Q1 2024 AvePoint Inc Earnings Call

Operator: Good day, and welcome to the Avepoint Inc. Q1 2024 earnings call. All participants will be in the synonymy mode.

Good day and welcome to the other point at Q1 'twenty to 'twenty four earnings call.

Operator: All participants will be in the center only mode.

Operator: Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. Now, I'd like to turn the conference over to your host today, Jamie Arestia, Vice President of Investor Relations. Please go ahead.

Operator: Need assistance, please signal conference specialist by pressing the star key followed by zero.

Operator: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

James Arestia: To withdraw your question. Please press Star then two.

Operator: Please note this event is being recorded.

James Arestia: I'd like to turn conference over to your host today, Jamie a Rusty Huh Vice President of Investor Relations. Please go ahead.

Operator: Yeah.

James Arestia: Thank you, operator. Good afternoon, and welcome to Avepoint's first quarter 2024 earnings call. With me on the call this afternoon are Dr. TJ Jiang, Chief Executive Officer, and Jim Caci, Chief Financial Officer. After preliminary remarks, we will open the call for a question and answer session.

James Arestia: Thank you operator, good afternoon, and welcome to ask Point's first quarter 2024 earnings call with me on the call. This afternoon is Dr. Tsu Jae Jang Chief Executive Officer, and Jim Kathy Chief Financial Officer.

James Arestia: After preliminary remarks, we will open the call for a question and answer session.

James Arestia: Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in our press release for a more complete description. All material in the webcast is the sole property and copyright of Avepoint, with all rights reserved. Please note this presentation describes certain non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, and non-GAAP operating margin, which are not measures prepared in accordance with U.S. GAAP.

James Arestia: Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.

James Arestia: We encourage you to review the Safe Harbor statements contained in our press release for a more complete description all materially in the webcast is the sole property and copyright of that point all rights reserved.

James Arestia: Please note. This presentation describes certain non-GAAP measures, including non-GAAP gross profit non-GAAP gross margin non-GAAP operating income and non-GAAP operating margin, which are not measures prepared in accordance with U S. GAAP.

James Arestia: The non-GAAP measures are presented in this presentation as we believe they provide investors with a means of understanding how management evaluates the company's operating performance. However, these non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to, financial measures prepared in accordance with U.S. GAAP. A reconciliation of these measures to the most directly comparable GAAP financial measures is available in our first quarter 2024 earnings press release, as well as our updated investor presentation and financial tables, all of which are available on our investor relations website. With that, I will turn the call over to TJ.

James Arestia: The non-GAAP measures are presented in this presentation as we believe they provide investors with the means of understanding how management evaluates the company's operating performance.

James Arestia: These non-GAAP measures should not be considered in isolation from as substitutes for or superior to financial measures prepared in accordance with U S. GAAP.

TJ: A reconciliation of these measures to the most directly comparable GAAP financial measures is available in our first quarter 2024 earnings press release as well as our updated investor presentation and financial tables, all of which are available on our Investor Relations website with that let me turn the call over to T. J.

Tianyi Jiang: Thank you, Jamie, and thank you to everyone joining us on the call today. Our first quarter was a very strong start to the year as we outperformed our guidance for total revenue and non-GAAP operating margin while delivering strong growth in total and net new ARR. Our performance was again driven by the robust capabilities of our platform, as well as a growing recognition among customers and partners of the need, now more important than ever, to build a strong data foundation.

TJ: Thank you Jamie and thank you to everyone joining us on the call today.

Tianyi Jiang: Our first quarter with a very strong start to the year.

Tianyi Jiang: We outperformed our guidance for total revenue and non-GAAP operating margin, while delivering strong growth in total and net new a R.

Tianyi Jiang: Our performance was again driven by the robust capabilities of our platform as well as a growing recognition among customers and partners of the knee now more important than ever to build a strong data foundation.

Tianyi Jiang: Doing so will empower them to govern their mission-critical information assets, optimize operational costs, boost workplace efficiency, and foster more insightful data-driven decisions. While these goals have always been top of mind, they're now more critical than ever as organizations around the world seek to leverage generative AI to unlock business value and gain a competitive advantage. It's this dynamic I would like to discuss today with two areas of focus.

Tianyi Jiang: Doing so will empower them to govern their mission critical information assets optimize operational costs.

Tianyi Jiang: Workplace efficiency and fostered more insightful data driven decision making.

Tianyi Jiang: While these goals have always been top of mind, they're now more critical than ever as organizations around the world seek to leverage <unk> AI to unlock business value and gain a competitive advantage.

Tianyi Jiang: Is this dynamic I would like to discuss today with two areas of focus.

Tianyi Jiang: First, the challenges and obstacles organizations face in adopting AI, primarily due to data security issues that prevent a comprehensive strategy to manage your data estate. And second, customer demand for AI to improve productivity and the overall employee experience. Along the way, I'll highlight some key customer wins in Q1 that demonstrate how we solve these challenges and close by touching on our ongoing investments to innovate in this dynamic business environment. I will then turn over to Jim to discuss our Q1 results and updated financial guidance. So let's jump in.

Tianyi Jiang: First the challenges and obstacles organizations face you're adopting AI, primarily due to data security issues that prevent a comprehensive strategy to manage their data state and second.

Tianyi Jiang: The customer demand for AI to improve productivity and overall employee experience.

Tianyi Jiang: Along the way I'll highlight some key customer wins in Q1 that demonstrate how we solve these challenges and close by touching on our ongoing investments to innovate in this dynamic business environment.

Tianyi Jiang: I'll, then turn it over to Jim to discuss our Q1 results and updated financial guidance.

Jim: So let's jump in.

Tianyi Jiang: It's no surprise companies everywhere want to incorporate AI into their business. I recently had the privilege of keynote the SkillsFuture SG Training and Adult Education Conference in Singapore. In speaking with many CXOs in attendance, it was clear the ambition to use AI to transform upscaling is palpable. But the elephant in the room is the concern that their data is not ready for AI. These conversations align with the findings in our inaugural AI and Information Management Report, which we published a few weeks ago.

Jim: It's no surprise companies everywhere want to incorporate AI into their businesses I recently had the privilege to keno the skills future S E training and adult Education conference in Singapore.

Tianyi Jiang: In speaking with many of you know attendance it was clear the ambition to use AI to transform upscaling its possible, but the elephant in the room is the concern that their data is not ready for AI. These conversation aligned with the findings in our inaugural AI and information management report.

Tianyi Jiang: Which we published a few weeks ago.

Tianyi Jiang: Our report surveyed nearly 800 organizations globally and found that 83% plan to increase their AI spending this year, with 60% intending to allocate at least a quarter of their technology budget to AI in the next five years. However, our survey also confirmed a significant delta between these ambitious goals and the reality facing these organizations.

Tianyi Jiang: Our report surveyed nearly 800 organizations globally and find that 83% plan to increase their AI spending this year with 60% intending to allocate at least a quarter of their technology budget to AI in the next five years.

Tianyi Jiang: However, our survey also confirmed a significant delta between these ambitious plans and the reality facing these organizations.

Tianyi Jiang: Simply put, they're not ready to deploy an effective AI strategy because their data estate is not in good order. This is where our confidence platform comes into play, by bolstering organizations' data security posture, providing robust cybersecurity measures, offering comprehensive control and visibility across the digital workplace, and delivering intelligent data insights through automation. By leveraging all our platform has to offer, customers can realize a secure and compliant digital environment that also improves the employee experience, and then build on this foundation with a meaningful AI strategy without taking these steps to solidify their data.

Tianyi Jiang: But they're not ready to deploy effective AI strategy because their daily state are not in good order.

Tianyi Jiang: This is where our confidence platform comes into play.

Tianyi Jiang: Stirring organizations data security postures, providing robust cyber security measures offering comprehensive control and visibility across the digital workplace and delivering intelligent data insights through automation.

Tianyi Jiang: I leveraging all our platform has to offer customers can realize a secure and compliant digital environment that also improves the employee experience and then build on this foundation with a meaningful AI strategy.

Tianyi Jiang: But without taking these steps to solidify their data he states the challenges business face are amplified when incorporating AI, particularly around data security and data governance. According to recent research from Gartner, 72% of organizations believe over sharing and <unk>.

