Q2 2024 AvePoint Inc Earnings Call
Operator: Good day, and welcome to the Avepoint Inc. second quarter 2024 earnings call. All participants will be in listen-only mode.
Speaker Change: Good day and welcome to the Avepoint, Inc. second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal a conference specialist 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. I would now like to turn the conference over to Jamie Arestia. Vice President of Investor Relations. Please go ahead. Thank you.
Speaker Change: 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.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Jamie Arestia.
Jamie Arestia: Thank you, Operator. Good afternoon, and welcome to Avepoint's second quarter 2024 earnings call. With me on the call this afternoon is 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.
Jamie Arestia: Vice President of Investor Relations.
Speaker Change: Please go ahead.
Jamie Arestia: Thank you, operator. Good afternoon and welcome to Avepoint's second quarter 2024 earnings call. With me on the call this afternoon is Dr. TJ Jiang, Chief Executive Officer, and Jim Caci, Chief Financial Officer.
Jamie 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.
Speaker Change: After preliminary remarks, we will open the call for a question and answer session.
Speaker Change: 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.
Speaker Change: We encourage you to review the Safe Harbor Statements contained in our press release for a more complete description.
AvePoint: All material in the webcast is the sole property and copyright of Avepoint with all rights reserved.
AvePoint: 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.
Jamie Arestia: The non-GAAP measures are presented in this presentation as we believe they provide investors with a means of understanding how management evaluates a 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 gap financial measures is available in our second 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.
AvePoint: The non-GAAP measures are presented in this presentation as we believe they provide investors with a means of understanding how management evaluates a company's operating performance.
AvePoint: 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.
AvePoint: A reconciliation of these measures to the most directly comparable GAAP financial measures is available in our second 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.
Tianyi Jiang: Thank you, Jamie. And thank you to everyone joining us on the call today. We're pleased to deliver another strong quarter, and our results reflect the ongoing customer demand for the Avepoint Confidence Platform, which enhances data security and cyber resilience, reduces costs, and improves decision-making. At the same time, our steady focus on execution and profitable growth once again enabled us to exceed our financial guidance for all key metrics, as organizations grapple with the tensions between the rising demand for AI tools and their current state of digital maturity. The critical role of data readiness has become increasingly clear. Additionally, the frequency and sophistication of cyberattacks are escalating, further underscoring the need for robust data governance and security.
AvePoint: With that, let me turn the call over to TJ.
TJ: Thank you, Jamie, and thank you to everyone joining us on the call today.
TJ: We're pleased to deliver another strong quarter, and our results reflect the ongoing customer demand for the Apple Incompetence Platform, which enhances data security and cyber resilience, reduces costs, and improves decision making.
Speaker Change: At the same time, our steady focus on execution and profitable growth once again enabled us to exceed our financial guidance for all key metrics.
Speaker Change: As organizations grapple with the tensions between the rising demand for AI tools and their current state of digital maturity, the critical role of data readiness becomes increasingly clear.
Speaker Change: Additionally, the frequency and sophistication of cyberattacks is escalating, further underscoring the need for robust data governance and security.
Tianyi Jiang: These challenges only become more pronounced in a multi-cloud environment, which is what we typically see in our customers and processes. Taken together, these macro trends position Avepoint exceptionally well because their problems we have solved for more than 20 years. And over that time, our platform evolution has kept pace with the proliferation of data, an increasingly dangerous threat environment, and the growing need for data security. Our technical expertise and innovation have brought us to this moment. We're addressing these data management needs has never been more urgent.
Speaker Change: These challenges only become more pronounced in a multi-cloud environment, which is what we typically see in our customers and prospects.
Speaker Change: Taken together, these macro trends position Avepoint exceptionally well because their problems we have solved for more than 20 years.
Speaker Change: And over that time, our platform evolution has kept pace with the proliferation of data, an increasingly dangerous threat environment, and the growing need for data security.
Speaker Change: Our technical expertise and innovation have brought us to this moment.
Speaker Change: We're addressing these data management needs has never been more urgent.
Tianyi Jiang: We see this playing out across our global business, driving our outperformance in the second quarter and providing us with the confidence to again raise our full year expectations. I'll spend my time today discussing these trends, and we'll share some key customer wins from the quarter. Then, Jim will cover our financial performance and updated guidance in more detail. So, let's jump right in.
Speaker Change: We see this playing out across our global business, driving our outperformance in the second quarter, and providing us the confidence to again raise our full year expectations.
Speaker Change: I'll spend my time today discussing these trends and will share some key customer wins from the quarter. Then, Jim will cover our financial performance and updated guidance in more detail.
Tianyi Jiang: Starting with customer demand to leverage generative AI contrasted with a reality of where most organizations currently are on their digital workplace journey, I recently hosted a CXO event on how to navigate AI with confidence. The discussions I had with the panelists and attendees revealed a significant appetite for practical AI implementation strategies and the knowledge that a strong data foundation is a crucial prerequisite to deploying AI. These conversations reinforce that the success of Gen AI implementation is closely tied to an organization's digital workplace maturity, specifically, effective AI strategies depend on strong data management, which addresses the data security issues that often thwart AI adoption. And the reality is that today, most digital workplaces are woefully immature.
Jim: So, let's jump in. Starting with the customer demand to leverage generative AI, contrasted with the reality of where most organizations currently are in their digital workplace journey.
Tianyi Jiang: Statistics from Gartner, which established a five-stage model assessing the maturity of digital workplaces, back this up. Gartner finds that the successful integration of generative AI happens at the fourth stage, and only after organizations have modernized their infrastructure and data to keep pace with technological changes. So where are most organizations today?
Tianyi Jiang: Gartner's recent assessment shows nearly 85% of organizations are still in the first two stages and are just starting to take action to modernize their data. And less than 2% have reached that critical fourth stage where the successful integration of generative AI can occur. This is where Avepoint comes in. Our approach manages our customers' entire data estate, which often spans multiple cloud environments, ensuring their data is ready for AI and can remain competitive in a rapidly evolving digital landscape.
Speaker Change: I recently hosted a CXO event on how to navigate AI with confidence.
Speaker Change: The discussions I had with the panelists and attendees revealed a significant appetite for practical AI implementation strategies and the knowledge that a strong data foundation is a crucial prerequisite to deploying AI.
Speaker Change: These conversations reinforce that the success of GenAI implementation is closely tied to an organization's digital workplace maturity.
Speaker Change: Specifically, effective AI strategies change on strong data management, which addresses the data security issues that often tender AI adoption.
Speaker Change: And the reality is that today, most digital workplaces are woefully immature.
Speaker Change: Statistics from Gartner, which established a five-stage model assessing the maturity of digital workplaces, back this up.
Speaker Change: Garner finds that the successful integration of generative AI happens at the fourth stage and only after organizations have modernized their infrastructure and data to keep pace with technological changes.
Speaker Change: So, where are most organizations today?
Speaker Change: Gardner's recent assessment shows nearly 85% of organizations are still in the first two stages and are just starting to take action to modernize their data. And less than 2% have reached that critical fourth stage where the successful integration of generative AI can occur.
AvePoint: This is where Avepoint comes in. Our approach manages our customers' entire data estate, which often spans multiple cloud environments, ensuring their data is ready for AI and can remain competitive in a rapidly evolving digital landscape.
