[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements regarding business plans and expected results that are subject to significant risks and uncertainties - This Quarterly Report contains forward-looking statements regarding business plans, objectives, and expected operating results, subject to significant risks and uncertainties[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk) - Key factors that could cause actual results to differ materially include the ability to recognize benefits from the Business Combination, future operating/financial results, acquisitions, business strategy, changes in strategy, market acceptance of business model, growth of the cloud industry, competition, ability to attract/retain employees, adaptation to consumer preferences, industry developments, unforeseen business disruptions (e.g, Russia-Ukraine conflict), intellectual property protection, capital requirements, and effects of inflation and foreign currency exchange[9](index=9&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's analysis of financial performance [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents AvePoint, Inc's unaudited condensed consolidated financial statements for the periods ended June 30, 2022, and December 31, 2021 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a slight decrease in total assets and stockholders' equity from December 31, 2021, to June 30, 2022 | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|---:|---:| | Cash and cash equivalents | $65,062 | $268,217 | | Short-term investments | $181,545 | $2,411 | | Total current assets | $304,296 | $334,156 | | Total assets | $387,921 | $388,738 | | Total liabilities | $138,497 | $133,173 | | Redeemable noncontrolling interest | $12,173 | $5,210 | | Total stockholders' equity | $237,251 | $250,355 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show increased revenue but also a higher net loss, reflecting growth alongside rising operating expenses | Metric (in thousands, except per share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:|---:|---:| | Total revenue | $55,701 | $45,344 | $105,992 | $84,144 | | Gross profit | $40,274 | $33,624 | $75,935 | $61,646 | | Loss from operations | $(11,743) | $(11,203) | $(25,591) | $(17,134) | | Net loss | $(9,202) | $(11,057) | $(20,255) | $(15,999) | | Net loss attributable to AvePoint, Inc | $(9,829) | $(11,556) | $(21,499) | $(16,895) | | Basic and diluted loss per share | $(0.05) | $(0.36) | $(0.12) | $(0.50) | - Revenue increased by **22.8%** for the three months and **26.0%** for the six months ended June 30, 2022, compared to the prior year, primarily due to growth in SaaS (**34.2%** and **39.5%** respectively) and services (**34.9%** and **42.0%** respectively)[20](index=20&type=chunk)[209](index=209&type=chunk)[227](index=227&type=chunk) - Operating expenses increased significantly, with Research and Development growing by **103.2%** for the three months and **79.0%** for the six months, and General and Administrative increasing by **39.9%** and **45.1%** respectively, driven by higher personnel costs and public company operating expenses[20](index=20&type=chunk)[219](index=219&type=chunk)[222](index=222&type=chunk)[238](index=238&type=chunk)[241](index=241&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The statements show a total comprehensive loss of $(21,758) thousand for the six months ended June 30, 2022, reflecting net loss and foreign currency adjustments | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:|---:|---:| | Net loss | $(9,202) | $(11,057) | $(20,255) | $(15,999) | | Total other comprehensive income (loss) | $225 | $248 | $(1,503) | $5 | | Total comprehensive loss | $(8,977) | $(10,809) | $(21,758) | $(15,994) | | Total comprehensive loss attributable to AvePoint, Inc | $(9,538) | $(11,256) | $(22,927) | $(16,838) | [Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Mezzanine%20Equity%20and%20Stockholders'%20Equity) These statements detail changes in equity, highlighting a decrease in total stockholders' equity due to net loss and share repurchases | Metric (in thousands, except share amounts) | Balance, December 31, 2021 | Balance, June 30, 2022 | |:---|---:|---:| | Redeemable noncontrolling interest | $5,210 | $12,173 | | Common Stock (shares) | 181,821,767 | 181,330,816 | | Additional Paid-In Capital | $625,056 | $644,931 | | Treasury Stock | $(1,739) | $(11,791) | | Accumulated Deficit | $(375,297) | $(396,796) | | Total Stockholders' Equity | $250,355 | $237,251 | - The company repurchased **1,901,662 shares** of common stock for approximately **$10,052 thousand** during the six months ended June 30, 2022, under its Share Repurchase Program[29](index=29&type=chunk)[135](index=135&type=chunk) - Redeemable noncontrolling interest increased significantly from **$5,210 thousand** at December 31, 2021, to **$12,173 thousand** at June 30, 2022, primarily due to the issuance of redeemable noncontrolling interest in EduTech and adjustments to present redemption value[29](index=29&type=chunk)[140](index=140&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The statements indicate a net decrease in cash, driven by significant cash used in investing activities for short-term investments | Metric (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:| | Net cash used in operating activities | $(6,596) | $(1,921) | | Net cash used in investing activities | $(184,578) | $(2,951) | | Net cash (used in) provided by financing activities | $(8,334) | $2,144 | | Net decrease in cash and cash equivalents | $(203,155) | $(2,774) | | Cash and cash equivalents at end of period | $65,062 | $66,338 | - Investing activities for the six months ended June 30, 2022, included **$180,041 thousand** in purchases of investments, significantly higher than the **$423 thousand** in the prior year period[33](index=33&type=chunk) - Financing activities shifted from providing **$2,144 thousand** in cash in 2021 to using **$8,334 thousand** in 2022, primarily due to **$10,042 thousand** in common stock repurchases[33](index=33&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the financial statements, covering accounting policies, business combinations, and other key financial data [1. Nature of Business and Organization](index=12&type=section&id=1.