Tianyi Jiang: The challenges businesses face are amplified when incorporating AI, particularly around data security and data governance. According to recent research from Gartner, 72% of organizations believe oversharing and exposing sensitive information is the biggest risk when deploying generative AI applications, such as Copilot for Microsoft 365. The Avepoint confidence platform can mitigate these risks by helping companies understand the quality of the data AI relies on, controlling permissions, and rapidly setting up proper access. In the health and life sciences industry, for example, we worked with a leading U.S.-based medical technology company in the quarter to ensure its data was ready for AI as they prepared to deploy CoPilot for Microsoft 365.

Tianyi Jiang: Clothing sensitive information is the biggest risk when deploying generative AI applications, such as co pilot for Microsoft <unk> five.

Tianyi Jiang: The Apple and confidence platform can mitigate these risks by helping companies understand the quality of the data AI relies on controlling permissions and rapidly setting up proper access controls.

Tianyi Jiang: The health and life Sciences industry for example.

Tianyi Jiang: Work with a leading U S based medical technology company in the quarter to ensure its data was ready for AI as they prepare to deploy co pilot for Microsoft to 65.

Tianyi Jiang: With Avepoint policies, Avepoint cloud governance, and Avepoint MyHub, the company is drastically reducing the risk of exposing sensitive information, streamlining their workspace policies, and securing data access so the company's 15,000 employees can utilize copilot. Our study also found that before implementing AI, 71% of organizations were concerned about data privacy and security, and 61% were worried about the quality and categorization of their internal data. But despite these, many forge ahead in the flawed belief that their existing information management strategy will suffice.

Tianyi Jiang: With Apple and policies Aplin cloud governance, and Apple in my head the company, it's drastically reducing the risk of exposing sensitive aberration streamlining their workspace policies and securing data access so the company's 15000 employees can utilize co pilot.

Tianyi Jiang: Our study also found that before implementing AI 71 person organizations, we're concerned about data privacy and security and 61% were worried about the quality and categorization of their internal data.

Tianyi Jiang: Despite these concerns many forge ahead in the floor belief that their existing information management strategy will suffice.

Tianyi Jiang: Specifically, our report finds that nearly half of the organizations lack basic measures such as archiving and retention policies, and just 29% of organizations use automation. These shortcomings are even more glaring when compared to the size and volume of data our customers need to secure. Driven by the relentless growth of data for many years, more than 40% of companies today manage at least 500 petabytes of data, and they're seeing that growth accelerate due to AI.

Tianyi Jiang: Specifically, our report find nearly half of their organizations lacked basic measures such as archiving and retention policies and just 29% of organizations use automation.

Tianyi Jiang: These shortcomings are even more glaring when compared to the size and volume of data our customers need to secure driven by the relentless growth of data for many years more than 40% of the companys today manage at least 500 petabytes of data and they're seeing that growth accelerate due to AI.

Tianyi Jiang: Addressing the challenges related to data growth and sprawl has always been a key use case for Avepoint and led to a new customer win in Q1 with a Germany-based real estate firm with over 130,000 tenants and 1,500 employees. The firm turned to Avepoint's secure backup solution to protect its growing data across Microsoft 365, Entral ID, and Power Platform and to rapidly identify crucial data sprawl and storage optimization challenges with Avepoint Open. With these critical output solutions, the customer can now quickly and intelligently archive its data and enhance its data governance and cyber resilience posture.

Tianyi Jiang: Addressing the challenges related to data growth and sprawl has always being a key use case for ethylene and led to a new customer win in Q1 with a Germany based real estate firm with over 130000 tenants and 1500 employees the firm turned to appoint secure backup solution to.

Tianyi Jiang: Protect its growing data across Microsoft who survive.

Tianyi Jiang: I D power platform and to rapidly identify crucial data sprawl and storage optimization challenges without point opus.

Tianyi Jiang: With these critical Alpha solutions, the customer can now quickly and intelligently archiving data and hence its data governance and cyber resilience posture.

Tianyi Jiang: As noted in our report, we believe the most effective approach for all companies is to establish a robust information management strategy from the outside because organizations with mature information management strategies are one and a half times more likely to realize benefits from AI than those with less mature strategies. For example, let's take a look at the CPG industry, where nearly half of companies are facing challenges collecting and integrating the volume of data needed for successful AI adoption.

Tianyi Jiang: As noted in our report we believe the most effective approach for all companies is to establish a robust information management strategy from the outset because organizations with mature information management strategies are one and a half times more likely to realize benefits from AI and those with.

Tianyi Jiang: Less mature strategies for example, let's take a look at the CPG industry, where nearly half of companies are facing challenges collecting and integrating the volume data needed for successful AI adoption.

Tianyi Jiang: This is largely due to data fragmentation across a large number of SKUs. [inaudible] Already an existing customer with a number of Avepoint solutions and a growing data estate, Opus will streamline data management policies for their 123,000 users, providing better visibility into data utilization, improve data quality, and lower the risk of breach. We know a healthy data state is essential to an effective AI strategy.

Tianyi Jiang: This is largely due to data fragmentation across large number of skus expansive supply chain and warehousing networks and complex product categories.

Tianyi Jiang: Q1, we expanded our relationship with one of our largest CPG companies in the world to streamline its information management approach with the purchase of ethylene opus aura.

Tianyi Jiang: Already existing customer with a number of athletes solution and a growing data state opus will streamline data managing policies for their 123000 users providing better visibility into data utilization improved data quality and lower the risk of breaches.

Tianyi Jiang: We know a healthy Betty state is essential to effective AI strategy and effective AI strategy. Obviously, it makes good business sense, and creating a more secure organization, reducing cost and addressing macro challenges.

Tianyi Jiang: An effective AI strategy obviously makes good business sense in creating a more secure organization, reducing costs, and addressing macro challenges. But one additional benefit of an effective AI strategy is the improvement of the overall employee experience. For example, Gartner finds AI can drive productivity gains by up to 20%. Why does that matter?

Tianyi Jiang: Well one additional benefit.

Tianyi Jiang: Our strategy is the improvement of the overall employee experience for example, garner finds AI can drive productivity gains by up to 20% why does that matter.

Tianyi Jiang: Research shows that more than 60% of a typical workday is lost to repetitive and mundane tasks, that knowledge workers spend 25% of their time searching for information, and they use the average of six to eight apps to complete a single process. If AI can successfully mitigate these employee frustrations, companies can retain talent and reduce turnover, further strengthening the organization. Our best-in-class abilities to solve these problems for many years have established a strong competitive moat.

Tianyi Jiang: Our research showed that more than 60% of our chemical workday is lost to repetitive and mundane tasks that knowledge workers spend 25% of their time searching for information and they use the average of six to eight apps to complete a single process.

Tianyi Jiang: If AI can successfully mitigate these employee frustration companies can retain talent and reduce turnover further strengthening the organization.

Tianyi Jiang: Our best in class abilities to solve these problems for many years have established a strong competitive moat and it's why we continue to innovate and invest in further enhancements for our customers and for the Ashland team.

Tianyi Jiang: And it's why we continue to innovate and invest in further enhancements for our customers and for the Avepoint team. Our Avepoint AI program, aimed at integrating AI into everything we do, continues to progress with internal and external applications of AI. One example is our TiGraph product, where we recently introduced new advanced analytics capabilities for CoPilot for Microsoft 365. We are proud to be first to market with this offering to support CoPilot, which enables companies to identify areas of high collaboration to better prepare for CoPilot readiness. This is just the latest of our AI readiness solutions for organizations to prepare, secure, and optimize data, which collectively will enable them to fully take advantage of AI in the workplace

Tianyi Jiang: Our App <unk> AI program aimed at integrating AI into everything we do continues to progress with internal and external applications of AI.

Tianyi Jiang: One example is our high graph product well, we recently introduced new advanced analytics capabilities for co pilot for Microsoft to spot.

Tianyi Jiang: We're proud to be first to market with this offering to support co pilot, which enables companies to identify areas of high collaboration to better prepare for Culp Halle readiness.

Tianyi Jiang: This is just the latest of our AI readiness solutions for organizations to prepare secure and optimize data, which collectively will enable them to fully take advantage of AI in the workplace.

Tianyi Jiang: In closing, successful AI deployments require a strong and healthy data estate, which in turn mandates a robust data management strategy. As companies become increasingly aware of this, we have a massive opportunity to drive AI adoption in the years to come, underpinned by our platform technology and our experience solving the most urgent challenges facing organizations around the world. I'm excited for the years ahead, and I want to thank the entire Apple team for their tireless efforts and dedication. Our Q1 results are another strong step forward, and we're laser focused on continued execution and capitalizing on the growing demand for our platform. With that, let me turn the call over to Jim.

