Q2 2025 AvePoint Inc Earnings Call
Speaker #3: Good afternoon and welcome to the AvePoint Inc. second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #3: After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two.
Speaker #3: Please note this event is being recorded. I would now like to turn the conference over to Jamie Arestia, Vice President Investor Relations. Please go head.
Speaker #4: Thank you, Operator. Good afternoon and welcome to AvePoint's second quarter 2025 earnings call. With me on the this afternoon is Dr. TJ Jiang, Chief Executive Officer and Jim Caci, Chief Financial Officer.
Speaker #4: After preliminary remarks, we will open the call for a question-and-answer session. Please note that this call will include forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from management's current expectations.
Speaker #4: We encourage you to review the Safe Harbor statements contained in our press release for a more complete description. All material in the webcasts, the sole property and copyright of AvePoint, with all rights reserved.
Speaker #4: Please note this presentation describes certain non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating margin, which are not measures prepared in accordance with US GAAP.
Speaker #4: The non-GAAP asures are presented in this presentation. As we believe they provide investors with a means of understanding how management evaluates the company's operating performance.
Speaker #4: These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to, financial measures prepared in accordance with US GAAP. A reconciliation of these measures to the most directly comparable GAAP financial measures is available in our second quarter 2025 earnings press release, as well as our updated investor presentation and financial tables, all of which are available on our estor relations website.
Speaker #4: With that, let me turn the call over to TJ. Thank you, Jamie, and thank you to yone joining us on the call today. As we recap our outstanding second quarter results, highlighted by outperformance on the top and bottom line, as well as continued rovement on a number of key financial and operational metrics.
Speaker #4: Q2 also represents a major milestone for AvePoint. Our first quarter to surpass $100 million in revenues. The entire AvePoint team deserves credit for this achievement.
Speaker #4: Which reflects the enormous market opportunity ahead of us and marks another step on our path to $1 billion in ARR by 2029. This achievement is not just a financial milestone.
Speaker #4: It's a reflection of the innovation that powers the AvePoint confidence platform. As well as the trust of our ustomers and partners placing us. That's why I want to spend my time today discussing our ongoing innovation, which has only accelerated in recent years.
Speaker #4: Today, these efforts have positioned us squarely at the intersection of data, security, and AI. And continue to drive the steady, consistent execution you have come to expect from AvePoint.
Speaker #4: I'll also share some meaningful customer wins and expansions during the quarter. And then turn the call over to Jim to recap our financial performance and updated outlook for the year.
Speaker #4: We know that innovation has always been essential to maintaining our competitive edge. But what's clear from every customer conversation today is that the data management challenges we're ving from AI governance and training data provenance to model explainability responsible surveillance, or simply the need to reduce costs, are now front and center in enterprise strategy.
Speaker #4: At the same time, organizations are realizing that tackling data management, governance, compliance, and security in isolation just doesn't cut it ymore. These functions need to work together.
Speaker #4: That's why we have built our platform around a unified framework, with three core pillars providing a comprehensive data protection strategy. First, ensuring data is always ailable and recoverable after a cyber attack.
Speaker #4: Second, securing it across every environment. And finally, governing its use to meet regulatory and business requirements. Our connected approach enables true cyber resilience. And it's why more enterprises are turning to integrated platforms like AvePoint.
Speaker #4: Our strong results this quarter reflect that growing momentum. In Q2, we advanced our platform in meaningful ways to help customers and partners turn today's challenges into strategic advantages.
Speaker #4: Positioning them to achieve operational excellence in an increasingly AI-driven, multi-cloud world. These strategic advancements come to life through the innovations we have delivered across our platform.
Speaker #4: Let me start with our product innovation. We introduced several new command centers within our confidence platform this quarter, each designed to help organizations optimize digital investments and strengthen resilience.
Speaker #4: In April, we announced the launch of our risk posture command center, a critical advancement within the AvePoint confidence platform and our most significant evolution yet in data protection.
Speaker #4: Designed specifically to counter advanced cyber threats like ransomware, the risk posture command center provides organizations real-time visibility into their data security posture, backed by actionable intelligence to reduce risk and remain compliant.
Speaker #4: As the complexity of data and AI adoption accelerates, too many organizations are left juggling disconnected tools and dashboards. Research from Gartner finds that 86% of organizations struggle to balance data security with business objectives.
Speaker #4: And nearly half of IT leaders lack confidence in their organization's ability to manage security and access risks. Our risk posture command center addresses this challenge head-on.