%20Nature%20of%20Business%20and%20Organization) AvePoint, Inc is a leading provider of enterprise collaboration and productivity software solutions through its SaaS-based Confidence Platform - AvePoint, Inc (formerly Apex Technology Acquisition Corporation) became the surviving entity after merging with AvePoint US LLC on July 26, 2021, following the Apex Business Combination on July 1, 2021[36](index=36&type=chunk) - The company provides enterprise collaboration and productivity software solutions and services, primarily in North America, Europe, Australia, and Asia, through its SaaS-based Confidence Platform[37](index=37&type=chunk) - The Confidence Platform offers Control Suite for data governance, Fidelity Suite for data integrity during digital transformation, and Resilience Suite for compliance and business continuity, supporting cloud services like Microsoft 365, Google, and Salesforce[37](index=37&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines key accounting policies, including the basis of presentation and recently adopted guidance for leases and business combinations - The company adopted **ASC 842 (Leases)** on January 1, 2022, using the modified retrospective approach, resulting in the recognition of **$13.9 million** in ROU assets and **$14.5 million** in lease liabilities, with no significant impact on operations or cash flows[41](index=41&type=chunk)[43](index=43&type=chunk) - Early adopted **ASU No 2021-08 (Business Combinations)** on January 1, 2022, which requires contract assets and liabilities acquired in a business combination to be recognized and measured in accordance with ASC 606, with no impact on current financial statements[43](index=43&type=chunk)[44](index=44&type=chunk) | Revenue Source | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | |:---|---:|---:|---:|---:| | SaaS | $27,619 | $20,586 | $54,172 | $38,845 | | Term license and support | $14,011 | $11,088 | $24,213 | $19,815 | | Services | $9,848 | $7,302 | $18,773 | $13,218 | | Maintenance | $4,067 | $5,458 | $8,508 | $10,867 | | Perpetual license | $156 | $910 | $326 | $1,399 | | Total revenue | $55,701 | $45,344 | $105,992 | $84,144 | | Metric (in thousands) | January 1, 2022 | June 30, 2022 | Increase/(decrease) | |:---|---:|---:|---:| | Accounts receivable, net | $61,335 | $56,218 | $(5,117) | | Deferred revenue | $82,332 | $80,946 | $(1,386) | | Deferred contract costs | $38,926 | $40,474 | $1,548 | - As of June 30, 2022, the transaction price allocated to remaining performance obligations was **$194.3 million**, with approximately **66%** expected to be recognized over the next twelve months[66](index=66&type=chunk) [3. Business Combination](index=20&type=section&id=3.%20Business%20Combination) This section details the Apex Business Combination and the subsequent acquisition of I-Access Solutions, which expanded the company's SaaS offerings - The Apex Business Combination on July 1, 2021, was accounted for as a reverse recapitalization, with Legacy AvePoint identified as the accounting acquirer, resulting in no goodwill or intangible assets recorded from this transaction[82](index=82&type=chunk) - EduTech acquired I-Access Solutions Pte Ltd on February 18, 2022, for approximately **$7.1 million**, consisting of cash and contingent consideration, to expand SaaS solutions for corporate learning[83](index=83&type=chunk) - Following a management changeover on April 15, 2022, the contingent consideration for the I-Access acquisition, including EduTech shares and a put option, was reclassified to mezzanine equity and included in redeemable noncontrolling interest[84](index=84&type=chunk) | Acquired Assets / Assumed Liabilities | Preliminary Allocation (in thousands) | |:---|---:| | Accounts receivable, net | $429 | | Goodwill | $4,862 | | Technology and software | $2,750 | | Customer relationship | $646 | | Order backlog | $263 | | Total purchase consideration | $7,109 | [4. Goodwill](index=22&type=section&id=4.%20Goodwill) Goodwill increased to $4.744 million as of June 30, 2022, primarily due to the I-Access acquisition, with no impairment identified | Metric (in thousands) | Goodwill | |:---|---:| | Balance as of December 31, 2021 | $0 | | I-Access acquisition | $4,862 | | Effect of foreign currency translation | $(118) | | Balance as of June 30, 2022 | $4,744 | - Goodwill is primarily attributed to intangible assets not qualifying for separate recognition, such as the acquired workforce and expected synergies from acquisitions[88](index=88&type=chunk) [5. Other intangible assets, net](index=22&type=section&id=5.