Tianyi Jiang: In closing successful AI deployments require a strong and healthy data state, which in term mandates a robust data management strategy.

Jim: As companies become increasingly aware of this we have a massive opportunity to drive adoption in the years to come underpinned by our platform technology and our experienced solving their most urgent challenges facing organizations around the world.

Jim: I'm excited for the years ahead, and I want to thank the entire outbound team for their tireless efforts and dedication.

Jim: Our Q1 results are another strong step forward and we're laser focused on continued execution and capitalizing on the growing demand for our platform.

Tianyi Jiang: With that let me turn the call over to Jim.

James Caci: Thanks, TJ, and good afternoon, everyone. Thanks for joining us today. As we review our strong first quarter results today, let me remind you that, unless otherwise noted, I'll be referring to non-gap metrics. For the first quarter ended March 31st, 2024, total revenues were $74.5 million, up 25% year-over-year and above the high end of our guidance. Within total revenue, first quarter SAS revenue was $51.3 million and grew 44% year-over-year. And in Q1, SAS comprised 69% of total revenues compared to 60% a year ago.

Jim: Thanks T J and good afternoon, everyone. Thanks for joining us today as we review our strong first quarter results today, Let me remind you that unless otherwise noted I'll be referring to non-GAAP metrics.

James Caci: SAS continues to be our fastest-growing revenue segment, with 44% year-over-year growth representing our highest growth in eight quarters. In addition, our other revenue lines continue to perform in line with our expectations and commentary. However, term license and support, as well as maintenance revenue, declined year over year, both in dollars and as a percentage of total revenue. At the same time, services revenues grew 8% year over year but declined as a percentage of revenue to 14% for Q1.

James Caci: Through the first quarter ended March 31, 2024, total revenues were $74 $5 million up 25% year over year and above the high end of our guidance. We didn't total revenue first quarter SaaS revenue was $51.3 million and grew 44% year.

James Caci: Over a year and in Q1, SaaS comprised 69% of total revenues compared to 60% a year ago.

James Caci: South continues to be our fastest growing revenue segment with 44% year over year growth, representing our highest in eight quarters.

James Caci: In addition, our other revenue line continue to perform in line with our expectations and commentary termed.

James Caci: Term license and support as well as maintenance revenue declined year over year, both in dollars and as a percentage of total revenue.

James Caci: At the same time services revenues grew 8% year over year, but declined as a percentage of revenue to 14% for Q1.

James Caci: And because services represents our only non-recurring business, 86% of our total Q1 revenues were recurring, our highest ever percentage. Our strong SAS performance is also evident as we look at our results from a regional perspective, where SAS revenue growth was above 40% in every region. In North America, SAS revenues grew 42% year over year and represented 77% of total North American revenues, which in turn grew 22% year over year. In EMEA, SAS revenues grew 46% year over year and represented 81% of total EMEA revenues, which in turn grew 17% year over year.

James Caci: Because services represents our only nonrecurring business, 86% of our total Q1 revenues were recurring our highest ever percentage.

James Caci: Strong SaaS performance is also evident as we look at our results from a regional perspective, where SaaS revenue growth was above 40% in every region.

James Caci: In North America, SaaS revenues grew 42% year over year and represented 77% of total North America revenues, which in turn grew 22% year over year in EMEA SaaS revenues grew 46% year over year and represented 81% that's total EMEA.

James Caci: Our revenues, which in turn grew 17% year over year and in APAC SaaS revenues grew 47% year over year and represented 45% of total APAC revenues, which in turn grew 40% year over year.

James Caci: And in APAC, SAS revenues grew 47% year over year and represented 45% of total APAC revenues, which in turn grew 40% year over year. Last quarter, we began disclosing our regional ARR performance as these growth rates provide a better view of the underlying momentum of the business everywhere we operate. We were again pleased with the year-over-year growth we saw in Q1, as North America ARR grew 22 percent, EMEA ARR grew 27 percent, and APEC ARR grew 27 percent.

James Caci: Last quarter, we began disclosing our regional performance as these growth rates provide a better view of the underlying momentum of the business everywhere we operate.

James Caci: We were again pleased with the year over year growth. We saw in Q1 as North American Air or grew 22% EMEA AOR grew 27% and APAC error grew 27%.

James Caci: Once again, each region was a strong contributor to our overall performance, with their respective ARR growth rates in line with the total ARR growth we reported on a consolidated basis. Now, continuing with total ARR and other key metrics we regularly assess.

James Caci: Once again each region was a strong contributor to our overall performance with their respective are our growth rates in line with the total Air group, we reported on a consolidated basis.

James Caci: Continuing now with total air our and other key metrics, we regularly assess as.

James Caci: As of March 31st, 2024, total ARR was $274.5 million, representing year-over-year growth of 23%. As a result, net new ARR in Q1 was $10 million and grew 29% year-over-year. Additionally, we ended the first quarter with 560 customers with ARR of over $100,000, an increase of 20% from the prior year. As of the end of Q1, 51% of total ARR came through the channel, compared to 48% a year ago. And for Q1, specifically, 62% of our incremental ARR came through the channel compared to 65% for Q4 of 23 and 56% in Q1 of 2023.

James Caci: As of March 31, 2024, total AOR was $274 $5 million representing year over year growth of 23% as a result, net new <unk> in Q1 was $10 million and grew 29% year over year.

James Caci: Additionally, we ended the first quarter with 560 customers with <unk> of over $100000, an increase of 20% from the prior year.

James Caci: As of the end of Q1, 51% of total air are came through the channel compared to 48% a year ago and.

James Caci: And for Q1, specifically, 62% of our incremental air or came through the channel compared to 65% for Q4 of 23 and 56% in Q1 of 2023.

James Caci: As we discussed, the channel contribution to our incremental ARR will fluctuate from quarter to quarter, but we expect the channel contribution to total ARR to continue increasing each quarter. Turning now to our customer retention rates, where we continue to make progress toward our medium-term goals, which, to remind you, are 90% plus for GRR and 110 to 115% for NRR.

James Caci: As we've discussed the channel contribution to our incremental air or will fluctuate from quarter to quarter, but we expect the channel contribution to total here are to continue increasing each quarter.

James Caci: Turning now to our customer retention rates, where we continue to make progress towards our medium term goals, which to remind you our 90% plus for <unk> and 110% to 115% for NR.

James Caci: Adjusted for the impact of FX, our trailing 12-month gross retention rate for the first quarter was 87%, consistent with our performance in 2023. And we are pleased that our FX adjusted net retention rate for the first quarter was 110% compared to 106% a year ago and to 109% in Q4 of 2023. On a reported basis, Q1 GRR was 86%, in line with the 86% we reported in Q4 2023. Q1 NRR was 110%, compared to 108% in Q4 2023.

James Caci: Adjusted for the impact of FX, our trailing 12 month gross retention rate for the first quarter was 87% consistent with our performance in 2023.

James Caci: And we are pleased that our FX adjusted net retention rate for the first quarter was 110% compared to 106% a year ago and two 109% in Q4 of 2023.

James Caci: On a reported basis Q1, <unk> was 86% in line with the 86% we reported in Q4 2023.

James Caci: Q1, <unk> was 110% compared to 108% in Q4 of 2023.

James Caci: Turning back to the income statement, gross profit for Q1 was $55.2 million, representing a gross margin of 74.1% compared to 71.5% in Q1 of 2023. The improvement in our gross margin is a result of improved SAS margins as well as our product mix, as we had more SAS revenue and less low-margin services revenue as a percentage of our overall revenue this quarter versus a year ago. Moving down the income statement, operating expenses for Q1 totaled $48.6 million, or 65% of revenue, compared to $42.9 million, or 72% of revenue a year ago.

James Caci: Turning back to the income statement gross profit for Q1 was $55 $2 million, representing a gross margin of 74, 1% compared to 71, 5% in Q1 of 2023 the.

James Caci: The improvement in our gross margin is a result of improved SaaS margins as well as our product mix as we had more SaaS revenue and less low margin services revenue as a percentage of our overall revenue this quarter versus a year ago.

James Caci: Moving down the income statement operating expenses for Q1 totaled $48 $6 million or 65% of revenue compared to $42 $9 million or 72% of revenues a year ago.