Speaker #4: Empowering both business and IT leaders with a single intuitive interface to detect early threats, assess compliance, and act swiftly on potential vulnerabilities. This is more than just a tool.
Speaker #4: It's a strategic asset that bridges the gap between technology teams and the C-suite, turning data risks into business opportunity. That's why 85% of CEOs now view cybersecurity as a critical growth driver, according to Gartner's 2025 CEO survey.
Speaker #4: And while only 10% of organizations are fully prepared for AI-augmented cyber threats, Accenture finds those that are prepared experience 69% fewer advanced attacks and a 15% boost in customer trust.
Speaker #4: And then in June, we announced the launch of two additional command centers. The optimization and ROI command center gives CIOs real-time visibility into underused licenses, redundant data, and cloud cost inefficiencies in turn, providing a comprehensive view of hard-to-find, cost-saving opportunities across their data estate, all through a single pane of glass.
Speaker #4: And with the vast majority of companies intending to implement some form of cost savings relating to people, processes, or technology, this command center will enable them to maximize efficiency while maintaining robust security standards.
Speaker #4: The other launch was the Resilience Command Center, which directly addresses the growing challenge of managing data protection across complex environments. The offering provides comprehensive monitoring and actionable insights for Microsoft 365 services, including storage consumption, tracking, backup data, oversight, visibility into the most critical data protection with Backup Express, and cost optimization recommendations.
Speaker #4: Taken together, these capabilities are vitally important in helping organizations protect against and recover from ransomware attacks which are growing in frequency and severity. And importantly, this new offering serves as the foundation for our broader, multi-cloud governance vision, with planned expansion to Google Workspace, Salesforce, and other ecosystems.
Speaker #4: Building on these foundational capabilities, we also expanded our agentic AI governance capabilities to secure AI agents like Microsoft 365 Copilot. These include prompt tracking, access controls, and policy enforcement for AI-generated content.
Speaker #4: Importantly, these capabilities were shaped directly by customer needs, especially from organizations preparing for large-scale Copilot rollouts and looking to mitigate oversharing and compliance risks.
Speaker #4: Taken together, these innovations help customers strengthen their multi-cloud resilience, prepare for the future of autonomous AI, and uncover real cost savings. And by delivering deep visibility into both risk posture and return on investment, we are enabling customers to make faster, smarter decisions that align IT operations with strategic priorities.
Speaker #4: Just as we are empowering customers to move faster and smarter, we're also deepening support for our partners who play a critical role in scaling these innovations across the market.
Speaker #4: Central to these efforts have been the ongoing enhancements to our elements platform. Specifically aimed at managed service providers, earlier this year, we launched the next generation of AvePoint elements, an AI-powered hub that helps MSPs deliver secure, scalable services across Microsoft 365, Google Workspace, and Salesforce.
Speaker #4: A centralized data protection, tenant management, and compliance with automation and integrations that simplify operations and boost recurring revenue. And in June, we added new capabilities to help MSPs further improve margins and reduce client risk, including marketplace integration for streamlined license management, behavioral analytics to flag risky users, and tools to reclaim unused licenses and archive stale data.
Speaker #4: Together, these enhancements give MSPs more control and stronger security and greater efficiency at scale. What's particularly compelling is how a solution originally designed for MSPs is now also delivering significant value to enterprise customers.
Speaker #4: A Big Four professional services firm with 500,000 users faced mounting risks from ungoverned Microsoft 365 tenants as they prepared to roll out Copilot. Our ability to create and customize baselines from existing tenants allowed them to centralize and simplify management of their security and compliance settings.
Speaker #4: This led to a major expansion in the quarter enabling them to reduce data sprawl, delegate administration, and ensure consistency across their multi-tenant environment. These innovations are more examples of how we enable our customers and partners to navigate complexity, giving them the clarity and confidence to move faster, safer, and smarter.
Speaker #4: And our integrated platform approach continues to resonate in the market as reflected in the strong customer momentum we saw in Q2 across both new customer acquisitions and expansions of existing relationships.
Speaker #4: A global airline with nearly 100,000 users became a new AvePoint customer in Q2, selecting our platform to unify lifecycle management and oversharing controls across Microsoft 365 a foundational step as they prepare AI adoption.
Speaker #4: Similarly, a US insurer with nearly 25,000 users joined as a new customer to implement structured provisioning, classification, and policy enforcement, giving them the governance framework needed to confidently scale their Copilot deployment.
Speaker #4: We also welcome a global commodities trading firm with 11,000 users who selected AvePoint over $4. Solutions for our ability to protect and secure multiple workloads.