%20Other%20intangible%20assets,%20net) Other intangible assets totaled $5.156 million as of June 30, 2022, primarily from the I-Access acquisition | Intangible Asset | Gross Carrying Amount (in thousands) | Accumulated Amortization (in thousands) | Net Carrying Amount June 30, 2022 (in thousands) | Weighted Average Life (in years) | |:---|---:|---:|---:|---:| | Technology and software, net | $3,857 | $(281) | $3,576 | 7.9 | | Content, net | $800 | $0 | $800 | 3.0 | | Customer relationship, net | $630 | $(21) | $609 | 10.0 | | Order backlog, net | $257 | $(86) | $171 | 1.0 | | Total | $5,544 | $(388) | $5,156 | 7.1 | | Year Ending December 31: | Estimated Future Amortization Expense (in thousands) | |:---|---:| | 2022 (six months) | $620 | | 2023 | $1,026 | | 2024 | $912 | | 2025 | $555 | | 2026 | $331 | | Thereafter | $1,712 | | Total | $5,156 | [6. Concentration of Credit Risk](index=22&type=section&id=6.%20Concentration%20of%20Credit%20Risk) The company's credit risk concentration is low, with no single customer accounting for more than 10% of revenue or accounts receivable - No customer accounted for more than **10% of revenue** for the six months ended June 30, 2022 and 2021[96](index=96&type=chunk) - No customer made up more than **10% of accounts receivable** at June 30, 2022 or December 31, 2021[96](index=96&type=chunk) [7. Accounts Receivable, Net](index=22&type=section&id=7.%20Accounts%20Receivable,%20Net) Accounts receivable, net, decreased to $51.441 million at June 30, 2022, from $55.067 million at December 31, 2021 | Component | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | |:---|---:|---:| | Trade receivables | $32,480 | $38,819 | | Current unbilled receivables | $20,281 | $17,086 | | Allowance for doubtful accounts | $(1,320) | $(838) | | Total Accounts receivable, net | $51,441 | $55,067 | [8. Line of Credit](index=23&type=section&id=8.%20Line%20of%20Credit) AvePoint maintains an unused $30.0 million revolving line of credit with HSBC, maturing in April 2023 - The company has a revolving line of credit of up to **$30.0 million**, with an additional **$20.0 million** accordion feature, with HSBC Ventures Bank USA Inc[104](index=104&type=chunk) - Borrowings under the line bear interest at **LIBOR plus 3.5%** and the line carries an unused fee of **0.5%** per year[104](index=104&type=chunk) - The line of credit matures on April 7, 2023; as of June 30, 2022, the company has not borrowed under the agreement and is in compliance with all covenants[105](index=105&type=chunk)[106](index=106&type=chunk) [9. Income Taxes](index=23&type=section&id=9.%20Income%20Taxes) The effective tax rate fluctuated due to the mix of pre-tax income by jurisdiction, foreign inclusions, and stock-based compensation | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:|---:|---:| | Effective tax rate | 5.6% | 0.7% | 1.2% | 6.5% | - The change in effective tax rates is primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, impact of foreign inclusions, and stock-based compensation[107](index=107&type=chunk) [10. Leases](index=24&type=section&id=10.%20Leases) The company recognizes operating lease right-of-use assets and liabilities for its office space leases | Lease Expense Component (in thousands) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |:---|---:|---:| | Lease liability cost | $1,498 | $2,649 | | Short-term lease expenses | $535 | $1,349 | | Variable lease cost | $37 | $69 | | Total lease cost | $2,070 | $4,067 | | Year Ending December 31: | Operating Lease Liabilities Maturity Schedule (in thousands) | |:---|---:| | 2022 (six months) | $2,808 | | 2023 | $5,995 | | 2024 | $4,076 | | 2025 | $2,844 | | 2026 | $2,133 | | Thereafter | $3,249 | | Total future lease payments | $21,105 | | Less: Present value adjustment | $(2,434) | | Present value of future lease payments | $18,671 | - ROU assets obtained in exchange for new operating lease liabilities amounted to **$5.7 million** for the three months and **$6.7 million** for the six months ended June 30, 2022[114](index=114&type=chunk) [11. Commitments and Contingencies](index=26&type=section&id=11.%20Commitments%20and%20Contingencies) AvePoint is not a party to any material legal proceedings and has guarantees totaling $1.4 million for service agreements - As of June 30, 2022, the Company was not a party to any material litigation for which a material claim is reasonably possible, probable, or estimable, outside of normal business operations[121](index=121&type=chunk) - Letters of credit totaling **$1.4 million** have been issued as security for service agreements in highly regulated sectors, which have not materially affected financial results[122](index=122&type=chunk) [12. Earn-Out and Warrant Liabilities](index=27&type=section&id=12.%20Earn-Out%20and%20Warrant%20Liabilities) Earn-out shares and warrant liabilities decreased, resulting in a gain of $5.8 million for the six months ended June 30, 2022 - Company Earn-Out Shares are derivatives marked to market each reporting period, with fair value determined using a Monte Carlo simulation[125](index=125&type=chunk)[126](index=126&type=chunk) | Metric (in millions) | June 30, 2022 | December 31, 2021 | |:---|---:|---:| | Earn-out shares liabilities | $4.8 | $10.0 | - A gain of approximately **$2.6 million** for the three months and **$5.8 million** for the six months ended June 30, 2022, was recognized from the change in fair value of earn-out and warrant liabilities[126](index=126&type=chunk)[127](index=127&type=chunk) [13. Mezzanine Equity and Stockholders' Equity](index=28&type=section&id=13.