James Caci: As a result, Q1 operating income was $6.6 million, or an operating margin of 8.9%. While Q1 non-GAAP operating income was well ahead of our guidance, I would point out that approximately $1.5 million of expenses we had expected for Q1 shifted to Q2 and the second half of the year, and this is reflected in our updated guidance, which I will cover shortly. But even after adjusting for this, Q1 operating income would have come in comfortably above the high end of our guidance, as our commitment to profitable growth and our sustained focus on expense management again allowed us to realize more of the substantial embedded leverage in our business.

James Caci: As a result, Q1 operating income was $6 $6 million or an operating margin of eight 9%.

James Caci: While Q1 non-GAAP operating income was well ahead of our guidance I would point out that approximately $1 5 million of expenses. We had expected for Q1 shifting to Q2 in the second half of the year and this is reflected in our updated guidance, which I will cover shortly.

James Caci: But even after adjusting for this Q1 operating income would've come in comfortably above the high end of our guidance is our commitment to profitable growth and our sustained focus on expense management again allowed us to realize more of the substantial embedded leverage in our business.

James Caci: Turning to the balance sheet and cash flow statement, we ended the first quarter with $219.3 million in cash and short-term investments. For the three months ended March 31st, 2024, cash generated from operations was $7.8 million, while free cash flow was $7.3 million. This compares to cash generated from operations of $1.3 million and free cash flow of $1 million in the first quarter of 2023. During the three months ended March 31st, we repurchased 1.8 million shares for a total cost of approximately $13.7 million.

James Caci: Turning to the balance sheet and cash flow statement. We ended the first quarter with $219 $3 million in cash and short term investments for the three months ended March 31, 2024 cash generated from operations was $7 $8 million, while free cash flow was $7 3 million.

James Caci: This compared to cash generated from operations of $1 $3 million and free cash flow of $1 million in the first quarter of 2023.

James Caci: During the three months ended March 31.

James Caci: We repurchased one 8 million shares for a total cost of approximately $13 $7 million.

James Caci: I would now like to turn to our financial outlook, where for the full year, we are pleased to raise our expectations for total ARR, total revenue, and non-GAAP operating income. For the second quarter, we expect total revenues of $73.8 million to $75.8 million, or approximately 15% year-over-year growth at mid-term. We expect non-GAAP operating income of $3.6 million to $4.6 million. For the full year, we now expect total ARR of $316.8 million to $321.8 million, or approximately 21% year-over-year growth at the midpoint.

James Caci: I would now like to turn to our financial outlook for the full year. We are pleased to raise our expectations for total air our total revenue and non-GAAP operating income.

James Caci: For the second quarter, we expect total revenues of $73 8 million to $75 $8 million or approximately 15% year over year growth at the midpoint.

James Caci: We expect non-GAAP operating income of $3 6 million to $4 $6 million.

James Caci: For the full year, we now expect total air our of $316 8 million to $321 $8 million or approximately 21% year over year growth at the midpoint.

James Caci: We now expect total revenues of $314.3 million to $320.3 million, or approximately 17% year-over-year growth at the mid-term. And lastly, we now expect full-year non-GAAP operating income of $30 million to $32 million, or an operating margin of 9.5 to 10 percent. And on a rule of 40 basis, which for Avepoint is the sum of our ARR growth and non-GAAP operating margin, our updated guidance reflects a 31 compared to the 29 that we initially guided for the year in February, with each component contributing equally to the increase.

James Caci: We now expect total revenues of $314 3 million to $323 million or approximately 17% year over year growth at the midpoint.

James Caci: Lastly, we now expect full year non-GAAP operating income of $30 million to $32 million or an operating margin of nine 5% to 10%.

James Caci: And on the rule of 40 basis, which for a half point is the sum of our AOR growth and non-GAAP operating margin. Our updated guidance reflects a 31 compared to the 29 that we initially guided for the year in February.

James Caci: With each component contributing equally to the increase in summary, Q1 was a strong start to 2024 and we are excited for another year of continued execution and capitalizing on the substantial long term opportunity ahead of us.

James Caci: In summary, Q1 was a strong start to 2024, and we are excited for another year of continued execution and capitalizing on the substantial long-term opportunity ahead of us. Thanks for joining us today. And with that, we'd be happy to take your questions. Operator.

James Caci: Thanks for joining us today and with that we'd be happy to take your questions operator.

Operator: Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keypad. If at any time any question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Derek Wood with T.D. Cowan.

Speaker Change: Yes. Thank you we will now begin the question and answer session.

James Derrick Wood: Just a question you May press Star then one on your telephone keypad, if you're using a speaker phone. Please pickup your handset before pressing the keys, but anytime any questions about trust and you would like to withdraw it. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble the roster.

James Derrick Wood: And the first question comes from Derrick Wood with TD Cowen.

James Derrick Wood: Great, thanks. Congratulations on a strong quarter. CJ, I'll start with you.

James Derrick Wood: Great. Thanks, Congrats on a strong quarter C. J I'll start with you.

Tianyi Jiang: Could you talk about the rollout of the co-pilot analytics offering within TIGRAF? What was just made available? What's the feedback from customers? And I imagine dollars tied to this will start small, but I'd be curious if marketing this kind of tool could draw incremental interest for some of your core offerings, whether it's cross-selling the base or generating new customers.

James Derrick Wood: Can you talk about the rollout of the.

Tianyi Jiang: Copilot analytics.

Tianyi Jiang: Operating within tie graph.

Tianyi Jiang: That was just made available once the feedback from customers and I imagine dollars tied to this will start small, but I'd be curious if marketing this kind of tool could draw incremental interest for some of your core offerings, whether its cross selling the base or generating new customers.

Tianyi Jiang: Yeah, great question. The Royal FortiGraph for Office 365 Co-Pilot is the first such solution in the market where we actually help customers zone in on the high-density collaboration areas and data estate to focus their effort around co-pilot readiness. Around the world, we have seen tremendous activities by companies across the board to actively experiment with Gen AI and traditional AI capabilities. And Microsoft has done a fantastic job in commoditizing and democratizing AI, especially offering co-pilot to well over 500 million users on M65. So a ton of experimentation was needed.

Speaker Change: Yes, great question.

Tianyi Jiang: The Royal for Tiger for office five co pilot is the first such solution in the market, where we actually help our customers zonian onto the high density collaboration areas and data states to focus their effort around coal pate readiness.

Tianyi Jiang: Around the world, we have seen tremendous activities of companies across the board to actually experiment with Germany, and traditional AI capabilities and Microsoft has done a fantastic job being.

Tianyi Jiang: How much of a commoditizing and democratizing AI approach, especially offering copilot to well over 500000 500 million users Mpc's, if I saw a ton of experimentation.

Tianyi Jiang: We haven't seen massive enterprise-wide deployment yet, so this is why the solution like PyGraph for co-pilot from Avepoint that was released just this quarter is the way to zoom in on the specific areas of collaboration and user groups. So this allows them to, in pilot mode, in essentially POC mode, in small group settings, to really experiment and take advantage of the power of Gen AI. And as we mentioned in our prepared remarks, a very important aspect of making sure that your AI deployment strategy works is to have very confident and solid trust in your data estate.

Tianyi Jiang: We haven't seen that.

Tianyi Jiang: Massive enterprise wide deployment yet. So this is why the solution like a pie graph.

Tianyi Jiang: For our co pilot from last point, that's released just this quarter.

Tianyi Jiang: Way too.

Tianyi Jiang: Zoom in onto the specific areas.

Tianyi Jiang: Areas of collaboration and user groups. So this allowed them to in pilot mode.

Tianyi Jiang: In essentially POC mode in small group settings to really Ah <unk>.

Tianyi Jiang: <unk> and take advantage of the power of journey II and as we mentioned in our prepared remarks are very.

Tianyi Jiang: Very important aspect of making sure that your AI deployment strategy worse is to have a very confident and solid and trusting your data. Your state. So a lot of that preparation work goes into preparing and making sure that you have the right privilege access by information management lifecycle of life control as well as removing.

Tianyi Jiang: So a lot of that preparation work goes into preparing, making sure that you have the right privileges for access, the right information management, life cycle, life control, as well as removing much of the redundant out-of-date trivial data. And what PyGraph for co-pilot does is actually allow you to not just look at your entire data estate, which could well be over 500 petabytes for a lot of customers, but to zoom into the specific areas and user groups that you start with and get a bigger ROI right away. So it's a very unique product set. And you're right; we see robust pipeline building from all these information management requirements.