Speaker #4: Similarly, a US-based cancer research hospital with 9500 users replaced several legacy tools with AvePoint to address ransomware protection, data governance, and delegate administration. In both instances, the highly regulated nature of these industries demanded a platform solution that could address multiple strategic use cases.
Speaker #4: On the expansion front, a global CPG leader with 130,000 users deepened their relationship with AvePoint by adopting archiving and governance solutions to reduce SharePoint online storage costs and improve data hygiene.
Speaker #4: Another Big Four professional service firm with 400,000 users also expanded their investment, leveraging our platform to prepare for a Copilot rollout by identifying overshared content and enforcing preventive controls.
Speaker #4: These examples underscore the growing demand for unified, intelligent data management. They reflect broader trends we're seeing across the enterprise, the convergence of security and governance concerns.
Speaker #4: Accelerating AI adoption, increasing regulatory pressures, and the need to reduce costs. These all play to AvePoint's ength. And as organizations look to consolidate vendors, we're positioned to meet that need.
Speaker #4: We're confident in our strategy and excited about the opportunities ahead as we continue to lead in this dynamic environment. Thank you again for joining us today.
Speaker #4: I'll now turn it over to Jim.
Speaker #2: Thanks, TJ. And good afternoon, yone. Thanks for joining us today as we review our strong second quarter results. Which once again are a testament to the team's broad-based execution as we efficiently deliver on the growing demand for our platform.
Speaker #2: We are proud to deliver another quarter reflecting our unwavering commitment to profitable growth, but we also have stressed our focus on investing for the future and capturing the long-term opportunity we see.
Speaker #2: Among many highlights this quarter, these mantras are reflected in our accelerated ARR growth, substantial operating margin expansion, and continued improvements on key operational metrics which demonstrate strong engagement with both new and existing customers.
Speaker #2: These achievements are delivering shareholder value now while also positioning us for success in many years to come. So let's turn to the quarter. Total revenues for Q2 were $102 million, up 31% year over year and above the high end of our guidance.
Speaker #2: On a constant currency basis, total revenues grew 27% year over year. SaaS delivered an exceptional quarter with Q2 revenue of $77.3 million, representing sequential growth of 12% and year over year growth of 44%.
Speaker #2: On a constant currency basis, Q2 SaaS revenues grew 40% year over year. Lastly, SaaS comprised $76% of total Q2 revenues our highest ever quarterly mix.
Speaker #2: This compares to 69% a year ago. Looking at our other revenue lines, term license and support declined 19% year over year in Q2 as we expected.
Speaker #2: And looking at our combined SaaS and term license revenues, or what we consider our subscription revenues, these grew 33% year over year in Q2.
Speaker #2: Which was the fifth straight quarter this metric has accelerated. Maintenance revenues decreased year over year to $1.3 million, or 1% of total revenues. And lastly, services revenue were 14.5 million dollars, or 14% of Q2 revenues.
Speaker #2: As a result, 86% of our total Q2 revenues were recurring. Our balance performance on a regional basis was another highlight for this quarter. In North America, SaaS revenues grew 38% year over year.
Speaker #2: And represented 82% of total North America revenues, which in turn grew 25% year over year. In EMEA, SaaS revenues grew 50% year over year.
Speaker #2: And represented 91% of total EMEA revenues, which in turn grew 38% year over year. And in APAC, SaaS revenues grew 48% year over year.
Speaker #2: And represented 52% of total APAC revenues, which in turn grew 32% year over year. On a constant currency basis, EMEA SaaS revenues increased 42% while total revenues increased 31%.
Speaker #2: And for APAC, SaaS revenues increased 43% on a constant currency basis while total revenues increased 27%. The same strength of our diversification is evident when looking at the performance of our regional ARR.
Speaker #2: In Q2, North America ARR grew 21%. EMEA ARR grew 29%. And APAC ARR grew 36%. Once again, each region was a strong contributor to our total ARR.
Speaker #2: Where we ended the second quarter at $367.6 million, this represents year over year growth of 27% both on a reported basis and after adjusting for FX.
Speaker #2: As a result, net new ARR in Q2 was 22.1 million, the highest dollar amount we have ever added and representing growth of 42% year over year.
Speaker #2: Additionally, we ended the second quarter with $721 customers, with ARR of over $100,000, an increase of 21% from the prior year. We also continue to see even higher growth rates from our larger cohorts, given our ongoing success landing new enterprise customers while expanding existing ones.