Tianyi Jiang: This is why we continue to see a healthy pipeline and demand for the platform. Our ability to solve a wide swath of technical challenges in turning neighboring AI adoption across the enterprise is something that no other software provider can match. And while we will remain cautious of the macro environment, we're confident in our ability to continue capitalizing on the long-term opportunity ahead of us. I want to highlight a few recent customer wins that demonstrate our resounding success in data management and addressing these data security and data governance challenges, as the team had another strong quarter acquiring high-quality new logos and selling even more of the Avepoint confidence platform to existing customers.
Speaker Change: This is why we continue to see a healthy pipeline and demand for our platform. Our unique ability to solve a wide swath of technical challenges, in turn enabling AI adoption across the enterprise, is something that no other software provider can match.
Speaker Change: And while we will remain cautious of the macro environment, we are confident in our ability to continue capitalizing on the long-term opportunities ahead of us.
Speaker Change: I want to highlight a few recent customer wins that demonstrate our resounding success in data management and in addressing these data security and data governance challenges.
Speaker Change: As a team had another strong quarter acquiring high quality new logos and selling even more of the Avepoint confidence platform to existing customers.
Tianyi Jiang: Let's start with the financial service industry, where a recent McKinsey survey found that the quality of unstructured data, particularly the security classification of new data created, was one of the biggest challenges to scaling gen AI. This led a Fortune 20 global financial service organization with 280,000 users to become an Affluent customer in the quarter. They could not meet their legal team's requirements for secure records management, which prevented them from moving legacy data into the cloud.
Speaker Change: Let's start with the financial service industry, where a recent McKinsey survey found that the quality of unstructured data, particularly the security classification of new data created, was one of the biggest challenges to scaling gen AI.
Speaker Change: This led a Fortune 20 global financial service organization with 280,000 users to become an Affluent customer in the quarter.
Speaker Change: They could not meet their legal team's requirements for secure records management, which prevented them from moving legacy data into the cloud.
Tianyi Jiang: After purchasing products from all three suites, one of the world's largest investment banks can securely unify their data, build a scalable data governance framework, and streamline records management policies. As a result, they will realize improved data visibility and data quality and reduce the risk of breaches, positioning them to more confidently deploy Gen-AI tools going forward. Another financial services win was a Fortune 500 US-based institution which sought to deploy CoPilot for Microsoft 365 but could not begin until they implemented data governance controls to address oversharing of sensitive data for their 25,000 users.
Speaker Change: After purchasing products from all three suites, one of the world's largest investment banks can securely unify their data, build a scalable data governance framework, and streamline records management policies.
Speaker Change: As a result, they will realize improved data visibility and data quality and reduce the risk of breaches, positioning them to more confidently deploy Gen AI tools going forward.
Speaker Change: Another financial services win was a Fortune 500 US-based institution which sought to deploy a co-pilot for Microsoft 365 but could not begin until they implement data governance controls to address oversharing of sensitive data for their 25,000 users
Tianyi Jiang: After we demonstrated our ability to mitigate these concerns, this existing customer purchased multiple products from our control suite, allowing them to quickly understand security risks across the environment and proactively prevent future oversharing of data. These are fantastic financial services customer wins. But, as we have said many times, the problems we solve are not confined to particular industries.
Speaker Change: After we demonstrated our ability to mitigate these concerns, this existing customer purchased multiple products from our control suite, allowing them to quickly understand security risks across the environment and proactively prevent future oversharing of data.
Speaker Change: These are fantastic financial services customer wins, but as we have said many times, the problems we solve are not confined to particular industries.
Tianyi Jiang: In managing vast digital workspaces, both a global automotive manufacturer and a Fortune 10 healthcare giant face challenges like the ones I just described. In order to comprehensively manage their Microsoft PC5 workspaces and ensure data ownership, regulatory compliance, and proactive policy enforcement across their 75,000 users, the automotive manufacturer became a new customer in Q2, purchasing multiple products from our Control and Resiliency. At the same time, we saw the health care organization expand their existing investment in Avepoint 2.2, purchasing the entire set of solutions in our control suite.
Speaker Change: In managing vast digital workspaces, both a global automotive manufacturer and a Fortune X healthcare giant face challenges like the ones I just described.
Speaker Change: In order to comprehensively manage their Microsoft 365 workspaces and ensure data ownership, regulatory compliance, and proactive policy enforcement across their 75,000 users, the automotive manufacturer became a new customer in Q2.
Speaker Change: Purchasing multiple products from our control and resilience suites.
Speaker Change: At the same time, we saw the healthcare organization expand their existing investment in Avepoint in Q2.
Tianyi Jiang: Going forward, they can quickly identify and remediate oversharing, implement effective data access policies, and ensure a secure and compliant digital environment to adopt generative AI solutions across their 200,000 users. These are just a few examples of how our platform establishes the foundational elements of data management and data governance, setting the stage for the adoption of successful AI strategies, including CoPilot for Microsoft 365, and driving transformative outcomes for organizations around the world.
Speaker Change: Purchasing the entire set of solutions in our control suite. Going forward, they can quickly identify and remediate oversharing, implement effective data access policies, and ensure a secure and compliant digital environment to adopt generative AI solutions across their 200,000 users.
Speaker Change: These are just a few examples of how our platform establishes the foundational elements of data management and data governance, setting the stage for the adoption of successful AI strategies, including CoPilot for Microsoft 365, and driving transformative outcomes.
Tianyi Jiang: Before I turn it over to Jim, I want to spend a moment discussing how we continue to innovate and meet the evolving needs of our customers, many of whom have multi-cloud strategies today. And a recent Saixara survey confirmed this to be the case for nearly 90% of enterprises, which, in addition to Microsoft 365, depend on platforms such as Google and Salesforce to meet diverse business needs. While this approach makes good business sense, it also introduces significant challenges in data management and governance, such as cloud misconfiguration.
Speaker Change: for organizations around the world.
Speaker Change: Before I turn over to Jim, I want to spend a moment discussing how we continue to innovate and move the evolving needs of our customers.
Speaker Change: many of whom have multi-cloud strategies today. And a recent Traxera survey confirmed this to be the case for nearly 90% of enterprises, which, in addition to Microsoft 365, depend on platforms such as Google and Salesforce to meet diverse business needs.
Speaker Change: While this approach makes good business, they also introduce you to the different challenges in data management and governance, such as cloud misconfiguration. Currently reported that 60% of organizations today will prioritize addressing this list up from 25% in 2021.
Tianyi Jiang: Garner reported that 60% of organizations today prioritized addressing this list, up from 25% in 2021. As our customers have evolved, we have expanded our multi-cloud approach, ensuring that the leading data protection solutions of the Appwin Confidence Platform span the most commonly leveraged cloud ecosystems. One example is the strategic partnership we recently entered into with SADA, one of the world's top Google Workspace partners. SADA now offers our award-winning data protection solution for Google Workspace and Google Classroom.
Speaker Change: As our customers have evolved, we have expanded our multi-cloud approach, ensuring that the leading data protection solutions of the Apple and Confluence platforms span the most commonly leveraged cloud ecosystems.
Speaker Change: One example is the strategic partnership we recently entered into with SADA, one of the world's top Google Workspace partners.