Tianyi Jiang: Much of their redundant how did they trigger data and what high graph Kolkata does is actually allow you to not just look at their entire data state, which could well be over 500 petabytes for a lot of customers so into specific areas and user groups that you start with and to get bigger.

Tianyi Jiang: Roy right away. So it's a very unique product sets and youre right, we see robust pipeline building from all of the information management requirements.

James Derrick Wood: Very interesting. Thanks.

Speaker Change: Very interesting thanks.

James Derrick Wood: And one for Jim, 44% SaaS growth really impressive.

James Caci: And one for Jim, 44% SaaS growth, really impressive. And even if I look at double sequential growth, it was double digits. We haven't seen that since, I think, the first half of 21.

James Derrick Wood: And even if I look at double a sequential growth. It was double digits. We haven't seen that since I think first half 'twenty. One can you talk about what's driving that inflection in SaaS is has there been a pickup in on Prem migrations or are there other factors like more cross selling new customer generation et cetera, and then how do we.

James Caci: Can you talk about what's driving that inflection in SaaS? Has there been a pickup in on-prem migrations? Or are there other factors like more cross-selling, new customer generation, etc.? And then how do we triangulate that strength with your guidance in Q2 of, I guess, relatively flat sequential growth in total revenue?

James Caci: While you wait that strength with your guide in Q2.

James Caci: I guess relatively flat sequential growth on total revenue.

James Caci: Yeah. Hi Derek.

Speaker Change: Yeah, Hi, Derek Thanks for the question.

Speaker Change: So maybe the first part of that question I think we're seeing.

James Caci: Thanks for the question. You know, so maybe the first part of that question, I think we're seeing, you know, actually a couple of different factors, right? We are seeing nice growth from new customers, but specifically in Q1, too, we saw some nice real expansion with our existing customer base, so to touch on your point, and getting to that 110% of NRR, that was a nice driver and also drove some of that SaaS expansion as well. So I think we're seeing it across the platform. I wouldn't say it's just coming from one particular product or even migration, as you suggested. It's really across the spectrum, which is nice.

Speaker Change: Actually a couple of different factors right. We are seeing nice growth from new customers, but specifically in Q1, two we saw some nice real expansion with our existing customer base. So to touch on your point and getting getting to that 110% of NR arm that was a nice driver and also drove some of that SaaS expansion as well.

James Caci: So I think we're seeing it really across the platform I wouldn't say, it's just coming from one particular product or even even migration as you suggested it's really across the spectrum, which is nice and again, both new customers and then again seeing nice growth from the existing customer base, which is nice that expansion.

James Caci: And again, both new customers and, then again, seeing nice growth from the existing customer base, which is nice, that expansion. And then I think when we think about Q2 in terms of, you know, where we ended Q1 and what we're thinking about for Q2, I think we're really pleased with the guidance that we have out there and, in terms of really setting the stage for the full year, you know, raise that we put out.

James Caci: And then I think when we think about Q2 in terms of.

James Caci: Where we ended Q1 and what we're thinking about for Q2 I think we're really pleased with the guidance that we have out there and in terms of really setting the stage for the full year raised that we put out.

James Caci: We feel comfortable about that. We went from a revenue forecast of about 15% year-over-year growth to 17. We're increasing the ARR growth from 7% or actually 20% to 21%. So we feel good about the guidance that we put out there. We also, you know, we've talked about this before. We do have this flux between SAS and term and the impact that that has on revenue. We did see in Q1 that there was a significant amount of SAS, and that can fluctuate from quarter to quarter.

James Caci: Feel comfortable about that we went from really revenue forecast about 15% year over year growth to 17.

James Caci: We're increasingly are our growth from seven crude actually 20% to 21%. So we feel good about about the guidance that we put out there. We also we've talked about this before we do have this flux between SaaS and term and the impact that that has on revenue.

James Caci: We did see in Q1, but there was a significant amount of SaaS and that can fluctuate from quarter to quarter and so we're mindful of that as we think about setting guidance specifically for Q2, but even thinking about the full year. So again. We're excited we've got we think the guidance that we put out there is good and we feel very comfortable.

James Caci: So we're mindful of that as we think about setting guidance specifically for Q2, but even thinking about the full year. So again, we're excited. We think the guidance that we put out there is good, and we feel very comfortable about

James Caci: About about achieving that.

Speaker Change: Well done thank you.

Operator: Thank you. The next question comes from Brett Knoblauch with Cantor Fitzgerald.

James Caci: Thank you and the next question comes from Brett Knoblauch with Cantor Fitzgerald.

Tommy Shinski: Hi guys, this is Tommy Shinski on for Brett. Congratulations on another solid quarter. I guess, um, last quarter, we talked a little bit about the MSP approach to the SMB sector and how that's kind of shielded you from a lot of the SMB headwinds that, you know, the SaaS industry is kind of seeing as we head into 2024. I guess, is there any update on whether you're seeing any, you know, SMB weakness? Or, you know, maybe even some budget constraints from the MSPs themselves?

Operator: Hi, guys. This is Tommy <unk> on for Brett Congrats on another solid quarter.

Tommy Shinski: I guess last quarter, we talked a little bit about the MSP approach to that to the SMB sector and how that's kind of shielded you from a lot of that can be headwinds that.

Tommy Shinski: The SaaS industry is kind of seeing as we as we head into 2024.

Tommy Shinski: I guess is there any update if youre seeing any you know SMB weakness or you know maybe even some budget constraints from the SME msp's themselves.

Tianyi Jiang: Yeah, that's a great question. So, MSP segmentation is our approach to the SMB segment. For Microsoft, the SMB segment is well over 40% of their total revenue. So for us today, it's just under 20% of our total recurring revenue.

Speaker Change: That's great question, so MSP segmentation.

Tianyi Jiang: Alright.

Tianyi Jiang: <unk> to SMB segment for Microsoft F&B segment as well.

Tianyi Jiang: While over 40% of our total revenue.

Tianyi Jiang: So for US today is just under 20% of our total recurring is still the fastest growing segment for us.

Tianyi Jiang: It's still the fastest-growing segment for us. We see a level of abstraction, so we don't – because what we do is we offer essentially a management platform for these managed service providers to enable their businesses to scale, to manage hundreds, if not thousands, of Microsoft Cloud tenants behind the scenes. So from that perspective, it's a different layer.

Tianyi Jiang: We see a level of distraction. So we don't because what we do is we offer essentially a management platform for these managed service providers to enable their businesses to scale to manage hundreds if not thousands of <unk>.

Tianyi Jiang: Microsoft cloud tenants behind the scenes so from that perspective, its a different layer and from there. We actually continue to see very strong demand. We do have a very differentiated platform approach in the Microsoft cloud play with information management.

Tianyi Jiang: And from there, we actually continue to see very strong demand. We do have a very differentiated platform approach in the Microsoft Cloud play with information management, and we continue to see very strong demand from MSPs. The world was really focused on data protection, data integration, and control. And now, a very, very hot topic, of course, is Microsoft Co-Pilot Readiness. Policy Insight is the product, and Opus is the service, the hero SKUs now among the MSP community.

Tianyi Jiang: And we continue to see very strong demand from Msp's before was really focused around data protection data integration and control and now very very hot topic of course, this Microsoft Copilot readiness.

Tianyi Jiang: Policy insight as to product and hope is that are these products that hero Skus now among the NSP community. So yeah, we actually don't see much softness in that segmentation perhaps.

Tianyi Jiang: So yeah, we actually don't see much softness in that segmentation. Perhaps, as I indicated before, it's because we're really targeting and enabling the MSP business to grow. And for us, SMB, the small, medium business segment, is still just 20% recurring, while the overall market is at least 40% of the total market. So still a tremendous headwind and headroom and a green space for us to grow into. Thank you

Tianyi Jiang: Before it's because we're really targeting and enabling the MSP business to grow and for US SME SMB small medium business segment is still just 20% of our recurring while the overall market is at least 40% of the total market, so still a tremendous headwind and.

Tianyi Jiang: Headroom and.

Tianyi Jiang: A green space for us to grow into thank you.

Operator: Awesome, thanks and congrats again, guys.

Speaker Change: Awesome, Thanks, and congrats again guys.

Speaker Change: Thank you.

Nehal Sushil Chokshi: Thank you. The next question comes from Nehal Chokshi with Northland Capital Markets.

Operator: Thank you and the next question comes from the House Akshay with Northland capital markets.