Speaker #2: Lastly, we are pleased that ARR from our mid-market segment reached the $100 million mark this quarter. As of the end of Q2, 56% of our total ARR came through the channel, compared to 52% a year ago.
Speaker #2: And for Q2 specifically, 62% of our incremental ARR came through the channel, compared to 61% in Q2 of 2024. The improvement reflects our strategic priority of driving more business through the channel.
Speaker #2: We expect to realize greater market reach while maintaining efficiencies in our sales and marketing spend. This, in turn, supports our ongoing focus on profitable growth.
Speaker #2: Turning now to our customer retention rates. Adjusted for the impact of FX, our trailing 12-month gross retention rate for the second quarter was 89%.
Speaker #2: A 2 percentage point improvement from a year ago. Additionally, I want to remind you that our migration products, which by their nature have lower renewal rates, are included in the calculation of GRR.
Speaker #2: This quarter, migration again served as a two-point headwind to GRR, so excluding it, GRR would have been 91%. The other important point on GRR has to do with the average duration of our subscription contracts.
Speaker #2: A metric which has been flat to modestly down over the past two years, but improved this quarter. And while this doesn't affect our GRR today, a higher average duration ensures that fewer contracts are up for renewal each quarter, thus counting as 100% renewed and supporting further GRR improvements a year from now.
Speaker #2: At the same time, our FX-adjusted net retention rate for the second quarter was 112%. This is a two-point improvement from a year ago. And the highest NRR we have ever delivered.
Speaker #2: Driven by team's ongoing success in selling more of the platform to our existing base of customers. To remind you, our updated long-term targets for GRR and NRR are 90% plus and 115% respectively.
Speaker #2: And we are pleased to show steady progress on these critical customer metrics. On a reported basis, Q2 GRR was 88% and Q2 NRR was 112%.
Speaker #2: For GRR, this represents a two-point improvement versus the prior year. And for NRR, this represents a three-point improvement versus the prior year. Turning back to the income statement, gross profit for Q2 was $76.3 million, representing a gross margin of 74.8% compared to $76.2% in Q2 of 2024.
Speaker #2: The year over year decline in our gross margin is primarily the result of a higher mix of low-margin services revenue this year. Moving down the income statement, operating expenses for Q2 totaled $57.6 million, or 56% of revenues compared to $50.6 million or $65% of revenues a year ago.
Speaker #2: As a result, Q2 operating income was $18.8 million, or an operating margin of 18.4% and above the high end of our guidance. This compares to non-GAAP operating income of $8.7 million in the prior year, or an operating margin of 11.2%.
Speaker #2: This represents year over year margin expansion of more than 700 basis points. As we continue to drive leverage and pursue efficiencies across the business, this is especially true for our sales and marketing expense, which represented 32% of total revenues in the second quarter, compared to 36% of revenues a year ago.
Speaker #2: Driven by ongoing improvements in sales efficiency and an increased contribution from the channel, Q2 marks another quarter of progress toward our longer-term target of 30% of revenues.
Speaker #2: Turning to balance sheet and cash flow statement, we ended the second quarter with $430.1 million in cash, cash equivalents, and short-term investments. Including $70.4 million of proceeds from warrant exercises in the second quarter.
Speaker #2: Lastly, we are pleased that the balance of the remaining warrants were exercised in July for additional cash proceeds of $8.7 million, and that we have no remaining warrants outstanding.
Speaker #2: For the first six months of the year, cash generated from operations was $20.8 million, while free cash flow was $18.3 million. This compares to cash generated from operations of $23.9 million, and free cash flow of $23 million in the first six months of 2024.
Speaker #2: And lastly, we repurchased $444,000 shares in the second quarter for approximately $7 million. And year to date, we have repurchased approximately $1.2 million shares for approximately $19 million.
Speaker #2: And have just over $130 million remaining in our authorized share repurchase program. I would now like to turn to our financial outlook and provide some color into our updated full-year expectations.
Speaker #2: First, our updated full-year guidance for revenue and non-GAAP operating income includes the respective second quarter outperformance relative to guidance. Second, we are raising our expectations for all guided metrics, total ARR, total revenue, and non-GAAP operating income, which reflect the momentum that we are seeing in the business.
Speaker #2: Lastly, why our ectations reflect this momentum and the healthy demand signals we are seeing, we also believe it is prudent to properly account for potential uncertainty in the second half of the year, particularly with regard to the public sector in the third quarter.