%20Mezzanine%20Equity%20and%20Stockholders'%20Equity) This section details the company's capital structure, including its common stock and a $150 million share repurchase program - As of June 30, 2022, there were **181,330,816 shares** of common stock issued and outstanding[130](index=130&type=chunk) - The company authorized a **$150 million** share repurchase program on March 17, 2022, and had repurchased **1,901,662 shares** for **$10,042 thousand** by June 30, 2022[33](index=33&type=chunk)[135](index=135&type=chunk) - Sponsor Earn-Out Shares (**2,916,700 shares**) are subject to vesting conditions based on stock price milestones or a subsequent transaction, and are classified as equity[132](index=132&type=chunk)[133](index=133&type=chunk) [14. Stock-Based Compensation](index=29&type=section&id=14.%20Stock-Based%20Compensation) Stock-based compensation expense totaled $18.678 million for the six months ended June 30, 2022, with significant unrecognized costs remaining | Line Item | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | |:---|---:|---:|---:|---:| | Cost of revenue | $703 | $272 | $1,281 | $362 | | Sales and marketing | $3,396 | $9,791 | $5,858 | $10,902 | | General and administrative | $5,281 | $4,364 | $9,765 | $6,355 | | Research and development | $1,024 | $83 | $1,774 | $180 | | Total stock-based compensation | $10,404 | $14,510 | $18,678 | $17,799 | - As of June 30, 2022, there was **$34.2 million** in unrecognized compensation costs related to non-vested stock options and **$61.2 million** for non-vested RSUs[149](index=149&type=chunk)[150](index=150&type=chunk) - The company granted **4,716,194 RSUs** under the 2021 Plan during the six months ended June 30, 2022, with a weighted-average grant date fair-value of **$5.80 per RSU**[150](index=150&type=chunk) [15. Financial Instruments](index=32&type=section&id=15.%20Financial%20Instruments) This section details the fair value measurement of financial instruments, primarily categorized as Level 2 and Level 3 | Assets (in thousands) | Level 1 | Level 2 | Level 3 | Total | |:---|---:|---:|---:|---:| | U.S treasury bills | $0 | $19,992 | $0 | $19,992 | | Certificate of deposits | $0 | $1,726 | $0 | $1,726 | | Short term investments: U.S treasury bills | $0 | $179,933 | $0 | $179,933 | | Short term investments: Certificate of deposits | $0 | $1,612 | $0 | $1,612 | | Total Assets | $0 | $203,263 | $0 | $203,263 | | Liabilities (in thousands) | Level 1 | Level 2 | Level 3 | Total | | Earn-out shares | $0 | $0 | $4,770 | $4,770 | | Warrant liabilities | $0 | $279 | $0 | $279 | | Total Liabilities | $0 | $279 | $4,770 | $5,049 | - Earn-out shares liabilities are measured at fair value using **Level 3** unobservable inputs, while private placement warrants are measured at fair value using **Level 2** inputs[155](index=155&type=chunk) [16. Segment information](index=33&type=section&id=16.%20Segment%20information) AvePoint operates as a single global segment, with performance assessed and resources allocated on a worldwide basis - The company operates in one segment, with its Chief Executive Officer acting as the chief operating decision maker (CODM) for global performance assessment and resource allocation[159](index=159&type=chunk) | Geographic Area | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | |:---|---:|---:|---:|---:| | United States | $24,523 | $20,556 | $46,232 | $38,189 | | EMEA | $17,570 | $13,753 | $32,912 | $24,944 | | APAC | $13,608 | $11,035 | $26,848 | $21,011 | | Total revenue | $55,701 | $45,344 | $105,992 | $84,144 | | Country (outside US) | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | |:---|---:|---:|---:|---:| | Germany | $7,947 | $5,553 | $13,918 | $10,279 | | Japan | $4,465 | $4,932 | $10,360 | $9,687 | [17. Loss Per Share](index=34&type=section&id=17.%20Loss%20Per%20Share) Basic and diluted loss per share was $(0.12) for the six months ended June 30, 2022, with potentially dilutive securities excluded due to the net loss | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:|---:|---:| | Total net loss available to common shareholders (in thousands) | $(9,829) | $(36,298) | $(21,499) | $(50,431) | | Weighted average common shares outstanding (in thousands) | 182,491 | 101,968 | 182,661 | 101,368 | | Basic and diluted loss per share available to common shareholders | $(0.05) | $(0.36) | $(0.12) | $(0.50) | | Potentially Dilutive Securities (in thousands) | June 30, 2022 | 2021 | |:---|---:|---:| | Stock options | 29,977 | 30,634 | | Restricted stock units | 9,321 | 0 | | Warrants | 17,905 | 0 | | Company Earn-Outs | 3,000 | 0 | | Total potentially dilutive securities | 60,203 | 72,635 | - Potentially dilutive securities were excluded from diluted EPS calculations for all periods presented because the company was in a net loss position, making them anti-dilutive[165](index=165&type=chunk) [18. Related Party Transactions](index=34&type=section&id=18.%20Related%20Party%20Transactions) AvePoint has indemnification agreements with its executive officers and directors to cover certain legal expenses - The company has indemnification agreements with its executive officers and directors, covering expenses like attorneys' fees, judgments, fines, and settlement amounts[167](index=167&type=chunk) [19. Subsequent Events](index=34&type=section&id=19.