Nehal Sushil Chokshi: Thanks and congrats on the strong quarter and strong raise. Your net new ARR was up 29% for the March quarter. How are you thinking about that net new ARR year-over-year growth as we move forward?

Nehal Sushil Chokshi: Alright, thanks, and congrats on the strong quarter or strong raise.

Nehal Sushil Chokshi: Your net new <unk> was up 29% for the March quarter how.

Nehal Sushil Chokshi: How are you thinking about the net new a are you already real growth as we move through the remainder of the year here.

James Caci: Thank you for your report as we move through the remainder of the year here.

James Caci: Yeah, so our guidance now for that we just put out implies $55 million of net new ARR for the year, and that'll be up about 10% over, you know, for the full year, year over year. So I think when we think about it over the course of the year on the net new, that's kind of how we're expecting the full year to shake out.

Speaker Change: Yeah. So I think our our guidance now for that we just put out implies 55 million of net new a O arm.

James Caci: For the year, and then it'll be up about 10% overall for the full year year over year. So I think when you think about it over the course of the year on the net new that's kind of how we're expecting the full year to shake out.

Nehal Sushil Chokshi: Right, I guess what I'm trying to get across is that I think that adds up.

Speaker Change: Right I guess, so what I'm trying to drive that is that I think that adds up to about $46 million net new <unk> for the remainder of three quarters.

Nehal Sushil Chokshi: I think that adds up to about $46 million in net new ARR for the remainder of the three quarters compared to $42 million in the comparable year-ago period, so that's up about 10% year-over-year. And yeah, you just did 30%.

Nehal Sushil Chokshi: Compared to 42.

Nehal Sushil Chokshi: In the comparable year ago period, So that's up about 10% year over year.

Nehal Sushil Chokshi: Is that.

Nehal Sushil Chokshi: And yet you just that 30% and so question here is that.

James Caci: And so, the question here is that what's behind what appears to be a deceleration in the net new ARR that's, Well, I think there's a couple of factors. I wouldn't say it's deceleration. But if you think about Q1 last year, Nehal, when we were sitting here, we had a relatively low Q1 last year. It's definitely the weakest part of last year, and it's definitely a comparison that we're comparing against. So we're pleased with the growth rate of 29%.

James Caci: Yeah.

James Caci: What's behind what appears to be a deceleration in the net new <unk> that you are expecting.

James Caci: Well I think I think there's a couple of factors not I wouldn't I wouldn't say, it's deceleration, but if you think about Q1 last year. When we were we were sitting here we had a relatively low Q1 last year, it's definitely the weakest part of last year and there's definitely a comp.

James Caci: We're comparing against so we're pleased with the growth of 29%, but it's also coming off a weak Q1 in particular.

James Caci: So again were.

James Caci: But it's also coming off a weak Q1 in particular. So again, we're pleased with the guidance that we have out there. I wouldn't call it a deceleration. We had strong performance in Q2 through Q4 of last year. And again, I think on that net incremental ARR, we feel good about that. And that gets us to our, you know, annual target of that 21%, which again, for the year, we're focused on achieving that growth rate and feel good about that guidance we have out there.

James Caci: We're pleased with the guidance that we have out there I wouldn't call. It a deceleration we had strong performance in Q2 through Q4 of last year and again I think on the net incrementally or are we.

James Caci: We feel good about that and that gets us to our.

James Caci: Annual target of 21%, which again for the year, where we're focused on achieving that growth rate and feel good about that guidance you have out there.

James Caci: By the way, 10% incremental ARR growth for the remainder of the year. Nothing to cry about.

James Caci: Great.

James Caci: By the way I mean, 10% incremental <unk> growth for the remainder of years nothing required by steps very good buy yourself anyhow.

Nehal Sushil Chokshi: T.J., thanks for the customer examples and especially the concrete example around how Opus is helping customers get their data Gen AI ready. Can you give us a sense as to what the ARPU adds as customers look at leveraging Avepoint's capabilities with respect to getting their data Gen AI ready? I know, that's a great question.

Speaker Change: T J.

Nehal Sushil Chokshi: Thanks for the.

Nehal Sushil Chokshi: Customer examples and especially as a concrete example around how opus is helping customers be get their data Gen AI ready.

Nehal Sushil Chokshi: Can you give us a sense as to what is the <unk> ad.

Nehal Sushil Chokshi: As customers look at leveraging <unk> capabilities with respect to getting their data journey already.

Tianyi Jiang: As we mentioned earlier, there's still a ton of experimentation happening. I think you probably also hear from other hyperscalers that the expectation for real revenue evidence monetization will really happen in 2025. This year, it's really because a lot of the challenge with AI deployment is it's actually change management. It has to drive from business owners, business C-levels versus just the IT conversation.

T.J.: I know that's great question as we mentioned earlier, there's still a ton of experimentation happening I think and you probably also here if my mother.

Tianyi Jiang: Hyperscale or is the expectation for <unk>.

Tianyi Jiang: Real revenue evidenced monetization.

Tianyi Jiang: We're really happened probably in 2025.

Tianyi Jiang: This year, it's really because a lot of I was just recently at the Microsoft Redmond headquarters around executive briefing.

Tianyi Jiang: The challenge with AI deployment.

Tianyi Jiang: Change management at.

Tianyi Jiang: It has to drive on business owners business.

Tianyi Jiang: Our fee levels versus just the I T conversation, so still a ton of experimentation and making sure that there is solid.

Tianyi Jiang: So, still a ton of experimentation and making sure that there's solid, concrete business ROI before folks are willing to really deploy this enterprise-wide, really deploy a massive amount of budget towards it. So, it's in the experimentation phase. We see a ton of that, and that adds, obviously, to the number of increases in conversations and opportunities in the pipeline. But I would say the real dollar value won't be seen, most likely, until next year.

Tianyi Jiang: <unk> business our ROI.

Tianyi Jiang: Before folks are willing to really deploy this enterprise wide.

Tianyi Jiang: Really deploy a massive amount of budget towards it so as experimentation phase. So we see a ton of that and we see that as obviously to the number.

Tianyi Jiang: Number of increases.

Tianyi Jiang: Conversations and opportunities in the pipeline, but I would say the real dollar value and we will see it most likely into next year.

Operator: That's great. Thank you.

Speaker Change: Okay, great. Thank you.

Operator: Okay.

Jason Noah Ader: Thank you. And the next question comes from Jason Ader with William Blair.

Operator: Thank you and the next question comes from Jason Haas.

Jason Noah Ader: And here with William Blair.

Jason Noah Ader: Yeah, thank you. Good afternoon, guys.

Jason Noah Ader: Yes. Thank you good afternoon guys.

Jason Noah Ader: I wanted to ask about multi product multi suite customers I know that you've.

James Caci: I wanted to ask about multi-product, multi-suite customers. I know that you talked a little bit about that. I don't know if you have specific metrics for us, but maybe you can just talk about any momentum there and then, beyond that, if you could build upon that and just maybe talk about the relative growth rates of each of your three suites and any color commentary on, you know, what is happening within each of those products.

James Caci: Talked a little bit about that I don't know if you have specific metrics for us, but maybe you can just talk to.

James Caci: Any momentum there and then.

James Caci: Beyond that if you could build upon that and just maybe talk about the relative growth rates of each of your three suites and any color commentary on.

James Caci: You know what what is happening within each of those product suites.

James Caci: Yes, so maybe the first part of that question, I think we provide, you know, the suites and the, you know, kind of multiple products and multiple suites within the customer. I think that metric we provide annually.

Speaker Change: Yeah. So maybe the first part of that question.

James Caci: We provide.

James Caci: The the suites and the kind of multiple.

James Caci: <unk>.

James Caci: Multiple suites within the customer I think with that metric, we're providing annually.

Speaker Change: But but I will say that Jason in terms of what we saw in Q2, we did see some again very nice growth from the existing customer base.

James Caci: But I will say that, Jason, in terms of what we saw in Q2, we did see some, again, very nice growth from the existing customer base. Most of the upselling that we see, or the sales to existing customers, is not so much more of the same product, but it is cross-sell motion. So we had a very strong quarter in Q2 in terms of where that landed. In terms of, you know, our annual disclosure around products, we've got about 50% of our customers that are on two or more products, and about 24% that are four or more products.

James Caci: Most of the Upselling that we see or the sales to existing customers is not so much more of the same product, but it is cross sell motion. So we had a very strong quarter in Q2 in terms of where that landed.

