PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) AvePoint provides SaaS data management solutions for Microsoft 365, leveraging its Confidence Platform to support global users and drive cloud-first growth [Overview of Our Business](index=6&type=section&id=Overview%20of%20Our%20Business) AvePoint's Confidence Platform, built on AOS, offers SaaS solutions for data management across Microsoft 365 and other cloud environments, supporting 8 million users - AvePoint's core offering is the Confidence Platform, a SaaS solution built on AvePoint Online Services (AOS) that supports **8 million users** across 7 continents and manages over **125 PB of content**[19](index=19&type=chunk) - The company's solutions are organized into three main suites: the Control Suite for governance, the Fidelity Suite for data migration and integrity, and the Resilience Suite for data protection and compliance[21](index=21&type=chunk)[26](index=26&type=chunk) - AvePoint is a **top 5 Microsoft IP-Co-Sell partner** out of 3,000 participating partners and has expanded its platform to support other cloud services including Dynamics 365, Salesforce, and Google Workspace[26](index=26&type=chunk) [2021 Consummation of the Business Combination](index=10&type=section&id=2021%20Consummation%20of%20the%20Business%20Combination) AvePoint completed its business combination with Apex Technology Acquisition Corporation on July 1, 2021, and began trading on Nasdaq as AVPT - AvePoint completed its business combination with Apex Technology Acquisition Corporation on **July 1, 2021**, and began trading on Nasdaq as "AVPT" on **July 2, 2021**[28](index=28&type=chunk)[30](index=30&type=chunk) - The transaction was supported by a Private Placement in Public Equity (PIPE) of **$140 million** from the sale of **14,000,000 shares** at **$10.00 per share**[30](index=30&type=chunk) [2021 Highlights](index=11&type=section&id=2021%20Highlights) In 2021, AvePoint launched a new global partner program, secured a **SGD 37 million** contract, and achieved Forrester Leader and FedRAMP ATO recognition - Launched a new global partner program to support MSPs, VARs, cloud consultants, and DevOps partners[31](index=31&type=chunk) - Awarded a **37 million Singapore Dollar contract** through its subsidiary, AvePoint EduTech, to deploy a SaaS training management platform for six institutions in Singapore[32](index=32&type=chunk) - Recognized as a **Leader** in The Forrester New Wave™: SaaS Application Data Protection, Q4 2021 report, receiving the highest possible rating for its M365, Google Workspace, and Salesforce backup solutions[33](index=33&type=chunk) - Received **FedRAMP (Moderate) Authority to Operate (ATO)** for its U.S. government cloud platform, sponsored by the U.S. Department of Energy, enabling its use across all U.S. government agencies[34](index=34&type=chunk) [Our Strategies](index=12&type=section&id=Our%20Strategies) AvePoint's cloud-centric strategy focuses on aggressive product development, customer retention, channel expansion, premium services, and strategic acquisitions - The company's strategy is cloud-focused, supporting customers in their transition to and management of cloud deployments like M365[36](index=36&type=chunk) - Growth strategies include aggressive product development, increasing customer retention (**trailing twelve-month dollar-based net retention rate was 110% as of Dec 31, 2021**), expanding market share in SMB and MM segments through channel partners, and offering premium services to large enterprises[37](index=37&type=chunk) - AvePoint plans to pursue acquisitions of complementary products and technologies as part of its long-term business strategy, as demonstrated by its 2022 acquisition of I-Access Solutions Pte. Ltd[38](index=38&type=chunk) [Our Products](index=13&type=section&id=Our%20Products) AvePoint offers SaaS solutions via its Confidence Platform for M365 and multi-cloud environments, alongside on-premises products like DocAve for SharePoint management - SaaS solutions are delivered through the Control, Fidelity, and Resilience Suites, offering data protection, migration, governance, and compliance for platforms like M365, Salesforce, and Google Workspace[40](index=40&type=chunk) - Recent product innovations include MyHub for M365 to drive user adoption and Policies & Insights (PI) for M365 to secure collaboration and prevent oversharing of sensitive content[40](index=40&type=chunk)[42](index=42&type=chunk) - The company's long-standing on-premises product is the DocAve Software Platform, which provides tools to migrate, manage, and govern SharePoint deployments[44](index=44&type=chunk) [Our Customers and Customer Success](index=16&type=section&id=Our%20Customers%20and%20Customer%20Success) AvePoint serves over **24,000 deployments** and **9 million cloud users** globally, with a diversified customer base segmented by size and supported by a dedicated Customer Success Team - As of December 31, 2021, AvePoint served over **24,000 deployments** in **84 countries**, with over **nine million cloud users**[49](index=49&type=chunk) - The customer base is diversified, with **no single customer accounting for more than 10% of revenue** or accounts receivable in 2021[49](index=49&type=chunk) - Customers are classified into three segments: Small- and Medium-Sized Business (SMB), Mid-Market (MM), and Enterprise, based on user seats and annual revenue[50](index=50&type=chunk) [Human Capital Resources](index=20&type=section&id=Human%20Capital%20Resources) AvePoint employed **1,934 people** globally as of December 31, 2021, focusing on talent, diversity, and a hybrid work model post-COVID-19 - As of December 31, 2021, the company had **1,934 employees** globally, with over **900 in research and development**[64](index=64&type=chunk)[57](index=57&type=chunk) - Key human capital objectives include attracting and retaining talent, with approximately **35% of U.S. employees** being promoted or changing roles in 2021[65](index=65&type=chunk) - The company formalized its commitment to diversity and inclusion by creating the I.D.E.A. (Inclusion, Diversity, Equality and Allyship) Committee in 2019[68](index=68&type=chunk) - In response to the COVID-19 pandemic, the company shifted to remote work and plans to implement a hybrid model allowing for flexibility[69](index=69&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) AvePoint faces significant risks including Microsoft dependency, intense competition, operational challenges, cybersecurity threats, evolving privacy laws, and internal control weaknesses [Risks Related to Our Business](index=26&type=section&id=Risks%20Related%20to%20Our%20Business) AvePoint's business risks include high dependency on Microsoft, a history of operating losses, intense competition, long sales cycles, and reliance on partners - The company's success is highly dependent on its partnership with Microsoft. If Microsoft were to develop competing features or acquire a competitor, it could negatively impact customer acquisition and renewals[88](index=88&type=chunk) - AvePoint has a history of operating losses and may not be able to achieve or sustain profitability as it continues to invest in sales, marketing, and R&D[90](index=90&type=chunk) - The company faces competition from established and emerging companies, which may result in price reductions, fewer orders, and loss of market share[96](index=96&type=chunk)[98](index=98&type=chunk) - Sales cycles with mid-market and large enterprise customers can be long (**three to nine months**) and unpredictable, requiring considerable time and expense[96](index=96&type=chunk) [Risks Related to Our Operations and Financial Condition](index=34&type=section&id=Risks%20Related%20to%20Our%20Operations%20and%20Financial%20Condition) Operational risks include managing growth complexity, maintaining brand recognition, reliance on third-party hosting, R&D investment uncertainty, and product failure liabilities - Continued growth will increase operational complexity, placing significant demands on management and financial resources[112](index=112&type=chunk) - The company relies on third-party data center hosting facilities, primarily from Microsoft, making it vulnerable to service interruptions, latency, or cost increases from these providers[108](index=108&type=chunk) - Significant investments in research and development may not translate into new products or material enhancements, potentially harming business results[121](index=121&type=chunk)[122](index=122&type=chunk) - Product failures or performance issues could result in loss of customers, warranty claims, and significant costs to resolve[123](index=123&type=chunk) [Risks Related to Data Privacy and Cybersecurity](index=38&type=section&id=Risks%20Related%20to%20Data%20Privacy%20and%20Cybersecurity) AvePoint faces significant cybersecurity risks, including data breaches, reputational harm, and liabilities from non-compliance with evolving global privacy laws like GDPR and CCPA - Security breaches or compromised measures could lead customers to cease using products, harm the company's reputation, and result in significant liabilities[124](index=124&type=chunk) - The company stores confidential and personal information, and any unauthorized access could expose it to liability, loss of business, and reputational damage[127](index=127&type=chunk) - Evolving global internet and privacy laws, such as GDPR and CCPA, may limit the use of services, expose the company to liability, and increase compliance costs[131](index=131&type=chunk) [Risks Related to Our Common Stock](index=49&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Common stock risks include price volatility, substantial control by insiders, material weaknesses in internal controls, and reduced reporting as an emerging growth company - The market price of the company's Common Stock may be highly volatile[157](index=157&type=chunk) - Directors, executive officers, and their affiliates beneficially own approximately **55%** of the outstanding Common Stock, giving them substantial control over corporate matters[159](index=159&type=chunk) - Management has identified material weaknesses in internal control over financial reporting related to financial accounting accuracy, review of non-routine transactions, and segregation of duties[162](index=162&type=chunk) - The company qualifies as an "emerging growth company," allowing it to rely on exemptions from certain disclosure requirements, which may make its stock less attractive to investors[164](index=164&type=chunk) [Item 2. Properties](index=54&type=section&id=Item%202.