%20Subsequent%20Events) No material subsequent events occurred after June 30, 2022, beyond those already disclosed in the notes - No material subsequent events occurred since June 30, 2022, other than those disclosed in Note 13 (Mezzanine Equity and Stockholders' Equity) and Note 14 (Stock-Based Compensation)[168](index=168&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&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 condition, results of operations, liquidity, and cash flows [Second Quarter 2022 Business Highlights](index=35&type=section&id=Second%20Quarter%202022%20Business%20Highlights) In Q2 2022, AvePoint increased Total ARR by 28%, repurchased shares, and gained inclusion in Russell indexes - Total Annual Recurring Revenue (ARR) increased **28%** to **$178.2 million** in Q2 2022 compared to Q2 2021[171](index=171&type=chunk) - The company repurchased approximately **1.9 million shares** for about **$10 million** through June 30, 2022[171](index=171&type=chunk) - AvePoint was included in the Russell 3000, Russell 2000, and Russell Microcap Indexes and was a finalist for multiple Microsoft Partner of the Year Awards[171](index=171&type=chunk) [Overview](index=35&type=section&id=Overview) AvePoint aims to enable secure digital collaboration and ensure business resiliency through its SaaS-based Confidence Platform - AvePoint's strategy focuses on empowering organizations to secure digital collaboration data, sustain connections, and ensure business resiliency[172](index=172&type=chunk) - The Confidence Platform, a SaaS solution, supports over **9 million users** on cloud services such as Microsoft 365, Google, and Salesforce[172](index=172&type=chunk) [Our Mission Statement](index=36&type=section&id=Our%20Mission%20Statement) AvePoint's mission is to enable confident collaboration in the modern workplace by securing data and ensuring business continuity - AvePoint's mission is to help organizations collaborate with confidence by securing digital collaboration data, sustaining connections, and ensuring business continuity[174](index=174&type=chunk) - The Confidence Platform supports **9 million users** globally, manages over **175 PB** of content, and is deployed across 14 global data centers with **99.9% uptime**, backed by ISO, SOC2 Type II, and FedRAMP certifications[175](index=175&type=chunk) - The platform's intelligence engine uses AI to maximize relevant data, provide insights, automate operations, and enable Control, Fidelity, and Resilience software suites to optimize organizational efficiency[175](index=175&type=chunk) [Key Business Metrics](index=39&type=section&id=Key%20Business%20Metrics) AvePoint uses Total ARR and Core TTM Dollar-Based Net Retention Rate to measure performance, showing continued growth and customer expansion | Metric | June 30, 2022 | June 30, 2021 | |:---|---:|---:| | Total ARR ($ in mil) | $178.2 | $139.0 | | Core TTM dollar-based net retention rate | 106% | 111% | - Total ARR increased **28%** year-over-year to **$178.2 million** as of June 30, 2022[185](index=185&type=chunk) - The Core TTM Dollar-Based Net Retention Rate of **106%** indicates that the company is effectively maintaining and expanding revenue with its existing customer base[185](index=185&type=chunk)[188](index=188&type=chunk) [Components of Results of Operations](index=40&type=section&id=Components%20of%20Results%20of%20Operations) This section details the components of revenue and expenses, outlining how each contributes to the overall financial results - Revenue is primarily derived from SaaS, term license and support, services, and maintenance, with SaaS and term license and support expected to increase as a percentage of total revenue[192](index=192&type=chunk)[201](index=201&type=chunk) - Cost of revenue includes direct costs for SaaS, term license and support, maintenance, and services, with gross margin expected to fluctuate but increase long-term as product mix shifts towards SaaS and term license and support[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk) - Operating expenses (Sales and Marketing, General and Administrative, Research and Development) are expected to increase due to investments in personnel, global expansion, brand awareness, and public company compliance costs[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of financial performance for the three and six months ended June 30, 2022, versus 2021 [Comparison of Three Months Ended June 30, 2022 and June 30, 2021](index=42&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030,%202022%20and%20June%2030,%202021) For Q2 2022, total revenue increased by 22.8% to $55.7 million, but higher operating expenses led to an increased loss from operations | Metric (in thousands) | June 30, 2022 | June 30, 2021 | Change Amount | % Change | |:---|---:|---:|---:|---:| | Total revenue | $55,701 | $45,344 | $10,357 | 22.8% | | Gross profit | $40,274 | $33,624 | $6,650 | 19.8% | | Loss from operations | $(11,743) | $(11,203) | $(540) | 4.8% | | Net loss | $(9,202) | $(11,057) | $1,855 | (16.8)% | | Revenue Source | June 30, 2022 (in thousands) | June 30, 2021 (in thousands) | Change Amount (in thousands) | % Change | |:---|---:|---:|---:|---:| | SaaS | $27,619 | $20,586 | $7,033 | 34.2% | | Term license and support | $14,011 | $11,088 | $2,923 | 26.4% | | Services | $9,848 | $7,302 | $2,546 | 34.9% | | Maintenance | $4,067 | $5,458 | $(1,391) | (25.5)% | | Perpetual license | $156 | $910 | $(754) | (82.9)% | | Total revenue | $55,701 | $45,344 | $10,357 | 22.8% | | Operating Expense (in thousands) | June 30, 2022 | June 30, 2021 | Change Amount | % Change | |:---|---:|---:|---:|---:| | Sales and marketing | $27,174 | $29,001 | $(1,827) | (6.3)% | | General and administrative | $16,322 | $11,664 | $4,658 | 39.9% | | Research and development | $7,892 | $3,883 | $4,009 | 103.2% | [Comparison of Six Months Ended June 30, 2022 and June 30, 2021](index=46&type=section&id=Comparison%20of%20Six%20Months%20Ended%20June%2030,%202022%20and%20June%2030,%202021) For the first half of 2022, total revenue increased by 26.0% to $106.0 million, while significantly higher operating expenses led to a larger net loss | Metric (in thousands) | June 