Speaker Change: SADA now offers our award-winning data protection solution for Google Workspace and Google Classroom. And this partnership will be especially significant for regulated industries, where security and compliance are paramount.
Tianyi Jiang: And this partnership will be especially significant for regulated industries, where security and compliance are paramount and have facilitated seamless integration and protection across cloud environments. Avepoint empowers organizations to maximize their multi-cloud strategies and confidently adopt AI technology, while maintaining high standards for data protection and cyber resilience. For example, a leading North American grocery chain struggled to manage over 400,000 user accounts across multiple cloud ecosystems, a challenge further compounded by the recent acquisition of another major chain.
Speaker Change: By facilitating seamless integration and protection across cloud environments, Avepoint empowers organizations to maximize their multi-cloud strategies and confidently adopt AI technology.
Speaker Change: while maintaining the high standards for data protection and cyber resilience. For example, a leading North America grocery chain struggled to manage over 400,000 user counts across multiple cloud ecosystems, a challenge further compounded by the recent acquisition of another major chain.
Tianyi Jiang: To effectively manage and report on the expanded user environment, this Fortune 50 company purchased three solutions from our control suite. Going forward, they can now meet data governance and security audit requirements, realize improved security resource allocations, and more efficiently manage users and workspaces across multiple cloud environments. To conclude, Avepoint is uniquely positioned to support organizations in their journey toward AI-driven transformation. By addressing the critical challenges of data security, governance, and management, we empower our clients to mitigate the risks of Gen AI while harnessing its full potential.
Speaker Change: To effectively manage and report on an expanded user environment, this Fortune 50 company purchased these solutions from our control suite.
Speaker Change: Going forward, they can now meet data governance and security audit requirements.
Speaker Change: realizing improved security resource allocations and more efficiently manage users and workspaces across multiple cloud environments.
Speaker Change: To conclude, Avepoint is uniquely positioned to support organizations in their journey toward AI-driven transformation.
Speaker Change: By addressing the critical challenges of data security, governance, and management in power our clients to mitigate the risks of Genia, the harnessing its full potential.
Tianyi Jiang: I want to thank the team for their tireless efforts this quarter, and I know I speak for them when I say how excited I am for a strong second half of 2024. With that, I will turn the call over to Jim.
Speaker Change: I want to thank the team for their tireless efforts this quarter, and I know I speak for them when I say how excited I am for a strong second half of 2024. 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 another strong set of results across the board. You've heard us discuss our commitment to profitable growth since the beginning of 2023. And today, we are pleased to deliver our sixth consecutive quarter of both meaningful top-line growth and operating margin expansion, raising our full-year expectations each step of the way. In an uncertain macro environment, our focus has been on controlling the controllable, and the team's ongoing execution positions us well to continue delivering value to Avepoint shareholders as we progress toward our Rule of 40 and GAAP profitability targets in 2025.
Jim: Thanks, TJ, and good afternoon, everyone. Thanks for joining us today as we review another strong set of results across the board.
Speaker Change: You've heard us discuss our commitment to profitable growth since the beginning of 2023. And today, we are pleased to deliver our sixth consecutive quarter of both meaningful top-line growth and operating margin expansion.
Speaker Change: raising our full-year expectations each step of the way.
Speaker Change: In an uncertain macro environment, our focus has been on controlling the controlable.
Speaker Change: and the team's ongoing execution positions us well to continue delivering value to Avepoint shareholders as we progress toward our Rule of 40 and GAAP profitability targets in 2025.
James Caci: With that, let's turn to our Q2 results. For the second quarter and June 30th, 2024, total revenues were $78 million, an increase of 20% year over year and above the high end of our guidance. In addition, we are pleased that total revenues reached approximately $300 million on a trailing 12-month basis this quarter. Within total Q2 revenue, second quarter SAS revenue was $53.6 million, growing 40% year-over-year and continuing to be our fastest-growing revenue segment.
Speaker Change: With that, let's turn to our Q2 results.
Speaker Change: For the second quarter ended June 30, 2024, total revenues were $78 million, an increase of 20% year-over-year and above the high end of our guidance.
Speaker Change: In addition, we are pleased that total revenues reached approximately $300 million on a trailing 12-month basis this quarter.
Speaker Change: Within total Q2 revenue, second quarter SAS revenue was $53.6 million, growing 40% year-over-year and continuing to be our fastest growing revenue segment.
James Caci: And in Q2, SAS comprised 69% of total revenues, compared to 59% a year ago. Additionally, 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 grew 4% year-over-year but declined as a percentage of second quarter revenues to 13%. And because services is our only non-recurring business, 87% of our total Q2 revenues were recurring, our highest ever percentage, surpassing the 86% recurring revenue mix we called out last quarter. Our strong SAS performance is also evident as we look at our results from a regional perspective.
Speaker Change: And in Q2, SAS comprised 69% of total revenues compared to 59% a year ago. Additionally, our other revenue lines continue to perform in line with our expectations and commentary.
Speaker Change: Term license and support, as well as maintenance revenue, declined year over year, both in dollars and as a percentage of total revenue.
Speaker Change: At the same time, services grew 4% year over year, but declined as a percentage of second quarter revenues to 13%.
Speaker Change: And because services is our only non-recurring business, 87% of our total Q2 revenues were recurring, our highest ever percentage, surpassing the 86% recurring revenue mix we called out last quarter.
James Caci: In North America, SAS revenues grew 40% year over year and represented 74% of total North American revenues, which in turn grew 12% year over year. In EMEA, SAS revenues grew 36% year-over-year and represented 84% of total EMEA revenues, which in turn grew 18% year-over-year. And in APAC, SAS revenues grew 50% year-over-year and represented 46% of total APAC revenues, which in turn grew 36% year-over-year. The same strength is evident as we look at the year-over-year growth in regional ARR, which, as we have said, provides a better view of the underlying momentum of the business everywhere we operate. Each region was, again, a strong contributor to our overall performance.
Speaker Change: Our strong SAS performance is also evident as we look at our results from a regional perspective.
Speaker Change: In North America, SaaS revenue is 40% new over year, and represent 74% of total North America revenues, which in turn, the new 12% year over year.
Speaker Change: In EMEA, SAS revenues grew 36% year-over-year and represented 84% of total EMEA revenues, which in turn grew 18% year-over-year.
Speaker Change: And in APAC, SAS revenues grew 50% year-over-year and represented 46% of total APAC revenues, which in turn grew 36% year-over-year.
Speaker Change: The same strength is evident as we look at the year of year growth in regional ARR, which as we have said provides a better view of the underlying momentum of the business everywhere we operate.
James Caci: Lastly, our EMEA region's ARR surpassed $100 million this quarter, and I want to congratulate the entire EMEA team for their efforts in achieving this milestone. Continuing now with total ARR and other key metrics we assess on a quarterly basis, as of June 30, 2024, total ARR was $290.1 million, representing year-over-year growth of 23%. As a result, net new ARR in Q2 was $15.6 million and grew 13% year over year.
Speaker Change: [inaudible]
Speaker Change: Lastly, our EMEA region's ARR surpassed $100 million this quarter, and I want to congratulate the entire EMEA team for their efforts in achieving this milestone.
Speaker Change: Continuing now with total ARR and other key metrics we assess on a quarterly basis.
Speaker Change: As of June 30, 2024, total ARR was $290.1 million, representing year-over-year growth of 23%.