%20Properties) As of December 31, 2021, AvePoint and its subsidiaries lease approximately 259,000 square feet of office space globally, with principal offices in Jersey City, NJ, and Richmond, VA - As of December 31, 2021, the company leased approximately **259,000 square feet** of office space across various global locations[172](index=172&type=chunk) - The principal corporate headquarters are in Jersey City, NJ, and principal operating offices are in Richmond, VA[173](index=173&type=chunk) [Item 3. Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2021, AvePoint is not a party to any material legal proceedings outside the normal course of business - The company is not currently a party to any material legal proceedings outside the normal course of business[176](index=176&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) AvePoint's Common Stock and Public Warrants began trading on Nasdaq on July 2, 2021, with **182.6 million shares** outstanding as of March 30, 2022, and no anticipated cash dividends - Common Stock and Public Warrants began trading on Nasdaq under symbols "AVPT" and "AVPTW" on **July 2, 2021**[179](index=179&type=chunk) - As of March 30, 2022, there were **182,602,086 shares** of Common Stock outstanding[180](index=180&type=chunk) - The company does not anticipate paying cash dividends in the foreseeable future[181](index=181&type=chunk) - In connection with the business combination, **14,000,000 PIPE shares** were sold in a private placement at **$10.00 per share** for an aggregate price of **$140 million**[184](index=184&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, AvePoint's total revenue grew **26.6%** to **$191.9 million**, driven by **64.3% SaaS revenue growth**, resulting in a **$33.2 million net loss** due to increased operating expenses [2021 Business Highlights and Key Metrics](index=58&type=section&id=2021%20Business%20Highlights%20and%20Key%20Metrics) For fiscal year 2021, AvePoint reported strong growth with Total ARR increasing **34%** to **$159.2 million**, a **110%** dollar-based net retention rate, and a **34%** increase in cloud users Key Business Metrics (2021 vs. 2020) | Metric | Dec 31, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Total ARR | $159.2 | $118.7 | | Core TTM dollar-based net retention rate | 110% | 107% | - The cloud user base expanded to **9.4 million**, up **34%** from **7.0 million** as of December 31, 2020[191](index=191&type=chunk) [Results of Operations](index=61&type=section&id=Results%20of%20Operations) For 2021, total revenue increased **26.6%** to **$191.9 million**, driven by **64.3% SaaS revenue growth**, but operating expenses rose **52.1%** to **$192.7 million**, resulting in a **$33.2 million net loss** Revenue by Source (FY 2021 vs. FY 2020) | Revenue Source | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | SaaS | $85,580 | $52,074 | 64.3% | | Term license and support | $50,970 | $38,949 | 30.9% | | Services | $31,919 | $34,140 | (6.5)% | | Maintenance | $21,022 | $23,462 | (10.4)% | | Perpetual license | $2,418 | $2,908 | (16.9)% | | **Total revenue** | **$191,909** | **$151,533** | **26.6%** | Key Profitability Metrics (FY 2021 vs. FY 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Gross Profit | $139,245 | $111,243 | | Loss from Operations | ($53,491) | ($15,437) | | Net Loss | ($33,245) | ($16,969) | - Total operating expenses increased by **52.1%** to **$192.7 million** in 2021, primarily driven by a **76.2% increase in stock-based compensation** (**$59.5 million** in 2021 vs. **$33.8 million** in 2020)[200](index=200&type=chunk)[201](index=201&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, AvePoint had **$268.2 million** in cash, with **$5.0 million** net cash from operations and **$198.6 million** from financing activities, primarily from the business combination - As of December 31, 2021, the company had **$268.2 million** in cash and cash equivalents and **$2.4 million** in short-term investments[214](index=214&type=chunk) Summary of Cash Flows (FY 2021 vs. FY 2020) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,030 | $19,120 | | Net cash (used in) provided by investing activities | ($3,377) | $1,368 | | Net cash provided by financing activities | $198,617 | $35,559 | - The company has a revolving line of credit of up to **$30.0 million** with HSBC, with an additional **$20.0 million** accordion feature. No amounts were borrowed under this facility as of December 31, 2021[221](index=221&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=71&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) AvePoint's primary market risks are interest rate and foreign currency exchange fluctuations, with a **$1.2 million** decrease in cash due to exchange rate changes in 2021 - The company's primary market risks are interest rate risk and foreign currency exchange risk[237](index=237&type=chunk)[238](index=238&type=chunk) - Interest rate risk is considered immaterial due to the short-term nature of cash and investment holdings[237](index=237&type=chunk) - Foreign currency fluctuations impact the translation of foreign subsidiary assets and liabilities into U.S. dollars. The effect of exchange rate changes on cash was a decrease of **$1.2 million** for the year ended December 31, 2021[238](index=238&type=chunk) - Credit risk is mitigated as **no single customer accounted for more than 10% of billings** or accounts receivable in 2021[239](index=239&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents AvePoint's audited consolidated financial statements for 2021, including balance sheets, statements of operations, and cash flows, with **$388.7 million** in total assets and a **$33.2 million net loss** Consolidated Balance Sheet Highlights (As of Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $268,217 | | Total current assets | $334,156 | | **Total assets** | **$388,738** | | **Liabilities & Equity** | | | Total current liabilities | $111,180 | | **Total liabilities** | **$133,173** | | **Total stockholders' equity** | **$250,355** | Consolidated Statement of Operations Highlights (Year Ended Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Total revenue | $191,909 | | Gross profit | $139,245 | | Loss from operations | ($53,491) | | **Net loss** | **($33,245)** | | **Loss per share (Basic & Diluted)** | **($0.48)** | [Item 9A. Controls and Procedures](index=104&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of December 31, 2021, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2021[366](index=366&type=chunk) - The ineffectiveness is due to material weaknesses in internal control over financial reporting related to: (1) completeness and accuracy of financial reporting, (2) accounting for non-routine/complex transactions, and (3) segregation of duties[367](index=367&type=chunk) - A remediation plan is underway, which includes hiring personnel with technical accounting experience and engaging external consultants to address the deficiencies[368](index=368&type=chunk) PART III [Items 10-14](index=106&type=section&id=Items%2010-14) Information for Items 10 through 14, covering governance, compensation, ownership, related transactions, and accounting fees, is incorporated by reference from the company's 2022 Proxy Statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance) is incorporated by reference from the 2022 Proxy Statement[378](index=378&type=chunk) - Information for Item 11 (Executive Compensation) is incorporated by reference from the 2022 Proxy Statement[379](index=379&type=chunk) - Information for Item 12 (Security Ownership) is incorporated by reference from the 2022 Proxy Statement[379](index=379&type=chunk) - Information for Item 13 (Certain Relationships and Related Transactions) is incorporated by reference from the 2022 Proxy Statement[380](index=380&type=chunk) - Information for Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the 2022 Proxy Statement[381](index=381&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=107&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements from Item 8 and provides an index of all exhibits filed with the Form 10-K, including key agreements and corporate documents - This section contains the index of exhibits filed with the Form 10-K, including agreements related to the business combination, corporate charters, and material contracts[382](index=382&type=chunk)[383](index=383&type=chunk)

AvePoint, Inc. (NASDAQ:AVPT) Q4 2021 Earnings Conference Call March 17, 2022 4:30 PM ET Company Participants Marc Griffin - Investor Relations TJ Jiang - Chief Executive Officer Jim Caci - Chief Financial Officer Conference Call Participants Kirk Materne - Evercore ISI Jason Ader - William Blair Brian Essex - Goldman Sachs Brett Knoblauch - Cantor Fitzgerald Nehal Chokshi - Northland Capital Markets Andrew Sherman - Cowen Operator Good afternoon and welcome to the AvePoint's Fourth Quarter and Full Year 202 ...