30, 2022 | June 30, 2021 | Change Amount | % Change | |:---|---:|---:|---:|---:| | Total revenue | $105,992 | $84,144 | $21,848 | 26.0% | | Gross profit | $75,935 | $61,646 | $14,289 | 23.2% | | Loss from operations | $(25,591) | $(17,134) | $(8,457) | 49.4% | | Net loss | $(20,255) | $(15,999) | $(4,256) | 26.6% | | Revenue Source | June 30, 2022 (in thousands) | June 30, 2021 (in thousands) | Change Amount (in thousands) | % Change | |:---|---:|---:|---:|---:| | SaaS | $54,172 | $38,845 | $15,327 | 39.5% | | Term license and support | $24,213 | $19,815 | $4,398 | 22.2% | | Services | $18,773 | $13,218 | $5,555 | 42.0% | | Maintenance | $8,508 | $10,867 | $(2,359) | (21.7)% | | Perpetual license | $326 | $1,399 | $(1,073) | (76.7)% | | Total revenue | $105,992 | $84,144 | $21,848 | 26.0% | | Operating Expense (in thousands) | June 30, 2022 | June 30, 2021 | Change Amount | % Change | |:---|---:|---:|---:|---:| | Sales and marketing | $54,228 | $48,302 | $5,926 | 12.3% | | General and administrative | $31,864 | $21,956 | $9,908 | 45.1% | | Research and development | $14,294 | $7,985 | $6,309 | 79.0% | [Certain Non-GAAP Financial Measures](index=50&type=section&id=Certain%20Non-GAAP%20Financial%20Measures) AvePoint uses non-GAAP operating income (loss) and margin to assess performance, excluding stock-based compensation - Non-GAAP operating income (loss) is defined as GAAP operating loss plus stock-based compensation, and non-GAAP operating margin is non-GAAP operating income (loss) divided by revenue[248](index=248&type=chunk) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:|---:|---:| | Non-GAAP operating (loss) income (in thousands) | $(1,339) | $3,307 | $(6,913) | $665 | | Non-GAAP operating margin | (2.4)% | 7.3% | (6.5)% | 0.8% | - The reduction in non-GAAP operating margin is primarily due to significant investment in the business and increased expenses related to becoming a publicly traded company[249](index=249&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, the company had sufficient liquidity with $65.1 million in cash and $181.5 million in short-term investments | Metric (in millions) | June 30, 2022 | |:---|---:| | Cash and cash equivalents | $65.1 | | Short-term investments | $181.5 | - The company has a revolving line of credit of up to **$30.0 million** with HSBC, which was undrawn as of June 30, 2022, and the company was in compliance with all covenants[252](index=252&type=chunk) - Management believes existing cash, investments, operating cash flows, and the credit facility are sufficient to meet working capital, capital expenditure, and debt service obligations for at least the next twelve months[253](index=253&type=chunk) [Cash Flows](index=51&type=section&id=Cash%20Flows) For the first half of 2022, cash was primarily used for short-term investments and common stock repurchases | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |:---|---:|---:| | Net cash used in operating activities | $(6,596) | $(1,921) | | Net cash used in investing activities | $(184,578) | $(2,951) | | Net cash (used in) provided by financing activities | $(8,334) | $2,144 | - Net cash used in operating activities for the six months ended June 30, 2022, was **$6.6 million**, reflecting a net loss of **$20.3 million**, adjusted for non-cash items and net cash outflows from changes in operating assets and liabilities[256](index=256&type=chunk) - Net cash used in investing activities was **$184.6 million**, primarily due to **$179.7 million** in purchases of short-term investments[258](index=258&type=chunk) [Indebtedness](index=52&type=section&id=Indebtedness) AvePoint maintains an unused $30.0 million revolving line of credit with HSBC, maturing in April 2023 - The company has a revolving line of credit of up to **$30.0 million**, with an additional **$20.0 million** accordion feature, maturing on April 7, 2023[260](index=260&type=chunk) - As of June 30, 2022, the company had no outstanding borrowings under the credit facility and was in compliance with all covenants[261](index=261&type=chunk) [Leasing Activities](index=52&type=section&id=Leasing%20Activities) The company is obligated under non-cancelable operating leases for office space with total commitments of $21.1 million - The company has non-cancelable operating leases for office space, with initial terms expiring through 2030[262](index=262&type=chunk) - As of June 30, 2022, total operating lease commitments are **$21.1 million**, with **$6.1 million** due in the next twelve months[262](index=262&type=chunk) [Operating Segment Information](index=53&type=section&id=Operating%20Segment%20Information) AvePoint operates as a single global segment, with its CEO making resource allocation and performance assessments on a worldwide basis - AvePoint operates in one segment, with its Chief Executive Officer (CODM) making global operating performance assessments and resource allocation decisions[263](index=263&type=chunk) - The CODM does not receive discrete financial information about asset allocation, expense allocation, or profitability by product or geography[263](index=263&type=chunk) [Critical Accounting Policies and Estimates](index=53&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management makes significant estimates and assumptions, particularly in revenue recognition and the valuation of Company Earn-Out Shares - Key estimates and assumptions are made for revenue recognition, allowance for doubtful accounts, deferred contract costs, goodwill and other intangible assets, income taxes, stock-based compensation, business combination purchase price, and