from 25% last year. We're definitely seeing some really healthy tailwinds, from the whole AI world.
Okay. I know the computer backup business, we said that that's relatively flat. How is investors should be thinking about that business on the go forward? I know it's not the underpinning for the bull thesis, at the same time, we do need to think through what that asset ultimately becomes for this organization.
I mean, that's a highly sticky business. Consumers or small businesses use it on average for 9 years. It's a very healthy cash cow to the business. Its gross margin is lower than B2, but on a contribution margin standpoint, given there's a lot less sales and marketing and R&D going into it's very high cash contribution margin. That funds a lot of the growth we're fueling on the B2 side, to innovate on the R&D side and sales and marketing. It continues to be a really healthy cash cow. You get about a 10% customer churn plus they stay with us for 9 years, but it's declining about 2%-3%. We said for the year, maybe 5%, but the most recent quarter was 2%.
What that tells you is there's still a lot of customers that are coming in and buying the product. We are trying to stabilize it to get it out of decline mode, but we're not yet guiding to that until we get more comfortable that the actions we've taken will take hold.
Understood. In the meantime, you get to source that cash cow to help fuel the growth over on the B2 Cloud side. For B2 Cloud, and again, you were teasing at this earlier, but you guys have seen some pretty tremendous growth from AI customers, whether it's account or the ARR generation. Can you talk about AI customer specific initiatives? How is it you guys are courting those organizations to come to the Backblaze platform?
Well, quite a few different ways. One, there's just a general reputation out there among CTOs and AI developers that goes back to the legacy of the company. I mean, the company was started in 2007, it's been around for 19 years. It's got an incredible reputation amongst that community.
Through a lot of word of mouth, a lot of people are coming to us, and we also publish a lot of content online around drive statistics, performance statistics in terms of loading up, downloading files, which platforms perform better than others, network statistics, where the workload's going. All this stuff is creating a lot of viral marketing that's creating a lot of demand and awareness that brings these customers to us as we process them through our engine. They come in different shapes and sizes. On the product-led growth side, I mean, we get at least 1,000 net of 1,000 a month that sign up. A lot of those could be AI developers, could be startups.
We're doing a lot of open source integration activities that make it easier for them to wanna connect or integrate with us. On the startup side, where we target them more 'cause they're obviously a lot bigger, I mean, their data needs are pretty big, and the sales motion there is very interesting 'cause their buying patterns and behaviors are very different than a large enterprise, right? They have just as much data needs, if not more.
They move a lot faster, and their needs are typically around performance for dollar. You know, we've been publishing a lot around this. You got another company who could say, we offer blistering speed at 25 Gbps . We offer up to 1 Tbps . On Performance for dollar basis, we're definitely leading edge, and that attracts them a lot 'cause they're trying to, you know, figure out, you know, how to architect their environment so they're putting the most dollars in their innovation. Data storage, given the amount of data they have, they wanna make sure they're not all putting it in flash or NVMe, which is pretty expensive compared to a hard drive capacity.
Okay. To your point, as far as the speed, I imagine that the sales cycles for these customers is significantly faster than what you see for the remaining cohort?
Significantly faster. I mean, one example we gave in our last quarter earnings call was.
Yeah
A CTO heard from us from another CTO. They came up to us and, you know, we started talking to them, and within 11 days we closed an almost $1 million deal. They definitely move faster. Their needs get validated faster. They're very agile, and they make decisions pretty fast.
Okay. For that organization, that was the AI training data customer, you had swapped out for an incumbent as part of that process, too. What was it that they were struggling with from the incumbent that you guys were able to solve for them?
You know, typically, it's interesting 'cause if you go through the hyperscalers, 'cause we do win a lot from the hyperscalers. There it's gonna be, you know, the value proposition's gonna be dollar for performance. Right? In the case of that customer, it was more of a neocloud provider. I think what you're seeing from a lot of neocloud providers is the software layer is not as reliable and performant as one that's established like ours. In that case, that's where they were having some issues, and they wanted better performance.
Excellent. Okay. the other
Reliability.
Yeah, yeah. The other big win, or the customer testimonial, if you will, that you guys announced was another AI customer for the GenAI video creation, right? Also significant. Half a million dollars, I believe, off the top of my head. How did that sales cycle come together? Was it similar as far as the speed? Again, were you coming in and displacing an incumbent there, or was this a net new opportunity?