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements and the inherent risks and uncertainties involved - Forward-looking statements are identified by words like "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions, and address future operating performance, events, or developments[6](index=6&type=chunk) - These statements are subject to **significant risks and uncertainties**, based on management's beliefs and assumptions, and actual results may differ materially[6](index=6&type=chunk) - The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[6](index=6&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part contains the company's unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents AvePoint's unaudited condensed consolidated financial statements and accompanying notes for the specified periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's assets, liabilities, and equity at the end of the reporting periods Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $260,704 | $69,112 | | Total current assets | $329,630 | $120,697 | | Total assets | $380,164 | $169,054 | | Total liabilities | $128,040 | $148,867 | | Total mezzanine equity | $4,631 | $213,014 | | Total stockholders' deficiency | $247,493 | $(192,827) | - The significant increase in cash and cash equivalents and total assets, and the positive shift in stockholders' deficiency, are **primarily attributed to the Business Combination**[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section reports the company's revenues, expenses, and net loss over the specified reporting periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $53,927 | $39,794 | $138,071 | $105,411 | | Gross profit | $38,705 | $29,538 | $100,351 | $75,715 | | Loss from operations | $(28,685) | $(6,023) | $(45,819) | $(4,644) | | Net loss | $(9,757) | $(12,185) | $(25,756) | $(4,870) | | Net loss attributable to AvePoint, Inc | $(10,274) | $(12,185) | $(27,169) | $(4,870) | | Basic Loss per share | $(0.05) | $(0.20) | $(0.47) | $(0.30) | - SaaS revenue increased significantly by **59.0% for the three months** and **70.0% for the nine months** ended September 30, 2021, while term license and support revenue also saw substantial growth of 113.9% and 60.2% respectively[11](index=11&type=chunk) - Operating expenses, particularly research and development, sales and marketing, and general and administrative, **increased substantially**, largely due to stock-based compensation, contributing to the increased net loss[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details the company's net loss and other comprehensive income components Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(9,757) | $(12,185) | $(25,756) | $(4,870) | | Foreign currency translation adjustments | $15 | $(33) | $20 | $(274) | | Total comprehensive loss | $(9,742) | $(12,218) | $(25,736) | $(5,144) | | Total comprehensive loss attributable to AvePoint, Inc | $(10,230) | $(12,218) | $(27,068) | $(5,144) | - Foreign currency translation adjustments had a **minor positive impact** on comprehensive income for the three and nine months ended September 30, 2021, compared to negative impacts in the prior year[14](index=14&type=chunk) [Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Deficiency](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Mezzanine%20Equity%20and%20Stockholders'%20Deficiency) This section outlines the changes in the company's equity structure, primarily driven by the Business Combination - The Business Combination on July 1, 2021, led to the **conversion of convertible preferred stock and redeemable common shares into common stock**, significantly impacting the mezzanine equity and stockholders' deficiency[17](index=17&type=chunk)[21](index=21&type=chunk) - Share-based awards previously classified as liabilities and mezzanine equity were **reclassified to permanent equity** following the Business Combination[17](index=17&type=chunk)[21](index=21&type=chunk) Key Changes in Equity Components (in thousands) | Metric | Balance, Dec 31, 2020 | Balance, Sep 30, 2021 | | :--- | :--- | :--- | | Convertible Preferred Stock Amount | $183,390 | $0 | | Redeemable Common Shares Amount | $25,074 | $0 | | Share Based Awards Amount (Mezzanine) | $1,489 | $0 | | Total mezzanine equity | $213,014 | $4,631 | | Common Stock Amount | $12 | $18 | | Additional Paid-In Capital | $105,159 | $614,569 | | Accumulated Deficit | $(299,789) | $(367,247) | | Total Stockholders' Deficiency | $(192,827) | $247,493 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(3,965) | $11,131 | | Net cash provided by (used in) investing activities | $(2,083) | $1,152 | | Net cash provided by financing activities | $197,608 | $22,753 | | Net increase in cash and cash equivalents | $191,592 | $34,707 | | Cash and cash equivalents at end of period | $260,704 | $46,869 | - The Business Combination was the primary driver of the **$197.6 million net cash provided by financing activities** in 2021, including $491.6 million from recapitalization of Apex shares and $140 million from PIPE, partially offset by redemptions and transaction fees[25](index=25&type=chunk)[231](index=231&type=chunk) - Net cash used in operating activities in 2021 was primarily due to a **net loss of $25.8 million**, adjusted for non-cash items like stock-based compensation ($50.5 million) and changes in operating assets and liabilities[25](index=25&type=chunk)[228](index=228&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies and financial items presented in the statements [Note 1. Nature of Business and Organization](index=12&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Organization) This note describes the company's formation through the Business Combination and its core business operations - AvePoint, Inc was formed through a **Business Combination on July 1, 2021**, with Legacy AvePoint being the accounting acquirer[28](index=28&type=chunk)[32](index=32&type=chunk) - The company provides enterprise collaboration and productivity software solutions, including DocAve Software Platform, AvePoint Online Services (AOS), and AvePoint Compliance Guardian[29](index=29&type=chunk) - AvePoint operates globally with headquarters in Jersey City, New Jersey, and offices across North America, Europe, Asia, Australia, and the Middle East[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the key accounting principles and estimates used in preparing the financial statements - The financial statements are unaudited and prepared in accordance with SEC rules for interim financial information, with certain GAAP disclosures condensed or omitted[30](index=30&type=chunk)[31](index=31&type=chunk) - The Business Combination was accounted for as a **reverse recapitalization**, with Legacy AvePoint identified as the accounting acquirer, resulting in no goodwill or intangible assets recorded[32](index=32&type=chunk) - Management uses estimates and assumptions for revenue recognition, allowance for doubtful accounts, deferred contract costs, income taxes, stock-based compensation, and R&D costs, acknowledging potential differences from actual results due to risks and uncertainties, including COVID-19[33](index=33&type=chunk) - Revenue is derived from SaaS, term license and support, services, and maintenance, with deferred sales commissions amortized over the estimated customer relationship period[38](index=38&type=chunk)[40](index=40&type=chunk) [Note 3. Business Combination](index=17&type=section&id=Note%203.%20Business%20Combination) This note provides a detailed account of the Business Combination transaction that occurred on July 1, 2021 - The Business Combination was consummated on July 1, 2021, with Apex renamed AvePoint, Inc, and Legacy AvePoint merging into the Company[58](index=58&type=chunk) - Key transactions included the conversion of Legacy AvePoint common stock into **103.8 million shares** of AvePoint Common Stock, redemption of preferred stock for **$130.9 million**, and the issuance of **14.0 million PIPE Shares for $140.0 million**[59](index=59&type=chunk) - The Company received **net cash consideration of $204.5 million** from the Business Combination, with total transaction costs amounting to $56.2 million, treated as a reduction of additional paid-in capital[60](index=60&type=chunk) [Note 4. Concentration of Credit Risk](index=17&type=section&id=Note%204.%20Concentration%20of%20Credit%20Risk) This note discusses the company's exposure to credit risk from its cash balances and customer accounts receivable - Cash balances are maintained with high credit-quality financial institutions, occasionally exceeding federally insured limits[62](index=62&type=chunk) - **No single customer accounted for more than 10% of revenue** for the three and nine months ended September 30, 2021 and 2020[62](index=62&type=chunk) - As of September 30, 2021, accounts receivable from **one distributor totaled $7.1 million**, exceeding 10% of the company's total accounts receivable[62](index=62&type=chunk) [Note 5. Accounts Receivable, Net](index=18&type=section&id=Note%205.