earn-out liabilities[51](index=51&type=chunk)[264](index=264&type=chunk) - Revenue recognition involves judgment in determining distinct performance obligations and allocating transaction prices based on relative standalone selling prices (SSPs), especially for bundled term license and support arrangements[266](index=266&type=chunk)[267](index=267&type=chunk) - Company Earn-Out Shares are treated as derivatives and marked to market using a Monte Carlo simulation, requiring subjective assumptions like expected volatility and term[268](index=268&type=chunk)[269](index=269&type=chunk) [Economic Conditions, Challenges, and Risks](index=54&type=section&id=Economic%20Conditions,%20Challenges,%20and%20Risks) AvePoint faces challenges from competitive markets, evolving customer preferences, and global macroeconomic and geopolitical factors - The software and cloud-based services markets are dynamic and highly competitive, requiring continuous evolution and adaptation[271](index=271&type=chunk) - Global macroeconomic and geopolitical factors, including the Russia-Ukraine conflict, create uncertainty, though the direct economic, financial, and operational exposure to Russia or Belarus is limited and not currently material[273](index=273&type=chunk) - International operations contribute a significant portion of revenue and expenses, making the company susceptible to foreign currency exchange rate fluctuations, though a natural hedge exists[274](index=274&type=chunk) [Seasonality](index=54&type=section&id=Seasonality) The company's revenue is seasonal, with historically higher revenue in the third and fourth quarters due to customers' fiscal year-ends - Historically, the third and fourth quarters have been the highest revenue quarters, driven by increased sales related to customers' fiscal year-ends[275](index=275&type=chunk) - Operating expenses generally increase sequentially due to personnel growth in connection with business expansion[275](index=275&type=chunk) [Emerging Growth Company Accounting Election](index=54&type=section&id=Emerging%20Growth%20Company%20Accounting%20Election) As an emerging growth company, AvePoint has elected to use the extended transition period for complying with new accounting standards - AvePoint is an emerging growth company (EGC) and has elected to use the extended transition period for complying with new or revised financial accounting standards[276](index=276&type=chunk) - This election means the company adopts new or revised standards at the same time as private companies, potentially affecting comparability with non-EGC public companies[276](index=276&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=54&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) Information about recent accounting pronouncements is available in Note 2 of the financial statements [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS](index=55&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISKS) The company is exposed to market risks from interest rates and foreign exchange rates, with no material changes identified during the period [Interest Rate Risk](index=55&type=section&id=Interest%20Rate%20Risk) The company's exposure to interest rate risk is minimal due to the short-term nature of its cash and investments - The company's exposure to changes in the fair value of its investment portfolio due to interest rates is not material, given the short-term nature of its cash, cash equivalents, and marketable securities[280](index=280&type=chunk) - As of June 30, 2022, the company had no outstanding obligations under its line of credit with HSBC[280](index=280&type=chunk) [Foreign Currency Exchange Risk](index=55&type=section&id=Foreign%20Currency%20Exchange%20Risk) Fluctuations in foreign currencies impact the U.S Dollar translation of assets and liabilities of the company's foreign subsidiaries - Fluctuations in foreign currencies impact the U.S Dollar translation of assets and liabilities of foreign subsidiaries, with changes recorded in accumulated other comprehensive income[281](index=281&type=chunk) - A hypothetical **10% weaker U.S Dollar** would have decreased reported cash, cash equivalents, and marketable securities by approximately **$2.6 million** as of December 31, 2021[282](index=282&type=chunk) [Concentration of Credit Risk](index=55&type=section&id=Concentration%20of%20Credit%20Risk) The company's concentration of credit risk remains low, with no single customer accounting for more than 10% of billings or receivables - No customer accounted for more than **10% of billings** for the years ended December 31, 2021 and 2020[283](index=283&type=chunk) - No customer made up more than **10% of accounts receivable** as of December 31, 2021[283](index=283&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=56&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were not effective due to material weaknesses, though a remediation plan is underway [Evaluation of Disclosure Controls and Procedures](index=56&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed not effective due to material weaknesses, but the financial statements are considered fairly presented - Disclosure controls and procedures were **not effective** as of December 31, 2021, or during the six months ended June 30, 2022, due to material weaknesses[286](index=286&type=chunk) - Despite material weaknesses, the audited Consolidated Financial Statements fairly present the financial position, results of operations, and cash flows in conformity with GAAP[286](index=286&type=chunk) [Material Weaknesses in Internal Control over