In, in all cases, I mean, there's a set of data that has to move from somewhere, right?
Unless they're really starting greenfield, the general market is about growth, but they're coming from somewhere.
Okay.
'Cause they're using somebody in their existing architecture. Every now and then there's a build versus buy, right? If you're selling to a neocloud, it is a build versus buy for them. In this case, in that particular company's case, they were moving from a hyperscaler.
They had multiple use cases, so it's not that they stopped using the hyperscaler. It's just that in one particular use case they said, "We're gonna start working with you, Backblaze." Now we're in discussions for expanding into other use cases.
In that specific use case that won them over to you, it comes back to that core hyperscaler displacement opportunity where it's dollar for performance?
Dollar for performance, exactly. I mean, the other thing they get with us, too, is, I mean, the service level is very different, right?
It's a lot more tailored, customized. You know, it's a phone call away, right?
Yeah.
When they're dealing with a hyperscaler, regardless of how big they are, they're gonna be a small fish in a very large ocean. With us they love the intimacy, the responsiveness, and the transparency, right? Transparency is really key to our culture and value proposition.
Totally understood on the service element. One of the things that I frequently get is, listen, the hyperscalers, if they're spending more money than God, like, how is it you guys are able to deliver them a product that has better performance on a per dollar basis? Can you just talk to that piece?
Yeah, in terms of how do we deliver better, I mean, listen, it's a gigantic market, right?
Yes.
On the GPU side it has been capacity constrained for a while. Depending on the use case, right, the hyperscalers are no need to try to change the way they structure their contracts, right?
If you know, if you search how buyers of these services feel, they generally get a lot of surprise billings. In the end, the TCO ends up being a lot higher than they expect. Once they better understand the TCO and all the extra service charges that come through it, be it egress or other kind of fees, they get very disappointed with these surprises, and that's where our value prop is a lot more simplicity. And they like that simplicity, that predictability, combined with the TCO. How do we do it? I mean, we got over 1 million lines of code and years in the making.
I mean, we're the first innovator of the Storage Pod. All the way down to the physical layer and the software layer, we got innovation all the way through that allows us to deliver this at really powerful economics that others haven't mastered yet.
We're talking about that level of innovation. I think one of the things that I don't wanna say caught people off guard, but when you guys announced B2 Overdrive last year, the speed at which it was developed and then the incremental cost was relatively de minimis in the grand scheme of things. Can you talk about what B2 Overdrive is, just for the audience, and then how have demand trends been tracking?
Yeah. I mean, what's interesting about B2 Overdrive, as we started having early AI companies, 'cause their use cases are typically they need to aggregate a big amount of data, and they need to be able to move it in fast speeds. Not low latency, just fast speed of moving big amount of data when they wanna run either the training models or the inference.
Yeah
Or the inference runs. As we started working with a few AI companies, they, you know, they do a lot of testing with multiple platforms, and they started telling us, like, "Guys, just so you know, like, your platform's way performant than you make it sound, you know?" As we dug into it, you know, a lot of the innovation was already there, of understanding how to pick up the data, how to flow it when it comes in or when it goes out, in a multi-tenant environment, right?
That's part of the sophistication of the platform and the software layer. You get the benefit of obviously having, you know, 500,000 customers flowing in and out. You get to work off the balance of everybody to be able to deliver a higher performance for those that need it. It does become a question of, okay, what do we need to do to package around that, the features and functionality, so that we can monetize it?
That's where it was interesting, that it was really a market customer reaction to us, that opened up our eyes to it. Since then, we've just been further accelerating the innovation and offering around that. B2 Neo, which is kind of a, an evolution of, you know, it's a bit of a Venn diagram, right? It's a business model offering to the B2 to the neoclouds. A lot of it comes from the need of having that higher throughput, or call it goodput, as a lot of analysts are putting it out there, which is what do you need to move, at what, at what pace and speed and what cost of it be at and what kind of medium?
There's just not a lot of flash memory around, to accommodate everything. The cost of flash memory is up more than 2x year-over-year, and it's capacity constrained. When you add that all up, that's where we're seeing a lot of demand around all this stuff.