Speaker #2: As a result, for the third quarter, we expect total revenues of $104.6 million to $106.6 million or growth of 18% to 20%. And on a constant currency basis, we expect revenue growth of 16% to 18%.
Speaker #2: We expect non-GAAP operating income of $18 million to $19 million. And for the full year, we now expect total ARR of $412.8 million to $418.8 million or growth of 26% to 28%.
Speaker #2: This includes a $3 million raise in our guidance, partially offset by a $2 million FX headwind. And so on an FX-adjusted basis, we expect total ARR growth of 24% to 26% for the full year.
Speaker #2: We now expect total revenues of $460.6 million to $410.6 million or growth of 23% to 24%. This includes the $5.8 million revenue beat from second quarter as well as a $2 million increase from our prior guidance.
Speaker #2: On a constant currency basis, we now expect revenue growth of 21% to 22% compared 18% to 19% growth we guided to last quarter. And lastly, we now expect full-year non-GAAP operating income of 68.3 million to 70.8 million or an operating margin of 16.8 to 17.2%.
Speaker #2: This represents year over year margin expansion of approximately $260 basis points and includes the $5.3 million operating income beat from the second quarter as well as a $1.5 million increase from our prior guidance.
Speaker #2: On a rule of 40 basis, which for AvePoint is the sum of ARR growth and non-GAAP operating margin, the midpoint of today's full-year guidance reflects a 44% compared to the 43% we guided to last quarter.
Speaker #2: With the improvement coming from both the top and bottom lines. Similar to last quarter, our current investor presentation includes slides which detail our actual Q2 performance relative to guidance as well as the walk from our prior full-year guidance in May to our current full-year guidance for all metrics.
Speaker #2: In summary, Q2 was another outstanding quarter of execution by team and we are pleased to deliver another strong set of results for shareholders. Thanks for joining us today and with that, we would be happy to take your questions.
Speaker #2: Operator.
Speaker #3: Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on our touchstone phone.
Speaker #3: If you are using a speaker phone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Speaker #3: At this time, we will pause momentarily to assemble our roster. Our first question, comes from Joseph Gallo of Jeffries. Please go ahead.
Speaker #4: Hey, guys. Thanks for the estion. Jim, I appreciate your prudence commentary embedded into guidance. Can you just talk about macro both for commercial and the government vertical?
Speaker #4: What are ou seeing today? And then are you embedding that it ets worse? Maybe just unpack a little bit about how you see federal shaping up next quarter.
Speaker #2: Yeah, thanks for question, Joe. You know, you think back to how we thought about guidance really at the beginning of the year, you know we knew at that point that there was a ton of uncertainty with the new administration coming in, the discussions around DOGE, clearly the focus on reducing spend and really going into that.
Speaker #2: So we were really conscious of building that into our guidance really from the beginning of the year. And so we focused on that at least from the federal point of view.
Speaker #2: So we haven't ally seen any change to that in terms of our guidance. We're kind of really considering the same kind of aspects that we thought about, you know, a number of months ago.
Speaker #2: We haven't seen that get worse. And again, we feel really good about that piece. And on the commercial side, you know, as you saw from our last quarter, we're eing really nice progress and nice growth and nice demand really across the board.
Speaker #2: Both geographically, we see nice growth in North America, EMEA, and APAC. And then also we're seeing really strong and healthy growth across all three customer segments.
Speaker #2: So you know, from that point of view, we really haven't seen any change on the federal side. And it's obviously one of the reasons that we're actually increasing guidance is seeing that healthy demand continuing.
Speaker #2: Obviously, not only in Q2, but we're seeing that for the rest of the year as well.
Speaker #4: No, that's great to hear and helpful. As a follow-up, can you just talk through your go-to-market investments both on the annel side and direct?
Speaker #4: You raised operating margin guidance, which is great. So I'm just curious how we should think about sales capacity and headcount going ward.
Speaker #2: Yeah, great estion. You know, again, we spent a lot of time thinking about capacity, efficiency, and 've seen a couple of things over the past really past two years and I've talked it a few other times too that we've en really the efficiency our sales teams improve and we measure that in a few different ways.
Speaker #2: Obviously, you can see it in the bottom line in the P&L where we're reducing our sales and marketing spend as a percentage of revenue.
Speaker #2: Obviously, heading toward our target of 30%, getting down to 32% this year. That's, I would say, at the macro level. At the highest level.
Speaker #2: But underneath that, what we see is performance-based improvements; things like time to first sale, in terms of ramping quota for new reps, and then in terms of execution and delivery against quota for our experienced reps.