%20Accounts%20Receivable,%20Net) This note presents the components of the company's net accounts receivable Accounts Receivable, Net (in thousands) | Component | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Trade receivables | $33,461 | $33,521 | | Current portion of unbilled receivables | $21,643 | $16,496 | | Allowance for doubtful accounts | $(878) | $(1,767) | | Total Accounts receivable, net | $54,226 | $48,250 | - The allowance for doubtful accounts **decreased from $1,767 thousand to $878 thousand**, indicating improved collectibility or lower perceived risk[65](index=65&type=chunk) [Note 6. Property and Equipment, Net](index=18&type=section&id=Note%206.%20Property%20and%20Equipment,%20Net) This note details the composition of the company's property and equipment assets Property and Equipment, Net (in thousands) | Component | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Computer equipment | $5,020 | $4,030 | | Leasehold improvements | $2,700 | $2,633 | | Total gross property and equipment | $10,133 | $8,945 | | Less accumulated depreciation and amortization | $(6,881) | $(6,282) | | Total property and equipment, net | $3,252 | $2,663 | - Depreciation and amortization expense for the nine months ended September 30, 2021, was **$0.9 million**, recorded in operating expenses as the portion attributable to cost of revenue was deemed immaterial[67](index=67&type=chunk) [Note 7. Accrued Expenses and Other Liabilities](index=19&type=section&id=Note%207.%20Accrued%20Expenses%20and%20Other%20Liabilities) This note provides a breakdown of the company's accrued expenses and other current liabilities Accrued Expenses and Other Liabilities (in thousands) | Component | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Accrued compensation | $17,391 | $16,738 | | Indirect taxes | $2,690 | $2,571 | | Cloud service fees | $1,172 | $994 | | Professional service fees | $1,061 | $500 | | Accrued partner expenses | $744 | $1,253 | | Income taxes payable | $48 | $1,713 | | Current portion of capital lease and deferred rent | $136 | $203 | | Other | $2,540 | $2,273 | | Total Accrued expenses and other liabilities | $25,782 | $26,245 | - Income taxes payable **significantly decreased from $1,713 thousand to $48 thousand**, while professional service fees more than doubled[71](index=71&type=chunk) [Note 8. Line of Credit](index=19&type=section&id=Note%208.%20Line%20of%20Credit) This note describes the terms and status of the company's revolving line of credit facility - The company has a **$30.0 million revolving line of credit** with HSBC Venture Bank USA Inc, bearing interest at LIBOR plus 3.5% and an unused fee of 0.5%[72](index=72&type=chunk) - The line of credit matures on April 7, 2023, and requires the company to maintain a specified adjusted quick ratio and minimum annual recurring revenue[73](index=73&type=chunk) - As of September 30, 2021, AvePoint was in compliance with all covenants and had **no outstanding borrowings** under the line of credit[73](index=73&type=chunk) [Note 9. Income Taxes](index=19&type=section&id=Note%209.%20Income%20Taxes) This note explains the components of the company's income tax provision and effective tax rates Effective Tax Rates | Period | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Three Months Ended | 36.3% | (105.1)% | | Nine Months Ended | 20.5% | 1.5% | - Changes in effective tax rates were driven by the mix of pre-tax income/loss across jurisdictions, valuation allowance changes, windfall tax benefits from equity exercises, and deductible transaction expenses[74](index=74&type=chunk)[75](index=75&type=chunk) - The company continuously evaluates the realizability of deferred tax assets and recognizes liabilities for uncertain tax positions[75](index=75&type=chunk) [Note 10. Commitments and Contingencies](index=20&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note discloses the company's future financial commitments and potential liabilities Future Minimum Operating Lease Payments (in thousands) | Year Ending December 31 | Amount | | :--- | :--- | | 2021 (three months) | $1,670 | | 2022 | $4,875 | | 2023 | $3,113 | | 2024 | $1,963 | | 2025 | $1,573 | | 2026 | $1,252 | | Thereafter | $2,944 | | Total | $17,390 | Future Minimum Purchase Commitments (in thousands) | Years ending December 31 | Amount | | :--- | :--- | | 2021 (three months) | $0 | | 2022 | $0 | | 2023 | $10,193 | | Total | $10,193 | - The purchase commitments include a **$22.0 million agreement for IT solutions** over a three-year term (ending May 2023), with payments based on consumption and any remaining obligations due at term end[81](index=81&type=chunk) [Note 11. Earn-Out and Warrant Liabilities](index=21&type=section&id=Note%2011.%20Earn-Out%20and%20Warrant%20Liabilities) This note details the accounting for earn-out shares and warrant liabilities related to the Business Combination - Company Earn-Out Shares are contingent on AvePoint's stock price reaching **$12.50, $15.00, and $17.50 milestones** within seven years post-Business Combination, with 1 million shares for each milestone[86](index=86&type=chunk) - The fair value of Company Earn-Out Shares **decreased from $29.6 million to $17.1 million**, resulting in a **$12.5 million gain** recognized in the statements of operations[88](index=88&type=chunk) - Private placement warrants, with a 5-year term and $11.50 strike price, were valued at $1.4 million on July 1, 2021, and $0.8 million on September 30, 2021, leading to a **$0.6 million gain**[89](index=89&type=chunk)[90](index=90&type=chunk) [Note 12. Mezzanine Equity and Stockholders' Deficiency](index=22&type=section&id=Note%2012.%20Mezzanine%20Equity%20and%20Stockholders'%20Deficiency) This note describes the changes and current state of the company's equity accounts post-Business Combination - Post-Business Combination, the company has one class of capital stock: Common Stock, with **181.0 million shares issued and outstanding** as of September 30, 2021[93](index=93&type=chunk)[94](index=94&type=chunk) - Sponsor Earn-Out Shares (2.9 million shares) are subject to vesting based on stock price milestones ($15.00) or a subsequent transaction, are currently outstanding, and classified as equity[96](index=96&type=chunk)[97](index=97&type=chunk) - As of September 30, 2021, **17.5 million public warrants are outstanding**, each exercisable for one share of Common Stock at $11.50[98](index=98&type=chunk) - All outstanding preferred stock was either **redeemed for cash ($130.9 million)** or converted into Common Stock as part of the Business Combination[99](index=99&type=chunk) [Note 13. Stock-Based Compensation](index=23&type=section&id=Note%2013.%20Stock-Based%20Compensation) This note provides details on the company's stock-based compensation plans and related expenses Total Stock-Based Compensation (in thousands) | Period | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total stock-based compensation | $32,676 | $13,381 | $50,475 | $16,235 | - A **one-time charge of $24.3 million** was recognized for previously unrecognized compensation costs related to Legacy PRC Options upon the Business Combination[110](index=110&type=chunk) - Officer Awards and Modified Common Stock/Options, previously classified as mezzanine equity or liabilities, were **reclassified to permanent equity** following the Business Combination, with associated compensation expense recognition[108](index=108&type=chunk)[123](index=123&type=chunk) - As of September 30, 2021, there was **$46.2 million in unrecognized compensation costs** for non-vested stock options and **$50.1 million for non-vested RSUs**[114](index=114&type=chunk)[115](index=115&type=chunk) [Note 14. Financial Instruments](index=27&type=section&id=Note%2014.%20Financial%20Instruments) This note discusses the fair value measurement of the company's financial instruments - Short-term investments (certificates of deposit) totaled **$1.6 million** as of September 30, 2021, and are classified as Level 2 assets[125](index=125&type=chunk) - Company Earn-Out Shares are measured at fair value using **Level 3 inputs**, while private placement warrants are measured using **Level 1 inputs**[126](index=126&type=chunk) [Note 15. Segment information](index=28&type=section&id=Note%2015.%20Segment%20information) This note provides information on the company's operating segments and geographic revenue distribution - The company operates in **one segment**, with the CEO making operating performance and resource allocation decisions globally[129](index=129&type=chunk) Revenue by Geographic Area (in thousands) | Region | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | North America | $24,181 | $18,051 | $62,370 | $46,522 | | EMEA | $14,799 | $10,812 | $39,743 | $30,381 | | APAC | $14,947 | $10,931 | $35,958 | $28,508 | | Total Revenue | $53,927 | $39,794 | $138,071 | $105,411 | - Property and equipment, net, is primarily located in **China ($1.86 million)** and the **United States ($0.85 million)** as of September 30, 2021[132](index=132&type=chunk) [Note 16. Loss Per Share](index=29&type=section&id=Note%2016.%20Loss%20Per%20Share) This note details the calculation of basic and diluted loss per share Loss Per Share (excluding sponsor earn-out shareholders) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss available to common shareholders | $(9,666) | $(17,800) | $(60,097) | $(26,283) | | Basic Loss per share | $(0.05) | $(0.20) | $(0.47) | $(0.30) | | Diluted Loss per share | $(0.05) | $(0.20) | $(0.47) | $(0.30) | | Weighted average common shares outstanding | 176,621 | 90,805 | 126,738 | 86,784 | - Potentially dilutive securities (e.g, stock options, RSUs, warrants, convertible preferred stock) were **anti-dilutive** and thus excluded from diluted EPS calculations due to the company's net loss[137](index=137&type=chunk)[138](index=138&type=chunk) [Note 17. Related Party Transactions](index=29&type=section&id=Note%2017.