Awesome. Awesome. And customer reception, appetite, I'm assuming that your sales org now knows how to sell this product. Like, where are we in that trajectory and scaling of the product today?
Yeah, I mean, it's an integral part of our discussions with customers. A lot of customers ask, you know, a mix of solutions, right? Sometimes you get some who may come in and say they just want Overdrive, but then as we do proof of concept and really explain to them, what they, you know, better understand what they need and better explain how to best solve it ends up being a mix. A lot of our deals are actually a mix of Overdrive and non-Overdrive. It's not all pure play. Even Overdrive, right, there's different levels of tiering within it, based on the performance you're looking for.
I would say discussions are generally pretty active across the board. We don't disclose exactly how much it drives.
Yeah.
It's been a very healthy driver of collaboration to solve for them, starting off from where they are. They usually come in thinking they need everything in Overdrive capacity, and usually where we land is they need a mix of type of different service levels within that.
Excellent. Excellent. I also just want to say, like, thank you. Like I always get nervous asking a CFO questions about product because it's like, what's the depth of technical knowledge. I really appreciate that. That was great. Thank you. We'll jump to go-to-market now. It'll be a little bit. I know, like, a few quarters ago, the company implemented a go-to-market transformation, right? Let's just start there. What did you guys implement to transform the go-to-market? How have those initiatives trended thus far?
Yeah. You know, if you go back and you think about the company, it started off as a consumer solution, right? Then from there evolved the product-led growth, self-serve motion. Came the B2B sales motion, right? You're layering one over the other, 'cause we're still doing the other ones. It's just a very different muscle, right? You need different processes, you need different people, different systems. Despite the company having tried the B2B motion for several years, I mean, the fir st part of the go-to-market transformation did a really good job at, of more than doubling basically the average deal size.
You could see it in our RPO and, you know, the disclosures we do around greater than $50,000 AR customers. There's been a really meaningful, nice progression over the past year and a half. On that part of the of what we wanted to do, we succeeded, right. The part we didn't succeed well is frankly creating more awareness and more outbounding demand generation to flow through an engine in a, in a recurring and predictable way. That's where we felt like we had to double down and do a lot more work. We're in the process of doing that. We did bring on a new Chief Revenue Officer. Actually, he's in the room. Too early to ask him questions. He's only been a few weeks on board.
you know, we're seeing some good changes on that front. It's still, it's still early in the process, and that's why we changed our guidance philosophy, where we said, "Listen, we're gonna stop guiding towards what we can do, and we're gonna guide to really what's more predictable from our standpoint, in our demand generation engine." Obviously, we did really well in Q1.
Yes. Yes.
Our aim is to do well in every quarter. For the time being, we're taking that approach in our outlook, so we, you know, we set things up for, you know, hitting or beating and not missing in any capacity.
Excellent. Maybe it's worth highlighting that as well, 'cause I know we had that conversation a quarter or so ago. How has the guidance philosophy changed? Like, what are you doing to inject incremental prudence into the, or conservatism into the guide to ensure that we're in a more steady state, beat and raise cadence, and all the good things that follow that.
Yeah
From an investor standpoint?
I mean, there's three things we've taken out of our guidance setting. Deals greater than half a million dollars in ARR booking.
You know, we've, I'd say for the past year as we move up market closing anywhere between 1 and 2 on average per quarter, but some quarters could be 0, and some could be 3. We said, you know, let's exclude that and just announce them as we win them on a quarterly basis. Number 2, there are some large customers that frequently go over their contracted minimum. Those are harder things to predict. That's what drove a lot of the upswing in the middle of last year by-
Yes
one large customer. If you look at Q1, most of our beat was driven by a few large customers consuming more than the contractual minimum. Until we could get more comfortable that that's a pattern, we're excluding that. The third is more go-to-market transformation benefits. I think, as we get more comfortable that we got more pipeline and conversion coming in, we'll start factoring that back into the guide in a very transparent way.
Excellent. Okay. Guide to what you see and leave the rest as upside. For those million-dollar-plus deals that you're not including in the guide then, do we have enough of a sample size or are we accruing that value from the sample size so we can build a more repeatable motion around that at this point?
I mean.
I know it's a work in progress.