Speaker Change: As a result, net new ARR in Q2 was $15.6 million and grew 13% year-over-year.
James Caci: Additionally, we ended the second quarter with 594 customers with ARR of over $100,000, an increase of 20% from the prior year. Additionally, as of the end of Q2, 52 percent of our total ARR came through the channel, compared to 49 percent a year ago. And for Q2, specifically, 61 percent of our incremental ARR came through the channel, compared to 62 percent for Q1 of 2024 and 61 percent for Q2 of 2023. Now, to our customer retention rate.
Speaker Change: Officially, we ended the second quarter with 594 customers with air of over $100,000 and increase of 20% from the prior year.
Speaker Change: As of the end of Q2, 52% of our total ARR came through the channel, compared to 49% a year ago.
Speaker Change: And for Q2 specifically, 61% of our incremental ARR came through the channel, compared to 62% for Q1 of 2024 and 61% in Q2 of 2023.
James Caci: Adjusted for the impact of FX, our trailing 12-month rose retention rate for the second quarter was 87%, consistent with our performance in Q1 and throughout 2023. At the same time, our FX adjusted net retention rate for the second quarter was 110%.
Speaker Change: Turning now to our customer retention rates.
Speaker Change: Adjusted for the impact of FX, our trailing 12-month rose retention rate for the second quarter with 87% consistent with our performance in Q1 and throughout 2023.
Speaker Change: At the same time, our FX-adjusted net retention rate for the second quarter was 110%, an improvement from the 107 we delivered a year ago and in line with Q1.
Speaker Change: On a reported basis, Q2 GRR was 86% compared to 85% in Q2 of 23 and in line with Q1.
Speaker Change: Q2 reported NRR was 109% compared to 104% in Q2 of 23 and 110% in Q1.
James Caci: Turning back to the income statement, gross profit for Q2 was $59.4 million, representing a gross margin of 76.2% compared to 71.1% in Q2 of 2023. The improvement in our gross margin is the result of our product mix, as we again had more SAS revenue and less services revenue as a percentage of our overall revenue. In addition, we saw improved services and SAS margins this quarter compared to last year.
Speaker Change: Turning back to the income statement, gross profit for Q2 was $59.4 million, representing a gross margin of 76.2% compared to 71.1% in Q2 of 2023.
Speaker Change: The improvement in our gross margin is the result of our product mix.
Speaker Change: As we again had more SaaS revenue and less services revenue as a percentage of our overall revenue. In addition, we saw improved services and SaaS margins this quarter compared to last year.
James Caci: Moving down the income statement, operating expenses for Q2 totaled $50.6 million, or 65% of revenues, compared to $43.3 million, or 67% of revenues a year ago. As a result, Q2 operating income was $8.7 million, or an operating margin of 11.2%, a year-over-year improvement of nearly $700 million. Our Q2 operating income was well ahead of our guidance, and the outperformance was primarily driven by two factors. First, a meaningful revenue beat, most of which flowed to the bottom line. And second, improved sales efficiency and proven expense management across the business.
Speaker Change: Moving down the income statement, operating expenses for Q2 totaled $50.6 million or $65% of revenues compared the $43.3 million or $67% of revenues a year ago.
Speaker Change: As a result, Q2 operating income was $8.7 million, or an operating margin of 11.2%, a year-over-year improvement of nearly 700 basis points.
Speaker Change: Our Q2 operating income was well ahead of our guidance, and the outperformance was primarily driven by two factors.
Speaker Change: First, the meaningful revenue beat, most of which flowed to the bottom line. And second, improved sales efficiency and proven expense management across the business.
James Caci: In addition, approximately $1 million of expenses that we had originally planned for Q2 are now expected in the second half of the year and in early 2025. Taken together, our ongoing commitment to profitable growth resulted in another quarter of margin expansion and was another step on our path to gap profitability. Turning to the balance sheet and cash flow statement, we ended the second quarter with $230.8 million in cash and short-term investments.
Speaker Change: In addition, approximately $1 million of expenses that we had originally planned for Q2 are now expected in the second half of the year and in early 2025.
Speaker Change: Taken together, our ongoing commitment to profitable growth resulted in another quarter of margin expansion.
Speaker Change: and was another step on our path to gap profitability.
Speaker Change: Turning to the balance sheet and cash flow statement, we ended the second quarter with $230.8 million in cash and short-term investments.
James Caci: And for the six months ended June 30, 2024, cash generated from operations was $23.9 million, while free cash flow was $23 million. This compared to cash generated from operations of $9.3 million and free cash flow of $8.5 million in the first six months of 2023. During the three months ending June 30, we repurchased 653,000 shares for a total cost of approximately $5.4 million.
Speaker Change: And for the six months ended June 30, 2024, cash generated from operations was $23.9 million, while free cash flow was $23 million.
Speaker Change: This compared to cash generated from operations of $9.3 million and free cash flow of $8.5 million in the first six months of 2023.
Speaker Change: During the three months ended June 30th, we repurchased 653,000 shares for a total cost of approximately $5.4 million.
James Caci: I would now like to turn to our financial outlook, where for the full year, we are pleased to again raise our expectations for total ARR, total revenue, and non-GAAP operating income. For the third quarter, we expect total revenues of $82 million to $84 million, or approximately 14% year-over-year growth at the midpoint. We expect non-GAAP operating income of $11 million to $12 million. And for the full year, we now expect total ARR of $319 million to $323 million, or approximately 21% year-over-year growth at the midpoint.
Speaker Change: I would now like to turn to our financial outlook, where for the full year, we are pleased to again raise our expectations for total ARR, total revenue, and non-GAAP operating income.
Speaker Change: For the third quarter, we expect total revenues of $82 million to $84 million or approximately 14% year over year grades at the midpoint.
Speaker Change: We expect non-GAAP operating income of $11 million to $12 million.
Speaker Change: And for the full year, we now expect total ARR of $319 million to $323 million or approximately 21% year-over-year growth at the midpoint.
James Caci: We now expect total revenues of $320.2 million to $324.2 million, or approximately 19% year-over-year growth at the midpoint. And given these higher top-line expectations, coupled with our outperformance on profitability this quarter, we now expect full-year non-GAAP operating income of $38.3 million to $39.8 million, or an operating margin of 11.9 to 12.3 percent. Lastly, on a rule of 40 basis, which for Avepoint is the sum of ARR growth and non-GAAP operating margin, our updated guidance today reflects a 33 compared to the 29 that we initially guided for the year in February and to the 31 we guided to in May.
Speaker Change: We now expect total revenues of $320.2 million to $324.2 million, or approximately 19% year-over-year growth at the midpoint.
Speaker Change: and give them these higher top line expectations, coupled with our outperformance on profitability this quarter.
Speaker Change: We now expect full year non-GAAP operating income of $38.3 million to $39.8 million or an operating margin of 11.9 to 12.3 percent.
Speaker Change: Lastly, on a Rule of 40 basis, which for Avepoint is the sum of ARR growth and non-GAP operating margin, our updated guidance today reflects a 33.
Speaker Change: Compared to the 29th that we initially guided for a year in February, and to the 31th, we guided to Lin Mei.
