AvePoint(AVPT) - 2021 Q4 - Annual Report

PART I Item 1. Business 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 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] - 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][26] - 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] 2021 Consummation of the Business Combination 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][30] - 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] 2021 Highlights 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] - 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] - 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] - 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] Our Strategies 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] - 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] - 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] Our Products 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] - 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][42] - The company's long-standing on-premises product is the DocAve Software Platform, which provides tools to migrate, manage, and govern SharePoint deployments[44] Our Customers and Customer Success 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] - The customer base is diversified, with no single customer accounting for more than 10% of revenue or accounts receivable in 2021[49] - 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] Human Capital Resources 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][57] - Key human capital objectives include attracting and retaining talent, with approximately 35% of U.S. employees being promoted or changing roles in 2021[65] - 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] - In response to the COVID-19 pandemic, the company shifted to remote work and plans to implement a hybrid model allowing for flexibility[69] Item 1A. Risk Factors 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 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] - 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] - The company faces competition from established and emerging companies, which may result in price reductions, fewer orders, and loss of market share[96][98] - Sales cycles with mid-market and large enterprise customers can be long (three to nine months) and unpredictable, requiring considerable time and expense[96] Risks Related to Our Operations and Financial Condition 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] - 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] - Significant investments in research and development may not translate into new products or material enhancements, potentially harming business results[121][122] - Product failures or performance issues could result in loss of customers, warranty claims, and significant costs to resolve[123] Risks Related to Data Privacy and Cybersecurity 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] - The company stores confidential and personal information, and any unauthorized access could expose it to liability, loss of business, and reputational damage[127] - 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] Risks Related to Our Common Stock 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] - Directors, executive officers, and their affiliates beneficially own approximately 55% of the outstanding Common Stock, giving them substantial control over corporate matters[159] - 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] - 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] Item 2. Properties 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] - The principal corporate headquarters are in Jersey City, NJ, and principal operating offices are in Richmond, VA[173] Item 3. Legal Proceedings 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] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 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] - As of March 30, 2022, there were 182,602,086 shares of Common Stock outstanding[180] - The company does not anticipate paying cash dividends in the foreseeable future[181] - 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] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] Results of Operations 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][201] Liquidity and Capital Resources 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] 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] Item 7A. Quantitative and Qualitative Disclosures about Market Risk 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][238] - Interest rate risk is considered immaterial due to the short-term nature of cash and investment holdings[237] - 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] - Credit risk is mitigated as no single customer accounted for more than 10% of billings or accounts receivable in 2021[239] Item 8. Financial Statements and Supplementary Data 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 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] - 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] - A remediation plan is underway, which includes hiring personnel with technical accounting experience and engaging external consultants to address the deficiencies[368] PART III Items 10-14 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] - Information for Item 11 (Executive Compensation) is incorporated by reference from the 2022 Proxy Statement[379] - Information for Item 12 (Security Ownership) is incorporated by reference from the 2022 Proxy Statement[379] - Information for Item 13 (Certain Relationships and Related Transactions) is incorporated by reference from the 2022 Proxy Statement[380] - Information for Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the 2022 Proxy Statement[381] PART IV Item 15. Exhibits and Financial Statement Schedules 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][383]