%20Related%20Party%20Transactions) This note discloses any transactions between the company and its related parties - The company indemnifies its directors and executive officers for expenses, judgments, fines, and settlement amounts incurred in legal actions related to their service, as permitted by Delaware law[139](index=139&type=chunk) [Note 18. Subsequent Events](index=29&type=section&id=Note%2018.%20Subsequent%20Events) This note reports any material events that occurred after the balance sheet date - **No material subsequent events** occurred between September 30, 2021, and November 15, 2021 (the date financial statements were available for issuance)[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and key business factors [Overview](index=31&type=section&id=Overview) This section provides a high-level summary of AvePoint's business, strategy, and market position - AvePoint is a Microsoft Gold Certified Partner and a **top 5 ISV partner** in Microsoft's IP-Co-Sell program, offering SaaS solutions for data protection, governance, and compliance[143](index=143&type=chunk)[144](index=144&type=chunk) - The company's strategy focuses on supporting cloud and hybrid cloud customers, with significant investments in cloud storage and computing, and expanded distribution through MSPs and a Global Partner Program launched in July 2021[145](index=145&type=chunk) - AvePoint has transitioned from a perpetual license model to a **subscription pricing model** since 2016, leading to a rapid increase in SaaS and term license and support sales[160](index=160&type=chunk) [The Business Combination](index=32&type=section&id=The%20Business%20Combination) This section discusses the impact of the Business Combination on the company's financial and operational structure - The Business Combination was completed on July 1, 2021, with Apex renamed AvePoint, Inc, and accounted for as a **reverse recapitalization**, with AvePoint as the accounting predecessor[148](index=148&type=chunk)[149](index=149&type=chunk) - The transaction resulted in a **net increase in cash of approximately $204.5 million**, including $140 million in gross proceeds from the PIPE, with total transaction costs of $56.2 million[149](index=149&type=chunk) - As a public company, AvePoint expects to incur additional annual expenses for directors' and officers' liability insurance, director fees, and increased accounting, legal, and administrative resources[149](index=149&type=chunk) [Impact of COVID-19 on AvePoint's Business](index=32&type=section&id=Impact%20of%20COVID-19%20on%20AvePoint's%20Business) This section analyzes the effects of the COVID-19 pandemic on the company's business and financial results - The COVID-19 pandemic has **positively affected AvePoint's business**, leading to strong demand for its products due to accelerated digital transformation and increased need for remote/hybrid work solutions[150](index=150&type=chunk)[151](index=151&type=chunk) - Revenue increased by **35.5% for the three months** and **31.0% for the nine months** ended September 30, 2021, compared to the same periods in 2020[150](index=150&type=chunk) - The company remains focused on improving and investing in products and services to support long-term growth, but the extent of the continuing impact of COVID-19 is uncertain and depends on various external factors[151](index=151&type=chunk) [Key Business Metrics](index=32&type=section&id=Key%20Business%20Metrics) This section presents the key performance indicators that management uses to evaluate the business Key Business Metrics | Metric | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Total ARR ($ in mil) | $147.5 | $111.6 | | Core TTM dollar-based net retention rate | 110% | 106% | - ARR is calculated as the annualized sum of contractually obligated Annual Contract Value (ACV) from SaaS, term license, and maintenance, plus annualized monthly recurring revenue (MRR) from the Channel business[155](index=155&type=chunk) - A Core TTM dollar-based net retention rate **greater than 100%** signifies positive net revenue retention, driven by customer retention and cross-sell/up-sell capabilities[156](index=156&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the various components of the company's revenue and expenses - Revenue sources include SaaS, term license and support (primarily billed annually, per user/data volume), services (recognized by percentage of completion or ratably), and maintenance/OEM (recognized ratably)[158](index=158&type=chunk)[159](index=159&type=chunk) - The company's strategic shift from perpetual licenses to a subscription model (SaaS and term license) is expected to **increase SaaS and term license revenue** as a percentage of total revenue[160](index=160&type=chunk) - Cost of revenue includes direct costs for SaaS, term license, services, and maintenance, with gross margin expected to increase long-term as the product mix shifts towards SaaS[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Operating expenses (Sales & Marketing, G&A, R&D) are projected to **increase in absolute dollars** due to hiring, global expansion, brand building, and public company operating costs[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial results for current and prior periods [Comparison of Three Months Ended September 30, 2021 and September 30, 2020](index=36&type=section&id=Comparison%20of%20Three%20Months%20Ended%20September%2030,%202021%20and%20September%2030,%202020) This section compares the company's operational results for the third quarter of 2021 and 2020 Revenue Breakdown (3 Months Ended Sep 30, in thousands) | Revenue Type | 2021 | 2020 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | SaaS | $22,410 | $14,092 | $8,318 | 59.0% | | Term license and support | $17,477 | $8,171 | $9,306 | 113.9% | | Services | $8,143 | $10,870 | $(2,727) | (25.1)% | | Maintenance and OEM | $5,293 | $6,056 | $(763) | (12.6)% | | Perpetual license | $604 | $605 | $(1) | (0.2)% | | Total revenue | $53,927 | $39,794 | $14,133 | 35.5% | Operating Expenses (3 Months Ended Sep 30, in thousands) | Expense Category | 2021 | 2020 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $25,186 | $21,830 | $3,356 | 15.4% | | General and administrative | $22,230 | $10,469 | $11,761 | 112.3% | | Research and development | $19,648 | $3,003 | $16,645 | 554.3% | | Total operating expenses | $67,390 | $35,561 | $31,829 | 89.5% | - **Stock-based compensation significantly impacted** the increase in cost of revenue ($2.2 million) and operating expenses, particularly R&D ($15.0 million) and G&A ($7.8 million), partly due to a one-time expense for international employees and Q3 2021 awards[181](index=181&type=chunk)[188](index=188&type=chunk)[191](index=191&type=chunk) [Comparison of Nine Months Ended September 30, 2021 and September 30, 2020](index=39&type=section&id=Comparison%20of%20Nine%20Months%20Ended%20September%2030,%202021%20and%20September%2030,%202020) This section compares the company's operational results for the first nine months of 2021 and 2020 Revenue Breakdown (9 Months Ended Sep 30, in thousands) | Revenue Type | 2021 | 2020 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | SaaS | $61,255 | $36,034 | $25,221 | 70.0% | | Term license and support | $37,292 | $23,272 | $14,020 | 60.2% | | Services | $21,361 | $26,173 | $(4,812) | (18.4)% | | Maintenance and OEM | $16,160 | $17,837 | $(1,677) | (9.4)% | | Perpetual license | $2,003 | $2,095 | $(92) | (4.4)% | | Total revenue | $138,071 | $105,411 | $32,660 | 31.0% | Operating Expenses (9 Months Ended Sep 30, in thousands) | Expense Category | 2021 | 2020 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $73,488 | $49,881 | $23,607 | 47.3% | | General and administrative | $44,186 | $20,918 | $23,268 | 111.2% | | Research and development | $27,633 | $8,760 | $18,873 | 215.4% | | Total operating expenses | $146,170 | $80,359 | $65,811 | 81.9% | - **Stock-based compensation was a major contributor** to the increase in cost of revenue ($2.5 million) and operating expenses, particularly R&D ($15.1 million) and G&A ($12.9 million), due to one-time expenses for international employees and mark-to-market adjustments[203](index=203&type=chunk)[210](index=210&type=chunk)[213](index=213&type=chunk) [Seasonality](index=42&type=section&id=Seasonality) This section discusses the seasonal patterns that affect the company's quarterly financial results - Historically, the **third and fourth quarters are the highest revenue quarters**, driven by increased sales from customers' fiscal year-ends[217](index=217&type=chunk) - Quarterly revenue can fluctuate due to new product/service introductions and the impact of the COVID-19 pandemic on consumer behaviors and customer activities[217](index=217&type=chunk) - Operating expenses generally increase sequentially due to personnel increases related to business expansion[217](index=217&type=chunk) [Certain Non-GAAP Financial Measures](index=42&type=section&id=Certain%20Non-GAAP%20Financial%20Measures) This section presents and reconciles non-GAAP financial measures used by