James Caci: In summary, Q2 was an outstanding quarter for Avepoint, and the team remains laser-focused on profitable growth and continued execution. Thanks for joining us today. And with that, we would be happy to take your questions. Operator. We will now begin.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Derek Wood with Coen & Co. Please go ahead.
Derek Wood: Great, thanks. Congratulations on another strong quarter. Maybe I'll just throw out the obligatory macro question. Doesn't seem like you guys have seen much change, but just when looking across verticals or deal sizes or customer cohorts, how would you describe the buying behavior out there in the market and anything that's perhaps getting better or more challenging?
Speaker Change: Much change, but just when when looking across verticals or deal sizes or customer cohorts.
Speaker Change: How would you describe the buying behavior out there in the market and anything that's perhaps getting better or more challenging.
Tianyi Jiang: Hey Derek, great question. So, on the macro level, things are the same.
Derek: Hey, Derek great.
Derek: Great question, so on the macro things I'm, saying enterprise deal continue to have the same type of conservatism.
Derek: And we continue to win based on our platform play that works very well applies to across all industries.
Tianyi Jiang: Enterprise, DEO, continues to have the same type of conservatism, and we continue to win based on our platform play. That works very well, and applies across all industries. In our prepared remarks, you hear that we, whether it's enterprise, mid-market, SMB, as well as across all GEOs, we are growing from strength to strength. At the end of the day, customers need to secure data before implementing an AI strategy. And that also
Derek: My prepared remarks are you here that we are whether it's enterprise mid market SMB as well its across all geos, we are growing from strength to strength.
Derek: And then are there any customers need to secure data before implementing AI strategy and that also position us well and lastly, a customer continue to seek to optimize costs and that's why we partner with them.
Tianyi Jiang: And lastly, customers continue to seek to optimize costs. And this is where we partner with them. And with our platform, the confidence platform, and also multiple end-to-end data management capabilities, we allow them to consolidate vendors. So, those trends still hold for us.
Derek: And with our platform our comprehensive platform.
Derek: And also multiple end to end data management capabilities will allow them to consolidate vendors. So those.
Derek: The trend still holds for us.
Tianyi Jiang: That's great to hear. And TJ, maybe we can just double click on some kind of data readiness projects around Copilot. I mean, I've seen studies, similar studies that you called out in your prepared remarks that there are issues of lack of information governance, and that's holding back on driving more adoption of M365 Copilot. That's obviously where you guys can come and help address those initiatives. So can you just give us an update on where you're getting pulled into co-pilot readiness programs? Maybe share kind of how the volumes of activity have been trending and how you're thinking about this becoming a bigger driver in the model?
Derek: That's great to hear and P. J maybe.
P.J: Could just double click on.
P.J: On a kind of data readiness projects around co pilot I mean I've.
P.J: I've seen studies similar studies that you called out in your prepared remarks that there are issues of lack of information governance, and that's holding back on driving more adoption of M 365 co pilot.
Speaker Change: That's obviously, where you guys can come and help address those initiatives. So can you just give us an update on where you're getting pulled into co pilot readiness programs, maybe share kind of how the volumes of activity has been trending and how you're thinking about this becoming a bigger driver in the in the mall.
Speaker Change: No.
Derek Wood: Yeah, that's a great question, Derek. So, as we shared last quarter as well, we are having a ton of conversations as experimentation continues. We do know that last quarter we had a very, very strong showing in our control suite because of the data management governance capabilities that we bring to the market. We think we have the most advanced SAS offering when it comes to co-pilot readiness in the cloud. And yeah, we have a lot of go-to-market activities with large customers as well as medium-sized customers across all geographies.
Speaker Change: Yeah, that's a great question Derek.
Speaker Change: So we are as we shared last quarter as well are we are in a ton of conversations as experimentation continues.
Speaker Change: We do know that last quarter, we have very very strong showing in our control suite because of the data management and governance capabilities that we bring to the to the market. We think we have the most advanced SaaS offering when it comes to co pilot readiness in cloud and yeah.
Speaker Change: We have a lot of the go to market motions.
Speaker Change: With large customers as well as medium sized customers across all geos.
Derek Wood: Japan is actually very, very strong in terms of AI experimentation. What we do see is, while we don't see many enterprise-wide deployments, we do see bigger-sized experimentation now. Especially in the medium 5,000-plus employee-sized companies. So, that's encouraging. The focus continues to be ROI-driven, business outcome-driven experimentation with AI.
Speaker Change: Japan is actually very very strong and talking about AI experimentation.
Speaker Change: While we do see is a while we don't see many enterprise wide deployment, we do see bigger size experimentation now, especially in the medium our 5000 plus employee size companies.
Speaker Change: So that's encouraging.
Speaker Change: That focus continue to be ROI driven.
Speaker Change: Business outcome, driven experimentation with AI.
Speaker Change: Yeah.
Derek Wood: Great to hear. I'll pass it on. Thanks.
Speaker Change: Great to hear I'll pass it on thanks.
Speaker Change: Thank you.
Joel Omino: Our next question comes from Joel Omino with Citi. Please go ahead.
Joel <unk>: Our next question comes from Joel <unk> with Citi. Please go ahead.
Joel Omino: Good afternoon, this is Joel Diverman for Fatima. Thanks for taking our question. So, just maybe, a two-part question for Jim. You know, it's a pretty substantial raise to the calendar 24-operating margin, but we're also seeing a bit of a top-line raise as well.
Speaker Change: Oh good afternoon. This is Joel Diamond link for for Chemo.
Joel Diamond: Thanks for taking our question. So just maybe a two part question.
Speaker Change: Jim.
Speaker Change: It's a pretty substantial race to the calendar 'twenty for operating margin, but we're also seeing a bit of a top line noise as well. Thank you you spoke about this a bit in your prepared remarks, but could you give any additional color on what's facilitating this the sufficiency and then maybe the second part on sales reps.
Joel Omino: I think you spoke about this a bit in your prepared remarks, but could you give any additional color on what's facilitating this efficiency? And then maybe, as the second part on sales rep productivity specifically, how is this coming in relative to your expectations? And what are you baking into the guide for the second? Thank you.
Speaker Change: Productivity specifically.
Speaker Change: How does this coming in relative to your expectations and what are you baking into the guidance.
Speaker Change: For the second.
Speaker Change: Sure.
James Caci: Yeah, great, Joel. Thank you for the question.
Speaker Change: Yeah, Great Joe. Thanks. Thank you for the question. So maybe on the on the first in terms of operating income I think youre right were seeing them.
Speaker Change: Two fold right, we're seeing improvement on the top line. So that's definitely having a contribution and then you know as we demonstrated in the first half of the year we're seeing.
James Caci: So, maybe on the first, in terms of operating income, I think you're right. We're seeing double-fold, right? We're seeing improvement on the top line. So, that's definitely making a contribution. And then, you know, as we demonstrated in the first half of the year, we're seeing some cost efficiencies even better than we had planned. And that's kind of across the board, from how we think about R&D and our global optimization of there of our costs to how we think of some of the G&A.
Speaker Change: Some cost efficiencies, even better than we had planned.
Speaker Change: And that's a kind of across the board from how we think about R&D and our global optimization there of our costs.
Speaker Change: We think of some of the G&A and then as you mentioned and alluded to when we think about sales productivity and sales efficiency. We are seeing improvement there as well we've been talking a lot about you know.