Yeah, yeah. I mean, look, when I mean, I've been with the company seven quarters. That upmarket momentum has been really the focus of that past seven quarters. Like I said, the average is 1 to 2 a quarter, right? At a half a million dollars, you could argue that's an average of $750,000 per quarter. Because we don't know, like, some quarters, they're just longer sales cycles, so some quarters it, you know, it's 0, some are 3. That's where we're factoring those out. We have enough of a pattern to say it does average around that, but just the consistency is not there of the timing.
I think we're getting close to it. Once we get close to it, we'll start layering that in to say, you know, from now on, we're gonna include one per quarter, right? Which would mean would add, like, half a million dollars or $750K on average. More, bookings per quarter. If you do that, I mean, by the end of the year, that's like $3 million more, which is roughly three percentage points of a $100 million or so ARR business.
Excellent. Excellent. Talk about for the B2B processes that you guys have instilled, you were talking about pipeline gen, demand gen. What are you doing specifically on those fronts to ensure that we are building that funnel of half a million or million-dollar-plus deals?
Yeah, I mean, breaking it up, everything, like, from the process all the way from top of funnel all the way to closing, right? I mean, top of funnel, we launched things like Flamethrower.
Yes. Yes.
Which is all about creating more buzz, more, you know, more demand generation on that front. We've expanded our series of what we publish around. Like I said, we've historically published drive statistics, which is a highly followed publication around drive failure rates. Anybody who works in the field kind of knows us for that. We've added network and performance statistics, which are really well followed, attracting a lot of good attention by people in that field. A lot of that top of funnel activity, still early in the works, right? 'Cause we just started a few quarters ago, but we need to do more on that front, but it's off to a decent start.
When you get into the full demand generation of, you know, segmenting who you're going after, who's the right ICP, getting the content right, you know, that outbounding motion is a data science driven model, right? Like, did the person, you know, slow down and they're scrolling and look at the ad, and if so, is that the right time to send them the email and the text message? When do you do the phone call and persistent, and what's the sequence in messaging that comes at every step? We're still in the process of mastering all that. I mean, that's a muscle to build. You don't.
Yes
You don't build it overnight. Once it gets to, you know, a qualified opportunity, having a ramp sales force, I mean, our sales force now has been Most of them are pretty new, frankly, over the past, call it year and a half.
They're well ramped now, so having them, you know, be a good oiled machine to understand how to quickly get to the value proposition of what works for the customer, when do you run a POC, when don't you need a POC, and then simplifying the whole contracting process. We're trying to re-engineer the whole process from beginning to end. People, process, and the underlying systems that govern it.
You were talking about, like, guiding that organization from discovery through the funnel to contract signing, right? When do you hit them with that ad or when do you send that email? Is that part of what the company's discussed as far as system upgrades, or no, that's an independent? Like, what are the system upgrades that you guys have spoken about for the go-to-market as well?
I mean, every all that activity underlining it are business systems. I mean, they're business systems you procure. We don't have a shortage of them. We've got a lot of them. We got all the right ones. You know, it's all about how you configure it. It's how do you make use of it. It's the data integrity. It's the process of how it connects all these systems together so you get the right transparency. I mean, I saw, like, in the previous Fireside Chat, they were talking about how you're using AI. For instance, we've deployed a lot of AI in that interaction where we have, like, AI SDRs reaching out to customers.
All that stuff just needs a lot of refinement and re-engineering of how these systems work together. It's less of a implementing new. It's almost like just cleaning up what's there, making sure it works better together, making sure the people know how to operate it well, serving them in the most efficient way. Like one common way you look at, you know, for instance, salespeople is how much time they're spending updating their data and doing administrative tasks versus selling. You know? Making sure you're shifting to having a lot more selling time versus administrative work by simplifying that whole environment. That, that's a lot of the kind of system work that's happening there.
Okay. I'll ask you the same question I asked the guys at Penguin. With your use of AI internally, like, you can do one of two things the way that I see it right now. One, you have all this efficiency. You can significantly broaden the platform or the depth of it and just innovate faster. Stir up higher growth revenues over the long term. You can drive cost savings. How is it you guys are looking? Have you defined yet, is it an either or question for you guys or are you trying to do both simultaneously? How do you view it?
Yeah, I mean, obviously we're benefiting a lot from the tailwind. The question is about how to deploy it internally.