management to evaluate performance - Non-GAAP operating income is defined as GAAP operating loss plus stock-based compensation, and non-GAAP operating margin is non-GAAP operating income divided by revenue[220](index=220&type=chunk) Non-GAAP Operating Income and Margin (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Loss from operations (GAAP) | $(28,685) | $(6,023) | $(45,819) | $(4,644) | | Add: Stock-based compensation | $32,676 | $13,381 | $50,475 | $16,235 | | Non-GAAP operating income | $3,991 | $7,358 | $4,656 | $11,591 | | Non-GAAP operating margin | 7.4% | 18.5% | 3.4% | 11.0% | - These non-GAAP measures are used by management and investors for consistency and comparability, **eliminating the effects of stock-based compensation**[220](index=220&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations - As of September 30, 2021, AvePoint had an accumulated deficit of $367.2 million, but **cash and cash equivalents increased significantly to $260.7 million**, primarily due to the Business Combination[222](index=222&type=chunk) - The company's short-term liquidity needs include working capital for sales & marketing, R&D, and innovation, with future capital requirements dependent on growth rate, revenue levels, and strategic initiatives[223](index=223&type=chunk) - AvePoint has a **$30.0 million revolving line of credit** with no outstanding borrowings as of September 30, 2021, and believes its current resources are sufficient for the next twelve months[224](index=224&type=chunk)[225](index=225&type=chunk) [Cash Flows](index=43&type=section&id=Cash%20Flows) This section provides a detailed analysis of the company's cash flow activities [Operating Activities](index=43&type=section&id=Operating%20Activities) This section details the cash generated from or used in the company's principal revenue-producing activities Net Cash from Operating Activities (in thousands) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(3,965) | $11,131 | - The **$4.0 million net cash used in operating activities** in 2021 reflects a net loss of $25.8 million, adjusted by $35.6 million in non-cash items (e.g, $50.5 million stock-based compensation, $(13.7) million gain on earn-out/warrant liabilities) and $13.8 million in net cash outflows from changes in operating assets and liabilities[228](index=228&type=chunk) - Changes in operating assets and liabilities included increases in accounts receivable and prepaid expenses, partially offset by increases in accounts payable, accrued expenses, and deferred revenue[228](index=228&type=chunk) [Investing Activities](index=43&type=section&id=Investing%20Activities) This section details the cash used for or generated from the acquisition and disposal of long-term assets Net Cash from Investing Activities (in thousands) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) investing activities | $(2,083) | $1,152 | - Cash used in investing activities in 2021 was driven by **$1.5 million in property and equipment purchases** and $0.6 million in short-term investment purchases[230](index=230&type=chunk) [Financing Activities](index=43&type=section&id=Financing%20Activities) This section details cash flows resulting from changes in the size and composition of the company's equity and borrowings Net Cash from Financing Activities (in thousands) | Period | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) financing activities | $197,608 | $22,753 | - The Business Combination generated a **$441.6 million cash inflow** (net of issuance costs), which was the primary driver of financing activities in 2021[231](index=231&type=chunk) - Significant cash outflows included **$130.9 million for preferred stock redemption** and **$106.2 million for Legacy AvePoint common stock redemption**[231](index=231&type=chunk) [Critical Accounting Policies and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the accounting policies that are most critical to the portrayal of the company's financial condition - Revenue recognition requires judgment in determining distinct performance obligations and allocating transaction prices based on standalone selling prices (SSPs), using a residual approach for on-premises perpetual and term licenses[236](index=236&type=chunk)[237](index=237&type=chunk) - Income tax accounting involves significant judgment for deferred tax assets/liabilities, uncertain tax positions, and valuation allowances, considering historical and projected financial performance[240](index=240&type=chunk)[241](index=241&type=chunk) - Stock-based compensation is measured at fair value (using Black-Scholes for options) and recognized over the service period, requiring subjective assumptions for expected term, volatility, risk-free rate, and dividend yield[244](index=244&type=chunk)[245](index=245&type=chunk) - Deferred sales commissions are amortized on a straight-line basis over the estimated period of benefit for various contract types[243](index=243&type=chunk) [Emerging Growth Company Accounting Election](index=46&type=section&id=Emerging%20Growth%20Company%20Accounting%20Election) This section explains the company's decision to utilize the extended transition period for new accounting standards - AvePoint is an "emerging growth company" and has elected to use the **extended transition period** for complying with new or revised financial accounting standards, adopting them at the same time as private companies[248](index=248&type=chunk) - This election is irrevocable and may make it difficult to compare AvePoint's financial results with other public companies that comply with public company effective dates for accounting standard updates[248](index=248&type=chunk) - The company will remain an emerging growth company until the earliest of December 31, 2024, reaching $1.07 billion in annual gross revenue, becoming a "large accelerated filer," or issuing over $1.0 billion in non-convertible debt[249](index=249&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including interest rate and foreign currency fluctuations - **Interest rate risk is not material** due to the short-term nature of cash and cash equivalents ($262.3 million as of September 30, 2021) and no outstanding obligations on its line of credit[250](index=250&type=chunk) - Foreign currency exchange rate fluctuations impact reported assets and liabilities of foreign subsidiaries, resulting in a **$0.2 million increase in cash and cash equivalents** for the nine months ended September 30, 2021[251](index=251&type=chunk)[252](index=252&type=chunk) - Concentration of credit risk exists as **one distributor's accounts receivable exceeded 10%** of total accounts receivable as of September 30, 2021, though no single customer accounted for more than 10% of revenue[253](index=253&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates the effectiveness of the company's disclosure controls and internal financial reporting controls - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2021, due to material weaknesses in internal control over financial reporting[255](index=255&type=chunk) - Identified material weaknesses include issues with the completeness and accuracy of financial accounting/reporting, identification/accounting for nonroutine transactions (e.g, derivative instruments classification), and segregation of duties[256](index=256&type=chunk) - The company is implementing a remediation plan, including hiring technical accounting personnel, engaging external consultants, and establishing formalized controls for segregation of duties and improved reporting procedures[258](index=258&type=chunk) - Despite material weaknesses, management believes the unaudited Consolidated Financial Statements fairly present the financial position, results of operations, and cash flows[255](index=255&type=chunk) [PART II. —OTHER INFORMATION](index=48&type=section&id=PART%20II.%20%E2%80%94OTHER%20INFORMATION) This part contains other required information, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses any material legal proceedings involving the company - The company is **not currently involved in any material legal proceedings** or litigation beyond those arising in the normal course of business[261](index=261&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section outlines the most significant risks that could adversely affect the company's business and financial results [Explanatory Note](index=48&type=section&id=Explanatory%20Note) This note clarifies the context and updates to the presented risk factors - Risk factors have been **materially updated** since the Apex 10-K due to the consummation of the Business Combination on July 1, 2021[263](index=263&type=chunk) - The Business Combination resulted in material changes to the company's business, operations, legal structure, and financial condition[263](index=263&type=chunk) [SUMMARY OF RISK FACTORS](index=48&type=section&id=SUMMARY%20OF%20RISK%20FACTORS) This section provides a high-level summary of the principal risks facing the company - Risks include **high dependence on technology partners (especially Microsoft)**, potential for growth rate not to be indicative of future growth, and intense competition from established and emerging companies[265](index=265&type=chunk) - Operational risks involve increasing complexity with growth, maintaining brand recognition, and ensuring R&D investments