James Caci: In terms of our.

James Caci: Annual disclosure around products, we've got about 50% of our customers.

James Caci: Or on two or more products.

James Caci: And about 24% that are four plus products and then when we talk about and suites, it's roughly about 25% of our customers on two plus suites.

James Caci: And then when we talk about in suites, it's roughly about 25% of our customers on two plus suites. That's that annual metric that we're providing. We'll again provide that next year, but again, we saw a nice progression in upsells in Q1, and that led to that NRR of 110, which was, again, a very strong quarter for us.

James Caci: Annual metrics that we're providing will again provide that next year, but again, we're still we saw a nice progression in upsells in.

James Caci: In Q1 and that led to that MLR of 110, which is again, a very strong quarter for us.

James Caci: Gotcha. And then just the rank order of the growth rates by suite and then color commentary. I might love to hear TJ talk about just the kind of dynamics in each of those three suites and, you know, what's going really well.

Speaker Change: Okay, and then just a.

James Caci: Rank order the growth rates by Sweden, and color commentary, maybe maybe a love to hear T. J talk to the just the kind of dynamics in each of those three suites in.

TJ: What's going really well.

Tianyi Jiang: Yeah, so overall, the upsell, we're very pleased with that. We saw a 25% increase in upsell deals in Q1 compared to this time last year. And also, deals over $100,000, we saw a 40% increase compared to this time last year. Now, in terms of suites, as I mentioned earlier, it's really the control suite that really focuses on information management and access control. That's the most active.

Speaker Change: Yeah. So overall the upsell, it's our we're very pleased with that we saw 25% increase upsell deals in.

Tianyi Jiang: In Q1 compared to this time last year and also deals over 100000 that we saw 40% increase compared to this time last year now in terms of suites as I mentioned earlier.

Tianyi Jiang: Really the control's suite.

Tianyi Jiang: That really focus on information management.

Tianyi Jiang: And access control.

Tianyi Jiang: Again, in terms of dollar value, though, we are seeing again smaller deployments because we do it by subscription and C-count, marrying that to Microsoft's license model for their cloud. So because of that, experimentation across accounts is still focused on smaller focus groups and business leaders to roll out general AI capabilities. So there's definitely that happening.

Tianyi Jiang: That's the most active again in terms of dollar value, though we are seeing again smaller deployments because we do do buy subscription that seat count.

Tianyi Jiang: Marrying that of our Microsoft licensing model for their cloud.

Tianyi Jiang: So because of that.

Tianyi Jiang: Our mentation across accounts are still focus on a smaller focus groups business leaders to rollout generating capabilities. So there's definitely.

Tianyi Jiang: That happening and we do have a.

Tianyi Jiang: That is.

Tianyi Jiang: And we do have a playbook for cold-potted readiness that actually leverages all three because people need to prepare, secure, and optimize their data estate. So step one is preparing to centralize and enhance data integration integrity. And step two is securing that, which is to identify and also enforce content policies.

Tianyi Jiang: Set playbook for coal part of readiness that actually Leverages, all three suites, because people need to prepare secure and optimize their data state.

Tianyi Jiang: So step one is preparing us to centralize and enhanced data.

Tianyi Jiang: Great integrity.

Tianyi Jiang: Step two is secure that as identify.

Tianyi Jiang: And and also enforced content policies and last step optimized is too.

Tianyi Jiang: And the last step, optimize, is to go forward with governance and automation. You have to do both at the input of the AI model as well as the outputs, because now almost 10% of data generated is being done by Gen AI. So the output also needs to be very much controlled and filtered and moderated because we all know with large language models that you have an inherent about 10%, however, around that of a hallucination that's happening.

Tianyi Jiang: Go forward without governance and automation.

Tianyi Jiang: To do both at the inputs of the AI model as well as the outputs because.

Tianyi Jiang: Now to.

Tianyi Jiang: Almost 10% of our data generated are being done by Jim AI. So the output also need to be very much controlled and filtered and moderated because we all know with larger language models that you have inherent about 10%.

Tianyi Jiang: Hover around that of a hallucination that's happening so because output oftentimes. There's also use as inputs of data models to capture and model concept drift as the business environment evolves.

Tianyi Jiang: So because the output oftentimes is also used as input to data models to capture and model concept drift as the business environment evolves for large enterprises, you always have to have that essentially software, governance, and man-in-the-middle type of approach to ensure that this continuous feedback to the model is managed, measured, and optimized. So, in fact, it's actually driving all three of our products.

Tianyi Jiang: For large enterprises.

Tianyi Jiang: So you never you always have to have that.

Tianyi Jiang: Essentially software governance and man in the middle type of approach to ensure that this continuous feedback to the model, it's at our managed and measured.

Tianyi Jiang: And optimized so in fact, it's actually driving all three of our product suites.

Speaker Change: Thanks, guys. Good luck.

Operator: Thank you. And the next question comes from Gabriela Borges of Goldman Sachs.

Tianyi Jiang: Thank you and the next question comes from Gabriela Borges with Goldman Sachs.

Gabriela Borges: Hi, good afternoon. Thank you.

Gabriela Borges: Hi, good afternoon. Thank you T. J I've pointed has this unique vantage playing in two ways. One is the savings that you enable thing our customers when they think things like storage optimization and the other is the projects that you have visibility into from an AI deployments.

Tianyi Jiang: TJ, Avepoint has this unique vantage point in two ways. One is the savings that you enable for your customers when they think through things like storage optimization. And the other is the projects that you have visibility into from an AI deployment standpoint. So my question for you is, how is the push towards cost optimization trending in some of your larger customers relative to last year? And the second part of the question is, Where is the budget for some of these AI projects coming from? And can Avepoint maybe connect the two pieces where you're enabling savings in one area of the business but then go towards funding AI projects in another area?

Gabriela Borges: So my question for you is how long is that push towards cost optimization trending and so I'm not sure how large of a customer as well unless you have lost share and the second part of that question is.

Tianyi Jiang: Whereas the budget for some of these AI projects coming from and can I point, maybe connect the two pieces were you're enabling savings in one area of the business with them, that's not something I projects and one on the area.

Tianyi Jiang: That's a great question, Gabriela. So we continue to see consolidation plays from customers where they like platform vendors; they like less singular products and fewer vendors, and this decreases risks and allows them to focus on high-quality platform providers. So that economic focus and platform approach continues into this year. And we do, as you mentioned, give customers significant savings. One of the important values we provide in the Microsoft Cloud ecosystem is to help our customers maximize ROI, return on investment, on their existing cloud investments.

TJ: That's a great question Gabriele.

Tianyi Jiang: So we continue to see consolidation.

Tianyi Jiang:

Tianyi Jiang: Some customers, where they like platform vendors they like.

Tianyi Jiang: Less singular products and less vendor.

Tianyi Jiang: And this decrease was risks and allow them to focus on the high quality platform providers so that.

Tianyi Jiang: Economics focus and platform approach continues into this year.

Tianyi Jiang: So we do as you mentioned.

Tianyi Jiang: Gave customers significant savings.

Tianyi Jiang: One of the.

Tianyi Jiang: Important value we provide in the Microsoft ecosystem is to help our customers maximize their ROI return on investment on their existing quality investments.

Tianyi Jiang: So we ourselves actually consume about $100 million of Azure over a three-year period, and that's growing very rapidly. And from that kind of economic scale, we're able to drive further savings for our customers. So storage optimization is just one such savings.

Tianyi Jiang: We ourselves actually consume about $100 million of Azure over a three year period, and thats growing very rapidly and from that kind of economic of scale, we're able to drive a further savings for our customers. So storage optimization is just one such savings. The others are also be able to provide consistent day.

Tianyi Jiang: Management capabilities across different licensed type tiers.

Tianyi Jiang: The others will also be able to provide consistent data management capabilities across different license type tiers, as well as multi-cloud. I can't emphasize enough that in today's world, customers are not only on one hyperscaler. In fact, most enterprise customers, including government agencies, have a mandate to do business continuity for business reasons. So they intentionally have multiple cloud vendors just to ensure that they have business resiliency. And the second part of the question is the budget bucket.

Tianyi Jiang: As well as multi cloud.

Tianyi Jiang: I can't emphasize enough that today's world customer.

Tianyi Jiang: Customers are not only on one.

Tianyi Jiang: One hyperscale or in fact.

Tianyi Jiang: Most of the enterprise customers, including government agencies have a mandate to do.