James Caci: And then, as you mentioned and alluded to, when we think about sales, productivity, and sales efficiency, we are seeing improvement there as well. We've been talking a lot about, you know, using the channel, and we're seeing some efficiency there. But even on the direct side of our house, we're seeing better rep productivity across the board. We're seeing a faster ramp-up of new reps coming onto the team. And then maybe third, and probably the most important or the most beneficial, is that our more tenured reps are even producing more than they did last year.
Speaker Change: Using the channel and we're seeing some efficiencies there, but even on the direct side of our house, we're seeing better rep productivity across the board, we're seeing a faster ramp up of new reps coming onto the team and then maybe third and probably the most important where we're the most benefit.
Speaker Change: Sure.
Speaker Change: More tenured reps are even producing more than they did last year. So we're seeing that efficiency and productivity across the board.
James Caci: So, we're seeing efficiency and productivity across the board. And all of that is contributing nicely to the operating margin that not only we saw in the first half of the year but gives us confidence to expand, as you mentioned, significantly for the second half of the year.
Speaker Change: And all of that is contributing nicely to the the operating margin that not only we saw in the first half of the year, but it gives us confidence to expand as you mentioned that significantly for the second half of the year.
James Caci: Got it. And if, perhaps, I could just sneak in a second question here. So, we're seeing pretty healthy growth in the 100k plus customer cohort, I think, both on a year-over-year basis and also in the net ads. So, I was just hoping you could shed some additional light on the behavior that you're seeing in this cohort, if there's any discernible demand or adoption trends. And also, if you could share what percentage of ARR they make up, And that's all.
Speaker Change: Got it and if perhaps let me just.
Speaker Change: Making it the second question here so we're.
Speaker Change: We're seeing pretty healthy growth.
Speaker Change: 100, K plus customer cohort I think both on a year over year basis and also the net adds.
Speaker Change: So it was just hoping you could shed some additional light on the behavior that you're seeing in this cohort if there's any discernible demand or adoption trends.
Speaker Change: If you could share what percentage of payout.
Speaker Change: They make up that's all thank you.
James Caci: Yeah, well, one of the good things about, you know, our diversification across both our customer base and even geography is that we have very good diversification across the customer base, both SMB, mid-market, as well as enterprise. Obviously, some of the bigger accounts that you're referring to are enterprises, but we're seeing growth across all three segments. It is not just focused on the large accounts. Now, we are seeing nice growth in those large accounts, so that's, you know, very helpful and good, and we'd like to see that. But again, it's literally across the board in terms of growth, so that's been very productive.
Speaker Change: Yeah, well you know one of the one of the good things about you know.
Speaker Change: Our diversification.
Speaker Change: Across both our customer base and even geos.
Speaker Change: As we have very good diversification across the customer base, both SMB mid market as.
Speaker Change: As well as enterprise, obviously, some of the bigger accounts that you're referring to enterprise, but we're seeing growth across all three segments. It is not just focused on the large accounts now we are seeing nice growth in those large accounts. So that's very helpful and good and we'd like to see that.
Speaker Change: But again, it's it's literally across the board in terms of growth.
Speaker Change: So that's been very productive and really when we think about the concentration of customers I think we've talked about this before Joe we don't have any one customer above 2% of our total revenue. So again, we feel really confident that there's there's room for expansion and our customers I think the platform play that T. J alluded to before is.
James Caci: And really, when we think about the concentration of customers, I think we've talked about this before, Joel, we don't have any one customer above 2% of our total revenue. So again, we feel really confident that there's room for expansion among our customers. I think the platform play that TJ alluded to before is ringing true in terms of how customers think about vendors, how they think about consolidation, and how they think about, you know, hey, can we get more from existing vendors?
Speaker Change: Ringing true in terms of how how customers think about vendors how they think about consolidation how do we think about hey can we get more from existing vendors I think that plays right into our sweet spot, we're seeing that in some of the expansions.
James Caci: I think that plays right into our sweet spot. We're seeing that in some of the expansions. You know, three of the five deals that TJ alluded to in his prepared remarks are through existing customers that are expanding with us. So again, we're seeing that across the board. I think the one metric, the 594 customers above 100K, is just one metric. We're seeing that expansion across the board, and, you know, obviously, we're looking forward to continuing it.
Speaker Change: Three of the five deals that T. J alluded to in his prepared remarks are through existing customers that are expanding with us. So again, we're seeing that across the board I think the one metric that $5 94 customers above 100, K is just one metric.
Speaker Change: But we're seeing that expansion across the board and you know obviously, we're looking forward to continuing that.
Speaker Change: Thank you I'll pass it on.
Kirk Maturne: Our next question comes from Kirk Maturne with Evercore ISI. Please go ahead.
Speaker Change: Our next question comes from Kirk <unk> with Evercore ISI. Please go ahead.
Chirag Ved: Hi, this is Chirag on for Curse. Thanks for taking my question, and I'll echo my congratulations on yet another strong quarter. So you spoke to the control suite a few questions ago. Can you go into a bit more depth on the traction you're seeing across your three suites, resilience, control, and modernization? and whether they're performing in line with the revenue breakdown you last provided or whether any of these categories are seeing stronger growth and what's driving that. Essentially, what are your customers most focused on right now?
Speaker Change: Hi, This is Charles on for Kirk.
Charles: Thanks for taking my question and I'll Echo my congratulations on yet another strong quarter.
Speaker Change: So you spoke to the controlled suite a few questions ago.
Speaker Change: Can you.
Speaker Change: You go into a bit more depth on traction you're seeing across your three suites resilience control modernization.
Speaker Change: And whether they're performing in line with the revenue breakout you last provided or whether any of these categories are seeing stronger growth and what's driving that essentially what are your customers most focused on right now.
Speaker Change: Yeah.
Tianyi Jiang: Yeah. I think what I mentioned in Q2, we actually have very strong growth in our control suite. It's the strongest growth, in fact.
Speaker Change: Yeah, I think what I mentioned in Q2, we actually have a very strong growth of our control suite, it's the strongest growth in fact.
Tianyi Jiang: So, we currently don't disclose the actual specific split between the three suites. We expect to do that on an annualized basis. But what's driving that is absolutely around data management and governance, as every company is looking at ways to modernize their data estate so that they can take on more AI strategies and deployment capabilities. So, that's definitely the tailwind.
Speaker Change: So we currently don't disclose the actual specific split between the three suites are we expect to do that on an annualized basis.
Speaker Change: But what's driving that it's absolutely around data management and governance.
Speaker Change: Every every company is looking at ways to.
Speaker Change: Modernize their data is stage so that they can take on.
Speaker Change: More.
Speaker Change: Our AI strategy and deployment capabilities. So that's definitely the tailwind there.
James Caci: Okay, and Jim, maybe one for you. Thank you.
Speaker Change: Okay, and then maybe one for you.
Speaker Change: Gross retention rates are continuing to increase can you speak a little bit too.
Speaker Change: That's you're taking to increasing gross retention to 90% or even above that and and how we should think about expansion here. Thank you.
James Caci: Great question. And thank you. I think you know, overall, we're really pleased with the results of Q2, literally across the board, right? We think we had a really strong quarter. I will tell you the one thing that we are focused on, and as we sit around the table and kind of rehash the quarter, you know, we've actually been flat in terms of our GRR, around 87%. So we actually haven't seen the growth there that we're, you know, actually anticipating, and we're working real hard to make that come to fruition. You're right, our longer-term target is 90-plus percent. So I would say that's the one takeaway for me from this quarter, that really strong quarter.