translate into product enhancements[266](index=266&type=chunk) - Data privacy and cybersecurity risks include compromised security measures, unauthorized access to confidential information, and the need to keep up with evolving cyber threats[267](index=267&type=chunk) - Legal, regulatory, and tax risks cover proprietary rights protection costs, potential litigation (including IP disputes), limitations on NOLs, and adverse changes in tax laws[268](index=268&type=chunk)[269](index=269&type=chunk) - Human capital risks include dependence on key personnel, challenges in attracting/retaining skilled employees, and maintaining corporate culture during growth. Public sector risks involve challenges in highly regulated industries and compliance with government contracting policies[270](index=270&type=chunk)[271](index=271&type=chunk) - Investment-related risks include stock price volatility, substantial control by a small number of stockholders, failure to meet financial guidance, and material weaknesses in internal controls[272](index=272&type=chunk) [RISK FACTOR DISCUSSION](index=50&type=section&id=RISK%20FACTOR%20DISCUSSION) This section provides a detailed discussion of the various risk factors affecting the company [Risks Related to Our Business](index=50&type=section&id=Risks%20Related%20to%20Our%20Business) This section details risks associated with the company's business model, market, and competitive landscape - Success is **highly dependent on technology partners (e.g, Microsoft)**; risks include partners acquiring competitors, developing competing features, or changing terms, which could lead to loss of customer acquisition momentum and renewals[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - **Recent strong growth rates may not be indicative of future growth**, which depends on factors like effective recruitment, customer acquisition/retention, partner relationships, and product development[289](index=289&type=chunk)[290](index=290&type=chunk) - The company faces competition from established and emerging companies, potentially lacking sufficient resources to maintain its competitive position, which could harm its ability to add/retain customers[309](index=309&type=chunk)[310](index=310&type=chunk)[312](index=312&type=chunk) - Failure to adapt to rapidly changing technology, evolving industry standards, and changing customer needs could render products less competitive, impacting revenue and operating results[317](index=317&type=chunk)[318](index=318&type=chunk)[321](index=321&type=chunk) - Success with SMB customers relies on resale and distribution partnerships; failure to maintain or expand these relationships would harm the business[322](index=322&type=chunk)[323](index=323&type=chunk) - Unfavorable industry or global economic conditions, or reductions in IT spending, could limit business growth and negatively affect results, especially given the company's customer base in financial services, public sector, and pharmaceuticals[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) [Risks Related to Our Operations and Financial Condition](index=61&type=section&id=Risks%20Related%20to%20Our%20Operations%20and%20Financial%20Condition) This section outlines risks concerning the company's operational management and financial stability - Anticipated growth will **increase operational complexity**, requiring substantial investments in controls and potentially straining management resources, which could harm business if not managed effectively[345](index=345&type=chunk)[346](index=346&type=chunk) - Failure to maintain or grow brand recognition could impair customer base expansion and financial condition, as competition increases and negative reviews or publicity could harm reputation[347](index=347&type=chunk)[349](index=349&type=chunk) - Significant R&D investments are planned; if these do not efficiently translate into new products or material enhancements, or if customer demand decreases post-development, business and operating results would be harmed[364](index=364&type=chunk)[365](index=365&type=chunk) - High-quality customer support is crucial for retaining and expanding existing customer agreements, especially with MM and large enterprise customers[350](index=350&type=chunk)[442](index=442&type=chunk) - Interoperability with third-party IT infrastructures (operating systems, applications, mobile devices) is vital; failure to adapt to changes or provide effective mobile functionality could harm customer growth and retention[351](index=351&type=chunk) - Customer or partner engagement in prohibited/illegal activities or misuse of products could damage the brand, subject the company to liability, and negatively impact financial results[352](index=352&type=chunk)[353](index=353&type=chunk) - International expansion poses risks including developing multi-language support, varying seasonality, adverse currency exchange rates, longer payment cycles, tariffs, regulatory limitations, and reduced IP protection[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) - Fluctuations in currency exchange rates, particularly for Euro, JPY, GBP, SGD, and CNY, could negatively affect reported revenue, operating results, and assets when translated to USD[359](index=359&type=chunk)[360](index=360&type=chunk) - Changes in subjective accounting assumptions, estimates, or GAAP principles (e.g, revenue recognition, stock-based compensation) could significantly affect financial condition and results[360](index=360&type=chunk)[361](index=361&type=chunk) - Acquisitions or investments in other companies may divert management's attention, dilute stockholders, and present integration challenges, potentially leading to unforeseen operating difficulties and expenditures[362](index=362&type=chunk)[363](index=363&type=chunk) - Product failures, defects, or performance problems could lead to customer loss, warranty claims, significant costs, reputational damage, and potential liability, especially if data unavailability or unauthorized access occurs[366](index=366&type=chunk)[368](index=368&type=chunk) [Risks Related to Data Privacy and Cybersecurity](index=65&type=section&id=Risks%20Related%20to%20Data%20Privacy%20and%20Cybersecurity) This section details risks associated with protecting data and systems from security threats - **Compromised security measures** could lead to perceived insecurity of products, customer loss, reputational harm, significant liabilities, and negative impact on results, especially given increasing cyberattacks and reliance on third-party infrastructure[369](index=369&type=chunk)[370](index=370&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk) - Storing customer and third-party confidential information exposes the company to risks of unauthorized access or breaches, potentially causing reputational damage, litigation, and loss of business, with limitations of liability possibly being inadequate[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Evolving global internet laws, privacy regulations (e.g, CCPA, VCDPA, GDPR), cross-border data transfer restrictions, and data localization requirements are complex, costly to comply with, and non-compliance could lead to substantial fines, legal claims, and operational changes[389](index=389&type=chunk)[390](index=390&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk) - Failure to provide successful updates, enhancements, and features to counter emerging cyber threats and meet customer needs could adversely affect the business and reputation[386](index=386&type=chunk) - Natural catastrophic events (e.g, earthquakes, power loss, global pandemics) and man-made problems (e.g, computer viruses, data breaches) can disrupt business operations, cause system interruptions, and lead to reputational harm and data loss[387](index=387&type=chunk)[388](index=388&type=chunk) - Successful cyberattacks or data breaches at other technology companies could lead to a general loss of customer confidence, negatively affecting AvePoint's market perception and product usage[384](index=384&type=chunk)[385](index=385&type=chunk) [Legal and Regulatory Risks](index=70&type=section&id=Legal%20and%20Regulatory%20Risks) This section covers risks arising from laws, regulations, and potential litigation - Protecting proprietary technology (trade secrets, trademarks, copyrights) is crucial but costly; challenges, circumvention, or invalidation of IP rights, especially internationally, could impair competitive position and lead to litigation[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk) - The company may face legal proceedings and intellectual property disputes, which are costly, divert management attention, and could result in substantial damages, royalty payments, product re-engineering, or injunctions[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk)[412](index=412&type=chunk) - Contractual indemnity provisions with customers and third parties could expose the company to uncapped or substantial liability for intellectual property infringement, data protection breaches, and other losses[413](index=413&type=chunk) - Compliance with U.S export controls (e.g, Export Administration Regulations, economic sanctions) and foreign import regulations is essential for international markets; violations could lead to significant fines, penalties, and reputational