Tianyi Jiang: <unk> business continuity reasons, so they they actually intentionally have multiple cloud vendors just to ensure that they have a business resiliency.

Tianyi Jiang: It is true that increasingly, the conversations are shifting towards the business budget versus the IT budget. If you only look at the pure IT budget, it's very hard to say, hey, I'm going to spend an extra $30 per user per month just on generic capabilities. From an IT infrastructure planning perspective, considering that that's equivalent to what more than most customers pay for the entirety of Office 365 today, with Teams, with Office, with email, with one terabyte of OneDrive, et cetera, combined.

Tianyi Jiang: And the second part of your question is that budget.

Tianyi Jiang: That is true increasingly the conversations is shifting towards the business budget versus the I T budget. If you only look at pure it budget, it's very hard to say, hey, I'm going to spend the extra 30 bucks per user per month.

Tianyi Jiang: Just on G&A capabilities.

Tianyi Jiang: If I my it infrastructure planning perspective.

Tianyi Jiang: Considering that that's equivalent to what more than most customers pay for entirety of.

Tianyi Jiang: Office three ship out today.

Tianyi Jiang: With teams with office with email with one terabyte <unk> drive et cetera, combined however, when you take it into a business context, when youre driving business outcomes.

Tianyi Jiang: However, when you take it into a business context, when you're driving business outcomes, that is a much easier and different conversation. And this is where we're seeing very, very aggressive and active experimentation across the board to drive business ROI. So yes, while the copilot experimentation happening is limited to smaller footprints within the overall user population in companies, those user populations today are all your power, effectively, power users within the business community.

Tianyi Jiang: That is a much easier and different conversation and this is what we're seeing.

Tianyi Jiang: Very very aggressive and active experimentation across the board to drive that business Rois. So yes, while the copilot experimentation happening are limited to smaller footprints.

Tianyi Jiang: Within the overall user population in companies, but those user population today are all your power.

Tianyi Jiang: Effectively power users among business community.

Tianyi Jiang: You're the head of sales, you're the head of marketing, head of HR, and CFOs. So when you have that kind of conversation, it's a very different conversation than just pure IT CIO-level conversations. So yes, it is actually a very different budget conversation altogether.

Tianyi Jiang: Head of sales you are head of marketing head of HR Cfo's. So when you have that kind of conversation is a very different conversation.

Tianyi Jiang: Then just pure.

Tianyi Jiang: <unk> CIO level conversation.

Tianyi Jiang: So yes, it is actually a very different budget conversation altogether.

Gabriela Borges: That makes sense. And then, given some of the dynamics we were just walking through and the newer products that Avepoint has in its portfolio, talk to us about how the go-to-market is evolving, both from a cross-sell standpoint and then from a customer education standpoint as well. How do you intersect some of the problems that you're solving with what customers are planning for 2024? How does that conversation get catalyzed?

Speaker Change: Yeah that makes sense and then give them some of them are on Sorrento smoking chair and your products not quite half.

Gabriela Borges: Hi, Al talk to us about how that kind of market is evolving from a cross sell standpoint, and then from a customer education at some point as well how do you ensure sought a must have.

Gabriela Borges: Problems with what the customers are planning for in 2024, how does that conversation that catalyst.

Tianyi Jiang: Yeah, that's a great question. So what's really interesting is Apple has been in the business of information management and data management for the last 20 plus years. And it's a very easy conversation with highly regulated industry customers because just policy and regulations demand it. But now with the Gen AI rollout, and everyone wants to take advantage of AI capabilities and disruptions to enhance and innovate their business, the market is educating them very, very quickly about the need for a very solid and clean data estate. So otherwise, it's a trash in, trash out issue because it's not magic, right?

Speaker Change: Yes, that's a great question so.

Gabriela Borges: So what's really interesting is aflac has been in the business of information management data management for the last 20 plus years.

Tianyi Jiang: It's a very easy conversation with a highly regulated industry customers because that just policy and regulations demanded but now with gen. AI rollout and everyone wants to take advantage of AI capabilities and disruptions to enhance and innovate on that.

Tianyi Jiang: <unk>.

Tianyi Jiang: The market educating them very very quickly that need for.

Tianyi Jiang: A very solid and clean data states so otherwise it's a.

Tianyi Jiang: So AI models heavily, heavily rely on your corporate data estates when you do fine tuning on existing large language models to take advantage of these new technologies and your existing domain-specific industry data so that your AI capability is not just a summer intern type of knowledge base but rather 20 years' worth of industry knowledge in your specific company and domain. So with that, the awareness of data and information management and governance is that it is becoming the forefront across our industries. So that's really the sea change that we see before us; we have to educate customers about the need for data management and governance and security. And today, they're actually coming to us to ask for that.

Tianyi Jiang: Cash and cash out issue because it's just not magic right. So AI models are heavily heavily rely on your corporate data states weighing too fine tunings on existing large language models to take advantage of these new technology and your existing domain specific industry data. So that you are.

Tianyi Jiang: AI capability is not just a summer intern had the knowledge base, but rather 20 year decades worth of industry knowledge and your specific company and domain. So big that the awareness of data and information management and governance.

Tianyi Jiang: It becomes a forefront across all industries. So that's really the sea change that we see before we have to educate customer the need for data management and governance and security and today, they are actually coming to us to ask for that and as I mentioned with our.

Gabriela Borges: And as I mentioned, with our playbook around what we call oftentimes working with regional partners and Microsoft regional teams around co-pilot readiness, is that three step process of prepare, secure, and optimize, and continually optimize and monitor your ongoing data usage to train and refine your models. That actually brings forth all of our product sets and our platform, and that also further highlights the need for a platform. You can no longer just offer point products that focus on just one aspect of the information management lifecycle or just focus on data protection. You have to really consider the entire lifecycle and data management and continuous governance cycle to be successful. So it elevates the importance of our platform even more.

Gabriela Borges: Our playbook around what we call oftentimes to work with regional partners and Microsoft reach our teams around coal Patty readiness is that a three step process of the pair secure and optimize and continually optimize and monitor the ongoing.

Gabriela Borges: Data usage to train and refine your models that actually brings forth all of our product set and our platform and that also further highlights the need for our platform.

Gabriela Borges: You can no longer just offer a point product. That's just one aspect of that information and management lifecycle are or just only focused on data protection.

Gabriela Borges: Have to really consider the entire.

Gabriela Borges: Lifecycle and data management and continuous governance.

Gabriela Borges: Cycle.

Gabriela Borges: To be successful so it elevates the importance of our platform even more.

Operator: Very interesting. Thank you. Thank you. That concludes our program.

Gabriela Borges: Yeah.

Speaker Change: Very interesting thank you.

Tianyi Jiang: Thank you. That concludes our question and answer session. I would like to turn the conference back over to CEO Tianyi Jiang for any closing comments.

Operator: Thank you that concludes our question and answer session I would like to turn the conference back over to CEO T. Zhang for any closing comments.

Tianyi Jiang: Yeah.

Tianyi Jiang: Okay.

Tianyi Jiang: Thank you.

Tianyi Jiang: The rate of innovation has always been rapid in our sector. It's gaining even more momentum, powered by the rise of AI. The energy was tangible during my recent visit with fellow Microsoft IGM partners at the Executive Briefing Center in Redmond. As I mentioned earlier, it was an inspiring experience to be part of such a massive technology ecosystem as we embrace the AI transformation wave together. At that point, we're excited by the transformational potential of AI, and we're equally aware of the challenges it poses to organizations around the world.

Tianyi Jiang: The rate of innovation always switch you know our sector, it's gaining even more momentum powered by the rise of AI.

Tianyi Jiang: Energy was tangible or during my recent visit with fellow Microsoft IGN partners, Our executive briefing center in women as I mentioned earlier it was riding experience to be part of such a massive technology ecosystem as we embrace the AI transformation wait together.

Tianyi Jiang: At that point, we're excited by the transformational potential of AI and we're equally aware of the challenges it poses to organizations around the world, we're ready to capture the many opportunities ahead of us.

Tianyi Jiang: We're ready to capture the many opportunities ahead of us, and we look forward to a strong 2024. Thank you again for joining us today, and we look forward to speaking with you more this quarter.

Tianyi Jiang: And we look forward to a strong 2024.

Tianyi Jiang: Thank you again for joining us today, and we look forward to speaking with you more this quarter.

Operator: Thank you. The Avepoint conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Speaker Change: Thank you Yeah point conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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