Speaker #2: All three of those categories are making significant improvements. And we're ally pleased with the progress that we've en there, particularly over the past couple of years.
Speaker #2: And that's really continued. And then when think about capacity, what we try and do is really look out as far as possible in terms of where we need our salespeople today to be delivering not only next quarter, not only next six months, but really thinking a year to two years ahead, do we have the capacity to deliver what we believe are the numbers we need to be achieving?
Speaker #2: So we've really got a global effort around that and really focused on ensuring that we have not only the right products, but also the right quality and quantity of resources to deliver against those targets.
Speaker #4: Thank you.
Speaker #3: Our next question, comes from Joe Vandrick of Scotiabank. Please go head.
Speaker #4: Thanks for taking my questions. TJ, I wanted to ask, what's the biggest theme driving customer conversations as of today? Is it AI readiness in general?
Speaker #4: Is it Microsoft Copilot governance or backup or maybe cyber resilience? I know you touched on all of those on the call. So or maybe is it something else?
Speaker #4: Would love hear your thoughts there.
Speaker #2: Yeah, thanks for the estion. Yeah, every estion, every company continued to focus on security threats as well as AI deployment capabilities. So that is consistent with a prior quarters.
Speaker #2: And we also are seeing that AI is starting to roll out more widely as we had discussed. So this applied to companies literally every region, vertical, and size.
Speaker #2: And this is where AvePoint helped them curate and secure their data. So governance of data estate is still central to an enterprise's strategy. And that really plays to our strength.
Speaker #2: And it's being embraced by organizations everywhere. So we're seeing the flywheel of our scale growth on a global level, but the highlighted questions are still concerns from companies are still the same as security and AI.
Speaker #4: Okay, that makes sense. And one for Jim, I think this is the second quarter in a row where you've left the constant currency ARR guide unchanged, but you've increased the constant currency revenue guide.
Speaker #4: So just curious what's driving the discrepancy there? Is it maybe outperformance from or ASC606 driving that? If you could touch on that.
Speaker #4: services revenue
Speaker #2: Yeah, I think number one, if you'll be able to see in some of the investor materials that we are actually raising our guidance around ARR.
Speaker #2: Yeah, I think number one, if you'll be able to see in some of the investor materials that we are actually
Speaker #2: you'll see an improvement there when you look at the detail. And I think it's what you see in the 24 to 26% is really more of a rounding issue.
Speaker #2: We're actually improving and raising the guidance, but from a rounding point of view, it stays the same percentages. So that's part of it. And then you're right.
Speaker #2: We did have part of the beat in Q2 was from services. But we're seeing really strong performance in SaaS and again, we're really pleased with the performance in Q2 and really excited about the expectations we're setting for the second half of the ar.
Speaker #4: Okay, very helpful. Thank you.
Speaker #2: Thanks, Joe.
Speaker #3: Our next question comes from Kirk. Maternity of Evercore ISI. Please go ahead.
Speaker #4: Hi, this is Chiragon for Kirk. Thanks for fitting me in here. So TJ, you talked about your multi-cloud governance strategy with companies such as Salesforce and Google.
Speaker #4: Can you touch on how early you all are in this opportunity and what needs to happen on your end and perhaps from a channel end to move the needle in terms of revenue and just overall influence here?
Speaker #4: Thank you.
Speaker #2: Thank you. Great question. So we have already been supporting backup as service for the Google Workspace ecosystem as well as Salesforce ecosystem. And we also mentioned outside of the Microsoft cloud ecosystem, our coverage is about less than 10% of our revenue today.
Speaker #2: So we already have meaningful revenue there, specifically you asked about the governance capabilities that we're rolling out that we announced most recent quarter. We're very excited about that to be able to roll that out to work with our partners around the world to go to market and really take advantage of our great reputation and capabilities in the Microsoft cloud world when it comes to data curation, data governance, and apply that to a multi-cloud setup.
Speaker #2: So those are still in early stages. But it is worth, again, reiterating, we have already done very meaningful revenue in the multi-cloud space with backup as service, migration as service.
Speaker #2: Now we're layering with governance as a service also.
Speaker #4: All right. And maybe one more, I just looking out into the second half of the year, where do ou see the largest opportunities for AvePoint to capitalize on as every company is looking to implement AI in their tech stacks?
Speaker #2: Yeah, you'll see we have already talked lot about agentic AI governance. That's the very hot topic we have already done this in prior with the power platform governance, low-code, and no-code application governance.