Yes.
You know, we, you know, I would say, like, saying you're getting your people proficient to use Cloud and ChatGPT is table stakes, right? Teaching them how to use Google Search these days. We've been pretty, I'd say, early stages of getting aggressive and really deploying it. For instance, first line ticket for customer support or IT helpdesk or even SDR-ing, I mean, a lot of that stuff is driven by AI for now without a human touch. We're really working to take it to a whole other level.
I mean, this is not stuff that's easy to do, everybody talks about the agentic revolution that's about to come about. Notice they all talk about what's coming about, right? There's a lot of preparation needed for there 'cause you also need a, like, a zero trust environment of protecting yourself 'cause you're letting agents without a human in the loop potentially run loose.
We're in the process of rethinking all that to see how we could get it to a whole other level. In a lot of our new recruiting, like, we make sure a lot of people come in and they're already proficient with, for instance, how to use AI to code. We're planning on, you know, further driving our, I'd say our productivity to a whole new different level, using AI. I think we're, we've done good strides in early stages and we want to drive a lot more out of it.
On the go-to-market too, one of the things you had slipped into your response earlier was Flamethrower, right? Can you just talk about what Flamethrower is? I know you guys, I think you got to 100+ organizations in, like, half the time it typically takes. Like, what is Flamethrower actually doing to benefit Backblaze on the back end of this program?
Flamethrower is a program where customers could get up to $100,000 in credits to store data. Early stage startups, you know, cost is very important, we're getting out there through different programs. I mean, even listing, listed on a16z Marketplace or participating in certain AI incubation models such as Startup Ventures or Launch. Some pretty, really well-known ones, and that's a lot of the AI native community you want to be well known with, right? Because those are the ones who come in small and could have really exponential growth. Flamethrower is all about, you know, getting into that community and creating some solid awareness. You get the 100 organizations who are already getting credit.
A lot of them are starting to bounce up against the end of that credit program, and then we're already in talks with them to start converting them to paying customers. If you think about the other hundreds of startups that have been exposed now to this program, is a great way for, you know, to get our name out there in that community 'cause these are people we want, you know, to bring onto the platform, 'cause they're, they'll be the ones where they'll be driving explosive growth.
The next couple of questions are gonna be about the leadership change, right? With, with Anuj coming in as the CRO. Can you talk about, and it's always a little uncomfortable when he's in the room, right? What was the CRO search process like? I think the one other thing I'd really like to weave into that conversation is, like, I feel like investors' antennas sometimes go up when they hear about, a CRO or leadership change midyear, right? Can you give us confidence or help us think about comp, quota, territory? Are all those set for the year or is there potential change as we think about calendar 2026 here?
Yeah, no, that's a good question. We're just talking about it yesterday night actually. You know, one thing you don't wanna do is change things up on your Salesforce right in midstream, right?
Yes.
I mean, funny enough, historically, you know, Backblaze was not a fan of comp plans and commission plans, and so it's been definitely a cultural shift, right? I would say the team is well set there. They're off to a really great start. I mean, if you look at our, a good indicator is our RPO within a year of how we change in Q1, right? It's up $3.4 million. That's a great indicator that they're off to a great start, so we definitely don't wanna disrupt that. I think, you know, when you think about Anuj coming in and the team that was in place and the changes we have done, a lot of it is looking at the different vectors of growth, right? One of them is working for instance with neoclouds.
Neoclouds are all racing, right, in a supply constrained market to build themselves up, grab the right market share. They have a great opportunity, and storage is one of these things where we could do for them way more efficiently than if they did it themselves, right?
Yes.
There's a build versus buy for a lot of them. Those are great discussions. We're off to a great start there. Jason, who was, is now our Chief Growth Officer reporting to Anuj, is very focused on that ’cause it's a very important market for us. ’Cause that's big time whale hunting in our size business. Meanwhile, Anuj comes in and is kind of, you know, refixing that whole engine around demand generation, re-looking at all routes to markets and saying, "Listen, do we have the right effort and strategy in every route to market given the, you know, the TAMs we wanna go after and where we could, we have the best permission to win?
How does that tie back working with our product management team and our engineering team to make sure the functionality and features are all about delivering to these end markets we wanna play with, really strongly?