Financial Reporting](index=56&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20over%20Financial%20Reporting) Material weaknesses persist in financial accounting, reporting of nonroutine transactions, and segregation of duties - Material weaknesses identified include issues with the **completeness and accuracy** of financial accounting, reporting, and disclosures[287](index=287&type=chunk) - Deficiencies exist in the identification, review, and accounting for **nonroutine and complex accounting transactions**[287](index=287&type=chunk) - There is a material weakness related to the **segregation of duties** with respect to the processing of financial transactions[287](index=287&type=chunk) [Remediation of Material Weaknesses](index=56&type=section&id=Remediation%20of%20Material%20Weaknesses) The company is actively implementing a remediation plan that includes hiring experienced personnel and engaging external consultants - Remediation efforts include **hiring personnel** with technical accounting and financial reporting experience[288](index=288&type=chunk) - The company is **engaging external consultants** to assist with complex accounting matters and establishing formalized internal controls for segregation of duties[288](index=288&type=chunk) - **Improved accounting and financial reporting procedures** are being implemented to enhance completeness and accuracy[288](index=288&type=chunk) [Changes in Internal Control Over Financial Reporting](index=57&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control occurred during the period other than the ongoing implementation of the remediation plan - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2022, other than the ongoing implementation of the Remediation Plan[292](index=292&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=57&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that no control system can provide absolute assurance against all errors or fraud due to inherent limitations - Management does not expect disclosure controls and procedures or internal control over financial reporting to prevent or detect all errors and fraud[293](index=293&type=chunk) - Control systems provide only **reasonable, not absolute, assurance**, and their effectiveness can deteriorate over time due to changing conditions or compliance levels[293](index=293&type=chunk) [PART II. OTHER INFORMATION](index=58&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity securities sales, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=58&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) AvePoint is not currently a party to any material legal claims or litigation outside the normal course of business - As of June 30, 2022, AvePoint is not a party to any material asserted, ongoing, threatened, or pending claims, suits, assessments, proceedings, or other litigation for which a material claim is reasonably possible, probable, or estimable, outside of normal business operations[295](index=295&type=chunk) [ITEM 1A. RISK FACTORS](index=58&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report - No material changes to the risk factors previously disclosed in the Annual Report have occurred since its filing on March 31, 2022[296](index=296&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not issue unregistered equity securities and repurchased 1.9 million shares under its $150 million program [Issuer Purchases of Equity Securities](index=59&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) The company repurchased 1.9 million shares for $10.0 million under its $150 million share repurchase program - The Board of Directors authorized a new share repurchase program on March 17, 2022, allowing the company to buy back up to **$150 million** of Common Stock over three years[299](index=299&type=chunk) | Period | Total shares purchased | Average price paid per share | |:---|---:|---:| | April 1, 2022 - April 30, 2022 | 675,000 | $5.0671 | | May 1, 2022 - May 31, 2022 | 540,000 | $5.1446 | | June 1, 2022 - June 30, 2022 | 551,662 | $5.5749 | - As of June 30, 2022, **1,901,662 shares** were repurchased under the program, with approximately **$139,947,393.29 remaining** for future purchases[301](index=301&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) AvePoint reported no defaults upon senior securities [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to AvePoint [ITEM 5. OTHER INFORMATION](index=59&type=section&id=ITEM%205.%20OTHER%20INFORMATION) AvePoint reported no other information [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Quarterly Report, including officer certifications and Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104.1)[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) [SIGNATURES](index=61&type=section&id=SIGNATURES) The report is duly signed by the Chief Executive Officer and Chief Financial Officer as of August 15, 2022 - The report was signed by Tianyi Jiang, Chief Executive Officer, and James Caci, Chief Financial Officer, on August 15, 2022[312](index=312&type=chunk)

AvePoint, Inc. (NASDAQ:AVPT) Q2 2022 Earnings Conference Call August 11, 2022 4:30 PM ET Company Participants Marc Griffin - IR Jim Caci - CFO Tianyi Jiang - CEO Conference Call Participants Brian Essex - Goldman Sachs Jason Ader - William Blair Derrick Wood - Cowen and Company Kirk Materne - Evercore Nehal Chokshi - Northland Capital Markets Brett Knoblauch - Cantor Fitzgerald Operator Good afternoon, and welcome to the AvePoint, Inc. Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Pl ...

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 ...