Speaker #2: And now we're working very closely with some of our largest global customers around agentic governance. So this is actually a fantastic growth area. We're very excited about the results we're seeing in the field.
Speaker #2: So we think that this is something that's going be a theme carrying forward the next few quarters.
Speaker #4: All right. Thank you so much.
Speaker #3: Our next question comes from Jason Adder of William Lair. Please go ahead.
Speaker #4: Yeah, thank ou. Good afternoon, guys. Just wanted to ask a couple of ings. First, just on the MSP business, the elements business. I think you've said historically that was around 15% of ARR.
Speaker #4: Any update there would be helpful. Any comments on the growth of that particular chunk of the business?
Speaker #2: Yeah, Jason, great estion. So we comment on the SMB segment. It's about 19% of our total recurring. MSP as part of that is not the whole subset of SMB.
Speaker #2: But MSP is a major portion of that. And they become our intermediary to unlock the SMB market. That continued to grow very robustly. It's actually our fastest growing vertical.
Speaker #2: We have made a number of major product expansions into the MSP offering collectively. It's known as the elements platform. And also in the prepared remarks, you will hear that you heard that we actually apply some of the MSP use cases now to our enterprise customers when it es to configuration, multi-tenant baseline management.
Speaker #2: So they're actually really interesting new use cases that we developed and deployed for our MSP partners now finding great ROI and use in the enterprise segment as well.
Speaker #2: So yeah, we're very excited about the MSP vertical. It's continued to be our fastest growing.
Speaker #4: And the $100 million in ARR, is that the entire SMB or is that just?
Speaker #2: That's the mid-market.
Speaker #4: That wasn't clear.
Speaker #2: Yeah, yeah. We actually so that's enterprise for us is $5,000 employee and above. Mid-market is $500 to $5,000. And SMB is $500 and below.
Speaker #2: So we stated before that enterprise, it's about 53% of our total ARR. SMB is 19% and remainder the mid-market. And mid-market have exceeded $100 million ARR.
Speaker #4: Okay, I gotcha. All right. And then Just talked about the NRR. Momentum. How the team is doing a better job of selling more of the portfolio to existing customers.
Sure. I mean I can add a few things and then maybe TJ can add too uh so appreciate you pointing that out nihal. Um but yeah, TJ covered a couple um in the prepared remarks and we talked about some of the customers uh really expanding. Um with us. We had we did have a number of large deals in the quarter. Um continuing to expand with our existing customer base. Um we also had
Really good nrr growth across. All 3 of our customer segments. Uh, again, good cross-selling or for us, we would really say, you know, that cross sell motion of of customers adopting, uh, and utilizing additional products within the platform. Um, so, again, it's been across the board North. America was very strong me as strong as well, in APAC. Uh, so we had some really nice wins. Um, and again across industry segments as well.
So again we had really good performance across all, all real aspects of the business and and are was just another 1 of those in terms of um this cross sell motion to existing customers.
Okay great. Uh so it sounds like it's a broad-based. That's driving that basically, no, no, no, single driver.
That's right.
Okay. Uh, and then based on recent M&A activity, it seems like identity and access management is at the precipice of an inflection driven by a check of AI. Is there a correlation with respect to data access management? So they said AvePoint is so well known for...
yeah, that's a great question. First of all, we're a very excited to see uh our area of focus have a lot of activity and vendors looking to expand offerings uh to to make it more of a platform play. Um, yeah, we're no different. We we've been uh, we we have done 6, Acquisitions to date, and we'll remain inquisitive and have a strong balance sheet as you. You can see.
Posture management is a, a key growth area for us.
I guess what I'm trying to point out. Is that policy creation and enforcement Works across identity and data? And therefore if identity is at an inflection point is, does that mean also data access management must be inflection point?
Yeah. Um, I think, uh, you also call this out in your report, the delegate Administration model that we have, that's a very unique that allow, uh, the end users, uh, to take on the accountability and responsibility to actually help the siso teams the security teams as well as it teams to actually achieve a better, uh, quality data and state faster. So, you're absolutely right. So the, the um, the data, uh, uh, governance and control its, uh, uh, very very critical. Now, especially with the AI refinement and the AI. Deployments
Okay, great. Thank you.
Thank you.
Our next question comes from galier Gabriella Borges of Goldman Sachs. Please go ahead.