Speaker Change: Yeah, Great question.
Speaker Change: And thank you I I think you know overall, we're really pleased with the results of Q2 are literally across the board right, where we think we have a really strong quarter I would tell you. The one thing that that we are focused on and as we sit around the table and kind of rehash the quarter.
Speaker Change: We've actually been flat in terms of our G. R. R. Brown.
Speaker Change: Around 87%, so we actually haven't seen the growth there that where we.
Speaker Change: We're actually anticipating and we're working real hard to to actually come have come to fruition.
Speaker Change: Youre right our longer term target is 90 plus percent. So I would say that's the the one takeaway for me from this quarter.
James Caci: We're happy and pleased that the retention rate has been stable at 87, but our goal is to see that improve. We are working on a number of initiatives on a regional basis across the globe to ensure that we see movement and progress toward that 90% target. So I do think I appreciate you pointing that out.
Speaker Change: Is that really strong quarter.
Speaker Change: We're happy and pleased that the retention rate has been stable at 87, but our goal is to see that improve we are working on a number of initiatives.
Speaker Change: On a regional basis across the globe to ensure that we see movement and progress toward that 90% target. So I do think I. Appreciate you pointing that out it is something we are focused on.
James Caci: It is something we are focused on. It is definitely top of mind for us. There are a number, like I said, of initiatives that are going on. We've talked about those in the past, both personnel-related and technology-related. And then even from a churn perspective, our biggest challenge on the churn side of why we're losing customers is really around our migration products, which have a lower retention rate than some of our other products.
Speaker Change: It is definitely top of mind for us.
Speaker Change: There are a number like I said theres a number of initiatives that are going on we've talked about those in the past both personnel related technology related.
Speaker Change: And then even from a when we think about what's the drivers behind that.
Speaker Change: Retention and our biggest challenge on the churn side of why we're using is really around our migration products, which have a lower retention rate than some of our other products and so we're working hard to ensure that that customer base, that's coming in utilizing migration product, we make sure that they have.
James Caci: And so we're working hard to ensure that that customer base that's coming in, utilizing the migration product, we make sure that they have the full value and see the full value of the platform, and we make it available to them, and they take advantage of the other opportunities and the other products that they have on the platform. And so that's really a critical step for us to see improvement there. And again, we're working real hard to make that happen.
Speaker Change: The full value and see the full value of the platform.
Speaker Change: And we make available to them and they take advantage of the other opportunities in the other products that they have in the platform and so that's that's really a critical step for us to see improvement there and again, we're working real hard to make that happen.
Chirag Ved: Thank you and congrats again on a strong quarter.
Speaker Change: Thank you and congrats again on a strong quarter.
Rod: Thanks Rod.
Gabriela Borges: Our next question comes from Gabriela Borges with Goldman Sachs. Please go ahead.
Speaker Change: Our next question comes from Gabriela Borges with Goldman Sachs. Please go ahead.
Max Gamperl: Hi, good afternoon. This is Max Gamperl on behalf of Gabriela. Thanks for taking our questions. A couple from us. TJ, you've talked about OPPO's product role in helping customers get their data strategy ready. Can you talk a little bit about the uplift for customers and any update on the monetization timeline for this product?
Smash Camera: Hi, Good afternoon. This is smash camera on for Gabriela. Thanks for taking our questions. A couple from US TJ you you've talked about I'll pose as product role in helping customers get their data strategy can you talk a little bit about the uplift for customers and any update on the monetization timeline for this product.
Speaker Change: <unk>.
Tianyi Jiang: Yeah, Opus has done well so far. It was launched in late 2023.
Speaker Change: Yeah opens has done.
Speaker Change: Done well so far it's a was launching late 2023.
Speaker Change: To remind everyone. This is the evolution of our information management story at brain.
Tianyi Jiang: To remind everyone, Opus is the evolution of our information management story. It brings together the best of our cloud records product with more informal information management practices to create a holistic solution for the lifecycle management of content. So, it's really actually three different functionalities around record management, retention archiving, and classification infused with AI. We also released a product called TiGraph for CoPilot, which helps identify density of collaboration because a lot of the CoPilot deployments are also massive change management exercises as well. So, we're happy with both products' progression and very strong pipeline building. So, yeah, we're monitoring them very closely.
Speaker Change: Together, the best of our cloud records product with more informal information management practices to create a holistic solution for the lifecycle management of content.
Speaker Change: So it's really actually three different functionalities around retro management retention archiving and classification infused with AI. We also released a product called Tai graph bar a co pilot, which helped identified density of collaboration.
Speaker Change: There's a lot of the co pilot deployments.
Speaker Change: Deployments are also massive change management exercises as well so we're happy with both products a progression and a very strong pipeline building. So yeah, we're monitoring them very closely.
Max Gamperl: And any update on the monetization timeline for this product and when we should expect a material contribution?
Speaker Change: And any update on our monetization.
Speaker Change: Your line of this product in memory, you should expect a material contribution.
Tianyi Jiang: So Open is part of our control suites. And so, yeah, and control suites perform very well, especially around governance. We actually have a whole set of products that talk about copilot readiness, a three-step process, right?
Speaker Change: So all this is part of our.
Speaker Change: Control suites.
Speaker Change: And and so.
Speaker Change: So yeah and.
Speaker Change: We performed very well, especially around our governance, we actually have a whole set of products that talk about cold hydro readiness, a three step process right.
Tianyi Jiang: So, discovery, secure, and optimize. So, we don't today split them out specifically on the monetization split. We do talk about the suite level. But I would just, again, say that the governance and management aspect of it is our strongest and fastest growing segment.
Speaker Change: So discovery, a secure and optimize.
Speaker Change: So it's a we don't today split them out specifically on the monetization of split we do talk about the suite level, but I will just again, saying that the governance that management aspect of it is our strongest and fastest growing segment.
Max Gamperl: And then taking a step back, there's been quite some volatility in software earnings the last couple of quarters, but it seems that you've been very consistent in predicting the business. What's driving that consistency in your results and execution?
Speaker Change: Understood. Thank you and then taking a step back there's been quite some volatility in software earnings the last couple of quarters, but it seems that you've been very consistent in predicting the business well, what's driving that consistency in your results and execution.
James Caci: Yeah, I mean, I think you hit the nail on the head. We, you know, our goal, we said this back at the beginning of 23, was to focus on profitable growth, controlling what we could control, and really, you know, providing guidance that we were confident in and that you all could have confidence in. And I think, you know, when we think about that, we want it to be reliable. We want it to be, you know, predictable.
Speaker Change: Yeah, I mean, I think you you hit it right on the head. We you know our goal. We said this back at the beginning of 'twenty three right was to focus on profitable growth controlling what we can control and really providing guidance that we were confident.
Speaker Change: And that you all could could have confidence in and I think when we think about that we wanted to be reliable, we want it to be predictable and sometimes that might be boring, but you know our focus was on executing and delivering and.
James Caci: And, you know, sometimes that might be boring, but, you know, our focus was on executing and delivering, and, you know, again, the credit really goes to our teams, you know, around the globe that have been doing the heavy lifting and executing well, quarter after quarter. You saw it in some of the prepared remarks, right? We've got consistent growth across each of the regions. That doesn't happen by accident.