Okay. The last question I had on the go-to-market around the pipeline is you guys had cited some pretty impressive growth specifically with pipeline from existing customers. I wanna make sure I got it right, but I think you doubled it year-over-year as far as pipeline from the installed base? Is that a function of the maturity of the sales reps that you guys have? Is that a function of, I guess you guys have become much more disciplined as far as, hey, Company X is Ciko s' territory, Company Y is Marc's territory. How is it you're driving that pipeline growth with the existing customers?
Yeah. It's, it's called a different maturity level of, you know, your customer success function. Right? I mean, I remember when customer success came out, it was basically everybody rebranding their customer support to customer success, right? Customer success is really caring for the customer. Are they getting the best out of that product? Our customer success team is fairly new. Before, they were very focused on renewals, right? Renewals is good, but you're in a business where people stay with you for nine years and are growing every year organically, whether you talk to them or not. You wanna keep that there.
Yes.
You really wanna talk to them to better understand their business issues, how are they getting the best out of the platform, you know, making sure you're setting them up for success. In those discussions, you identify a lot of really nice expansion opportunities.
When those expansion opportunities are sized, that's when you get the sales team involved to go help and turn that into a full sales process in motion. It's really about transforming your customer success side. By the way, that's integral to the whole go-to-market transformation. Right? I talked about the top of funnel all the way to close, and this is all the post-sale support, right? How do you have that intimacy with your customers, understanding their sentiment, their needs, and finding nice expansion opportunities there. Because it's, I mean, the win rate there is just a lot higher.
Right? For whatever pipeline you create, you'll have a higher win rate 'cause they already know you, right? It's proven out, so you don't have to reprove yourself with them. The T& Cs are already set up. It just accelerates everything, and it's a low-hanging fruit. It's a lot of it has to do with the maturity of the customer success function.
I'm sure part of it benefits, too, just from the new products that you guys have launched as well. You have much more of a cross-sell motion today versus a year or two ago.
Yeah.
Excellent. I have a couple more on my side, but just wanna make sure I'm checking with the audience. Does anyone have any questions they wanna ask? Happy to keep going. All right. Oh, yeah, go ahead.
Just talk about, like, your current capacity, like if you just had a rush of demand, I mean, can you satisfy what level could you satisfy? If you had to chase and get more capacity, how do we think about that?
Yeah, good question. In terms of, for those that didn't hear the question, it's about how much capacity do we have organically. We maintain the three main kinds of capacities we gotta maintain is obviously a very scalable software platform, which we have, data center footprint, and hard drive capacity and a CapEx capacity. We maintain a pretty healthy buffer. We're self-funding our growth. I would say this is a very rough estimate, but we could probably self-fund our growth up to 50% revenue growth for B2, which, you know, would be a great problem to have. That's what we wanna get to.
North of that, I mean, you start to have to relook at the capital structure, and just making sure, like, we're set up right, 'cause then you get into much bigger capital expenditures and data center footprint expansion.
Maybe on the question around hardware, like, how is it you guys are tackling some of the supply constraints that are out there in the market today? How is that impacting you guys, and how are you potentially changing your, your procurement behavior?
I mean, you gotta be very nice to your vendors. I think from a risk management standpoint, I mean, you just gotta think. For us, I mean, we publish hard drive failure rates online, right? There's no secret as to how long we use our equipment for. We're kind of averaging, I would say, 6.5 years- 7 years, right?
With that, what that means is we need CapEx to fuel growth, and then we need CapEx to replenish older equipment. Generally speaking, there's only three hard drive makers. We obviously buy other kinds of components, like networking gear or memory and so on, but the biggest part of our CapEx is hard drive equipment. We got a really good relationship with all three hard drive makers, and it goes back a while, right? Going back to the legacy of the company. We have direct relationships with them, which is not common for a company our size. They have been facing explosive growth.
By having that really tight relationship, we work well ahead of time to place, you know, forecast that goes out longer, so we could get our fair share of allocation. While maybe we, you know, things have increased by, call it, a few month in terms of fulfilling orders, we're well set for the year, and even looking into next year for, from the supply side.
Excellent. Excellent. We'll leave it there. Thank you so much, Marc. I appreciate it, and thank you to the audience for joining us today. Thank you, guys.
Thank you.