harm[414](index=414&type=chunk)[415](index=415&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk) - The company is subject to anti-corruption, anti-bribery, and anti-money laundering laws (e.g, FCPA, UK Bribery Act); non-compliance, even by third-party intermediaries, can result in criminal/civil liability, fines, and reputational damage[419](index=419&type=chunk) [Tax Risks](index=72&type=section&id=Tax%20Risks) This section discusses risks related to tax laws, audits, and the company's tax positions - The ability to utilize Net Operating Losses (NOLs) may be limited by **Section 382 ownership changes** and the 80% taxable income deduction limit for NOLs generated after 2017, as per TCJA/CARES Act[420](index=420&type=chunk)[421](index=421&type=chunk) - Tax authority examinations or expiration of statutes of limitations could materially change tax reserves or impact the valuation of deferred income tax assets[423](index=423&type=chunk) - New or adversely applied tax laws/regulations could increase product costs, require additional tax payments, fines, and penalties, negatively impacting business and financial performance[424](index=424&type=chunk) - Determining the provision for income taxes requires significant management judgment, and adverse outcomes from ongoing tax examinations or audits in various jurisdictions could materially impact results[425](index=425&type=chunk)[426](index=426&type=chunk) - International operations expose the company to potential adverse tax consequences, including challenges to transfer pricing methodologies, which could result in additional taxes, interest, and penalties[427](index=427&type=chunk) [Risks Related to Intellectual Property](index=73&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section details risks associated with the protection and use of intellectual property - Reliance on third-party proprietary and open-source software carries risks, including the inability to obtain or renew licenses on favorable terms, adherence to license terms, or errors/defects in the software, which could delay product releases and harm business[428](index=428&type=chunk)[429](index=429&type=chunk)[430](index=430&type=chunk) - Protecting intellectual property (trademarks, copyrights, patents, trade secrets) is critical but challenging due to potential infringement, challenges to rights, and costly enforcement litigation, particularly in foreign countries with weaker IP laws[431](index=431&type=chunk) - Failure to adequately protect IP could diminish the value of brands and other intangible assets, leading to unauthorized copying, use of proprietary information by competitors, and adverse effects on business operations and financial condition[431](index=431&type=chunk) [Human Capital Risks](index=75&type=section&id=Human%20Capital%20Risks) This section outlines risks related to managing the company's workforce - The company's success is **highly dependent on the continued services of its founders, senior management, and skilled individual contributors**; loss of key employees or inability to attract/retain talent could significantly delay strategic objectives[439](index=439&type=chunk)[440](index=440&type=chunk) - Maintaining corporate culture (agility, innovation, teamwork) during rapid growth is crucial; failure to do so could negatively affect reputation and ability to attract/retain customers and employees[442](index=442&type=chunk) - Attracting, recruiting, and retaining highly qualified employees (e.g, technical solutions professionals, software engineers) is critical for success and growth, given intense competition for such personnel[443](index=443&type=chunk) - Failure to hire and integrate additional sales and marketing personnel or maintain their productivity could harm results and growth prospects, due to challenges in finding qualified individuals and achieving target performance levels[444](index=444&type=chunk) [Public Sector Risks](index=74&type=section&id=Public%20Sector%20Risks) This section discusses the unique risks associated with serving government and public sector clients - Serving highly regulated industries and public sector customers involves challenges like intense competition, significant upfront time/expense, and specific contractual terms (e.g, shorter subscriptions, broader rights, termination clauses)[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk) - Changes in public sector fiscal/contracting policies, funding decreases, or non-compliance with laws could impede the ability to maintain or increase revenue from public sector contracts, leading to penalties or debarment[435](index=435&type=chunk)[436](index=436&type=chunk) - Sales to government entities are subject to procurement laws, budgetary cycles, and potential audits; violations could result in civil/criminal penalties, contract termination, or suspension from future government business[438](index=438&type=chunk) [Risks Related to an Investment in Our Securities](index=76&type=section&id=Risks%20Related%20to%20an%20Investment%20in%20Our%20Securities) This section outlines risks for investors in the company's common stock and other securities - The **market price of common stock may be volatile**, and an active trading market may not develop or be sustained, making it difficult for investors to sell shares at an attractive price[445](index=445&type=chunk) - The ability to raise future capital may be limited or unavailable on acceptable terms; debt or equity issuances could dilute ownership interests and depress stock price[448](index=448&type=chunk)[449](index=449&type=chunk)[472](index=472&type=chunk) - A small number of stockholders (approx **54.9%**) have substantial control, potentially limiting other stockholders' influence on corporate matters and delaying/preventing third-party acquisitions[450](index=450&type=chunk) - Failure to meet public guidance or investment analyst expectations could lead to a decline in the market price of common stock[451](index=451&type=chunk)[452](index=452&type=chunk) - The company incurs significant increased expenses and administrative burdens as a public company, which could negatively impact its business and financial condition[454](index=454&type=chunk)[455](index=455&type=chunk)[457](index=457&type=chunk) - **Material weaknesses in internal control over financial reporting have been identified**, and failure to implement and maintain effective controls could result in material misstatements, impact reporting obligations, and erode investor confidence[458](index=458&type=chunk)[459](index=459&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[466](index=466&type=chunk) - As an "emerging growth company," reduced public company reporting requirements may make its common stock less attractive to investors, potentially leading to a less active trading market and more volatile stock price[467](index=467&type=chunk) - Management has limited experience in operating a public company, which could lead to increased time devoted to regulatory oversight and reporting, potentially diverting focus from business management and growth[469](index=469&type=chunk) - Provisions in organizational documents (e.g, classified board, advance notice requirements) and regulatory rules may delay or prevent third-party acquisitions, even if beneficial to stockholders[474](index=474&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk) - The company has **no current plans to pay cash dividends**, meaning stockholders may only receive a return on investment by selling shares at a price greater than the purchase price[471](index=471&type=chunk) [Item 6. Exhibits](index=82&type=section&id=Item%206.%20Exhibits) This section lists the documents filed as exhibits to the report - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to SEC Rules 13a-14(a), 15(d)-14(a), and 18 U.S.C Section 1350)[478](index=478&type=chunk)[479](index=479&type=chunk)[480](index=480&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase) are filed for interactive data[480](index=480&type=chunk)[481](index=481&type=chunk) [Signatures](index=83&type=section&id=Signatures) This section contains the formal signatures of the company's authorized officers - The report was signed on behalf of AvePoint, Inc by its duly authorized representatives on November 15, 2021[484](index=484&type=chunk)[485](index=485&type=chunk)

AvePoint, Inc. (NASDAQ:AVPT) Q3 2021 Earnings Conference Call November 15, 2021 8:30 AM ET Company Participants Erica Mannion – Sapphire Investor Relations Tj Jiang – Chief Executive Officer Jim Caci – Chief Financial Officer Brian Brown – COO and Chief Legal Counsel Conference Call Participants Brian Essex – Goldman Sachs Jason Ader – William Blair Kirk Materne – Evercore ISI Derrick Wood – Cowen and Company Nehal Chokshi – Northland Capital Markets Operator Good morning, everyone and welcome to the AvePoi ...

AvePoint, Inc. (NASDAQ:AVPT) Q2 2021 Earnings Conference Call August 11, 2021 8:30 AM ET Company Participants Erica Mannion – Sapphire Investor Relations TJ Jiang – Chief Executive Officer Sophia Wu – Chief Financial Officer Conference Call Participants Brian Essex – Goldman Sachs Jason Ader – William Blair Kirk Materne – Evercore Nehal Chokshi – Northland Capital Operator Good afternoon everyone, and welcome to the AvePoint Second Quarter 2021 Earnings Call. For opening remarks and introductions, I will no ...