Speaker Change: Again, the credit really goes to our teams around the globe.
Speaker Change: It had been doing the heavy lifting.
Speaker Change: And executing well quarter after quarter.
Speaker Change: And some of the prepared remarks right we.
Speaker Change: We've got consistent growth across.
Speaker Change: Across each of the regions that.
Speaker Change: That doesn't happen by accident, there's a lot of people that are working really hard to make that happen and so again the credit really goes to them and I think what we've tried to do is be forthright. We provided additional metrics. This year in terms of what we were sharing we've tried to be open.
James Caci: There are a lot of people that are working really hard to make that happen. And so, again, the credit really goes to them. And I think what we've tried to do is be forthright. We provided additional metrics this year in terms of what we were sharing. We've tried to be open, you know, as transparent as we can and, again, provide expectations that we believe are achievable. And then, you know, we've, again, tried to aggressively go out and hit those objectives. And, you know, again, six straight quarters that we've been able to do that. And, you know, we'd like to continue to see that happen.
Speaker Change: You know as transparent as we can and again provide.
Speaker Change: The expectations that we believed were achievable and then.
Speaker Change: We've again tried to aggressively go out and hit those objectives and you know again six straight quarters that we've been able to do that and you know we'd like to continue to see that happen.
Speaker Change: Great. Thank you.
Operator: Again, if you have a question, please press star 1. Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Please go ahead.
Speaker Change: Thanks, Brian again he has a question. Please press Star then one.
Speaker Change: Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Please go ahead.
Brett Knoblauch: Hey guys, this is Thomas Shinske on for Brett. Congratulations on another really solid quarter.
Speaker Change: Hey, guys. This is Thomas Shinskie on for Brad Congrats on another really solid quarter.
Thomas Shinske: On the AI front, I guess, are you guys seeing increased urgency from enterprises to deploy AI? Because, you know, a lot of the excitement has been lagged by broader deployment. So, I'm just curious to see where you're seeing deployment on an enterprise-wide scale. Thanks.
Thomas Shinskie: On the AI front I guess are you guys seeing increased urgency from enterprises to deploy AI.
Speaker Change: Because you know a lot of that.
Speaker Change: Excitement has been lagged by broader deployment. So I'm just curious to see where your where you are seeing deployment on an enterprise wide scale. Thanks.
Tianyi Jiang: Yeah, as we mentioned earlier, we do see continued experimentation, and the experimentation sizing is getting larger, so that's very encouraging. Enterprise-wide deployment, however, is still few and far between, but the enthusiasm around deploying Gen AI across enterprises is still very much there.
Speaker Change: Yeah, as we mentioned earlier, we do see a continued experimentation and the experimentation sizes are getting larger so that's very encouraging.
Speaker Change: Enterprise wide deployment, however is still few and far in between but the enthusiasm around.
Speaker Change: Deploying gen AI across the enterprise is still very much there so that's very encouraging.
Thomas Shinske: And then just if I may touch on TiGraph, Microsoft just recently reported, and they highlighted double quarter over quarter growth in CoPilot. I guess I'm just curious how much of you guys are seeing that flow through to demand for TiGraph, and Kind of also, I guess, on Opus and MyHub and Power, I guess, how has the AI demand been there as well?
Speaker Change: Awesome and then just if I may touch on pie graph, Microsoft just recently reported and they highlighted double quarter quarter over quarter growth of co pilot.
Speaker Change: I guess I'm just curious how much of you guys are seeing that flow through to demand for Thai graph and.
Speaker Change: Kind of also I guess on Opus in my hub in power I guess, how is the AI demands been there as well.
Tianyi Jiang: Yeah, MyHub is actually the number one used Teams application with hundreds of thousands of top part admins on a daily basis. And yeah, we'll continue to see strength there. Microsoft's co-pilot growth, we do see that, obviously, starting from a small number, but we are very pleased to see the adoption growth there. So that's why we talk about, hey, you know, the enthusiasm is there. And, of course, we are involved in a ton of co-pilot readiness conversations.
Speaker Change: Yeah. My hobby is actually the number one used team's application with hundreds of thousands of partners.
Speaker Change: On a daily basis.
Speaker Change: And yeah, we'll continue to see strength there.
Speaker Change: Microsoft's.
Speaker Change: Co pilot growth, we do see that obviously, it's starting from a small number so but.
Speaker Change: We are very pleased to see the adoption.
Speaker Change: Growth there so.
Speaker Change: So that's why we talk about Hey, you know, it's a the enthusiasms there and of course, we are involved in a ton of co pilot readiness conversations and all of the product that you mentioned sets.
Tianyi Jiang: And all the products that you mentioned set us well as the most comprehensive SaaS platform to have a multiple holistic solution around co-pilot readiness. So that really bodes well for our pipeline building and also continued business growth.
Speaker Change: Sets us up well as the most comprehensive SaaS platform.
Speaker Change: To have a multiple holistic solution around coal by their readiness, so that really bodes well for our pipeline building and also continued business growth.
Thomas Shinske: Awesome. Thanks and congrats again.
Speaker Change: Awesome, Thanks, and congrats again.
Tom: It's Tom again.
Tianyi Jiang: This concludes our question and answer session. I would like to turn the conference back over to T.J. Jones for any closing remarks.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to T. J P. J Jones for any closing remarks.
Tianyi Jiang: Thank you. We're proud of our strong second quarter results, which reflect our continued ability to help our customers and partners achieve AI-driven transformation with comprehensive and scalable data management and data governance solutions across their data estates. In addition to the strong results, we were also honored to be included in INC's annual best workplaces list, reflecting our continuous investment in our people. It was also an honor to win our 6th Global Microsoft Partner of the Year Award as well as be named Microsoft Singapore Education Industry Partner of the Year for our excellence in innovation as well as implementing solutions to meet the needs of our customers.
Speaker Change: Thank you.
Speaker Change: Proud of our strong second quarter results, which reflect our continued ability to help our customers and partners achieve AI driven transformation with comprehensive and scalable data management and data governance solutions across their data States. In addition to the strong results.
Tom: We're also honored to be included E inks annual best workplaces list, reflecting our continuous investment in our people.
Tom: There was also a honor to win our six global Microsoft partner of the year Award as well as being named Microsoft Singapore Education industry partner of the year for our excellence and innovation as well as implementing solutions to meet the needs of our customers.
Tianyi Jiang: Having met with many of our teams, customers, and partners in the past several weeks, I'm confident that our message is responding stronger than ever, and we are in a great position to continue capturing the massive opportunities we see ahead of us. Thank you again for joining us today, and we look forward to speaking with you more this quarter.
Tom: Having met with many of our teams customers and partners in the past several weeks I am confident that our message is resonating stronger than ever and we are in a great position to continue capturing the massive opportunities. We see ahead of us. Thank.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Thank you again for joining us today, and we look forward to speaking with you more this quarter.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
James Caci: And improvement from the 107 we delivered a year ago and in line with Q1. On a reported basis, Q2 GRR was 86% compared to 85% in Q2 of 23 and in line with Q1. Q2 reported NRR was 109% compared to 104% in Q2 of 23 and 110% in Q1.