Hey good evening. Thanks for taking my question TJ. I always appreciate your comments about AI. Adoption given the unique points of visibility that. You have what I want to ask you is about the durability of growth in the control Suite. Do you think we're going through a period of time where new customer lands, customer crossover and control is particularly elevated? Because 2025 is the year where Enterprises are waking up and really pushing to get there. Uh, get that data strategy, sorted out before AI, adoption such that we have a Slowdown over the next 3 years. Or do you see enough in the install base of this kind of Dimension can be durable for several years and maybe several quarters as well. Thanks so much.
Uh, thank you Deborah. Uh, great question. Uh, we actually think we're still in the early endings. Um, while Microsoft have announced, uh, uh, co-pilot deployment, uh, have a step-up function. Uh, it's still uh, you know, in the in the low double digits, um, there's uh, we also previous quarter, we highlight that. Um, it's not a correct or just associate companies AI adoption with their co-pilot deployment because there's Microsoft's overall AI uh moniker it's co-pilot uh there's office co-pilot there's a GitHub co-pilot and then of course there's uh General uh cognitive Services. That's basically the front end to uh uh back in uh commercial available, a large language models. So we see
Uh, up to 80% of companies are deploying some sort of, uh, AI, uh, and uh, that, uh, is what, uh, get us into and involve into the, uh, conversations. And as the office co-pilots, uh, continue to increase in penetration, uh, we see, uh, more areas for our coverage. So I think we're still in the early endings. I don't see this slowing down anytime soon.
Excellent. Thank you Jim. The follow-up is for you. Could you just remind us what drove the services outperformance in the quarter and our price growth relative to trending.
Yeah, so you know, really um, you know, we have a, a Global Services business. We do some projects more almost SI work in some parts of the world and um, we had a bunch of those projects conclude, uh, in the quarter that, uh, gave us some outsized performance in terms of Revenue. Um, so that that contributed a little bit to, um, the performance, uh, beat. Uh, we did expect those, we had planned for those. Um, but again, it was, it was nice to see them finally conclude and close out in Q2.
Thank you.
Our next question comes from Derek wood of TD Cowen, please go ahead.
Great. Thanks, guys. This is Cole on for Derek. Um, TJ. I think this is kind of a follow-up to a question that was asked earlier. But, um, could you just talk about how customers spend levels change, as they move from, you know, getting ready to roll out production, uh, use cases for co-pilot or even agents and then once they're into production, you know, like how they're how their level of spend changes with that point.
Uh, formerly, uh, formalizes, uh, uh, ah, spend for all AI related, uh, work streams. So we think that's a positive, uh, from our perspective. This is also why we uh, continue to see our uh, governance uh, Suite to be the fastest growing of uh, our offerings.
Super helpful, thanks. And then Jim there's 1 for you. Um,
you noted some longer uh longer term contracts, anything in particular driving that
Um, not not only 1 thing, we've seen um, you know, again across the board, you know, our average contract length increasing um which was nice to see, I think. Um I probably shared on a number of calls that over the past 2 years,
You know, as people were really, you know, tightening their belts and looking at their budgets. Um, you know, it it's been a a battle in terms of getting people to sign longer term contracts. We've put some effort around that some structure and some discipline. Uh, I think it still makes sense for for companies to committing longer term, particularly with some of the solutions we have. They're they shouldn't be solutions that are easily uh replaced or changed. So it makes sense to be signing. We saw a nice uptick this year but it literally was the board, not just 1 or 2 customers but we saw a nice uptick. Uh and again we want to continue to see improvements there and and hope to see that going forward.
Very helpful. Thank you.
Thanks Cole.
This concludes our question and answer session, I would like to turn the conference back over to the company for any closing remarks.
Thank you before we close, I want to take a moment to reflect on what this quarter truly represents.
Surpassing 100 million in quarterly revenue is a defining milestone for our point and a clear signal our strategy is working.
it's a testament to the strength of our platform, the trust of our customers, and partners, and the consistent execution of our Global teams over the past several weeks,
I've sat down with our regional leaders string, quarterly business, overviews around the world. What's clear? Is that our teams are energized aligned and Laser focused on the opportunity ahead.
We're not just reacting to Market shifts. We're anticipating them and building the solutions, our customers and partners need to thrive in an ai-driven multicloud world.
Where we remain confident in our ability to scale this momentum our path to 1 billion dollar in our by 2029 is grounded. In the progress, we're making every quarter and we'll continue to pursue that goal with the same discipline. That's driven our profitable growth to date while accelerating Innovation that sets us apart.
thank you again for joining us today and we look forward to speaking with you more, this quarter
This.
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Thank you for participating and have a pleasant day.