UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________.
Commission file number:
AvePoint, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| | | The | ||
| | | The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 8, 2024 there were
AVEPOINT, INC.
FORM 10-Q
For the Fiscal Quarter Ended March 31, 2024
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, as well as descriptions of the risks and uncertainties that could cause actual results and events to differ materially, may appear throughout this Quarterly Report, including in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2 of this Quarterly Report), “Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Quarterly Report), and “Risk Factors” (Part II, Item 1A of this Quarterly Report).
These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events, or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, sales, earnings, and statements expressing general views about future operating results — are forward-looking statements. These forward-looking statements are, by their nature, subject to significant risks and uncertainties, and are based on the beliefs of, as well as assumptions made by and information currently available to, our management. Our management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Readers should evaluate all forward-looking statements made in the context of these risks and uncertainties. The important factors referenced above may not contain all of the factors that are important to investors.
These forward-looking statements speak only as of the date of this Quarterly Report and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about:
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our future operating or financial results; |
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future acquisitions, business strategy and expected capital spending; |
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changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; |
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the implementation, market acceptance and success of our business model and growth strategy; |
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expectations and forecasts with respect to the size and growth of the cloud industry and digital transformation in general and Microsoft’s products and services in particular; |
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the ability of our products and services to meet customers’ compliance and regulatory needs; |
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our ability to compete with others in the digital transformation industry; |
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our ability to grow our market share; |
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our ability to attract and retain qualified employees and management; |
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our ability to adapt to changes in consumer preferences, perception and spending habits and develop and expand our product offerings and gain market acceptance of our products, including in new geographies; |
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developments and projections relating to our competitors and industry; |
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our ability to develop and maintain our brand and reputation; |
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unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, armed hostilities (including the ongoing hostilities between Russia and Ukraine), extreme weather conditions, natural disasters, other pandemics or other calamities; |
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our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; |
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expectations regarding the time during which we will be an emerging growth company under the JOBS Act; |
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our future capital requirements and sources and uses of cash; |
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our ability to obtain funding for our operations and future growth; |
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the effects of inflation; and |
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the effects of foreign currency exchange. |
The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise, except as required by law.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, the events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the ‘‘Risk Factors’’ section of our Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, and the "Risk Factors" section of this Quarterly Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to the Quarterly Report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless the context otherwise indicates, references in this report to the terms “AvePoint”, the “Company”, “we”, “our” and “us” refer to AvePoint, Inc. and its subsidiaries.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Item 1
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $and $, respectively | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Deferred contract costs | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, mezzanine equity, and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other liabilities | ||||||||
| Current portion of deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Long-term portion of deferred revenue | ||||||||
| Earn-out shares liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Mezzanine equity | ||||||||
| Redeemable noncontrolling interest | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, $par value; shares authorized, and shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities, mezzanine equity, and stockholders’ equity | $ | $ | ||||||
See accompanying notes.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| SaaS | $ | $ | ||||||
| Term license and support | ||||||||
| Services | ||||||||
| Maintenance | ||||||||
| Total revenue | ||||||||
| Cost of revenue: | ||||||||
| SaaS | ||||||||
| Term license and support | ||||||||
| Services | ||||||||
| Maintenance | ||||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Income (loss) before income taxes | ( | ) | ||||||
| Income tax expense | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net (loss) income attributable to noncontrolling interest | ( | ) | ||||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted shares used in computing loss per share | ||||||||
See accompanying notes.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive (loss) income net of taxes | ||||||||
| Reclassification adjustment for net gains on available-for-sale securities included in net loss | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total other comprehensive (loss) income | ( | ) | ||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Comprehensive (loss) income attributable to noncontrolling interests | ( | ) | ||||||
| Total comprehensive loss attributable to AvePoint, Inc. | $ | ( | ) | $ | ( | ) | ||
See accompanying notes.
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity
(In thousands, except share amounts)
(Unaudited)
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Accumulated | Comprehensive | Noncontrolling | Stockholders’ | |||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Deficit | Income | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||
| Accretion of redeemable noncontrolling interest | ( | ) | ( | ) | — | — | — | — | — | |||||||||||||||||||||||||||
| Redemption of noncontrolling interest | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Reclassification adjustment for net gains on available-for-sale securities included in net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Income | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
See accompanying notes.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Operating activities |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Operating lease right-of-use assets expense |
||||||||
| Foreign currency remeasurement loss (gain) |
( |
) | ||||||
| Stock-based compensation |
||||||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Other |
( |
) | ( |
) | ||||
| Change in value of earn-out and warrant liabilities |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
||||||||
| Prepaid expenses and other current assets |
||||||||
| Deferred contract costs and other assets |
||||||||
| Accounts payable, accrued expenses, operating lease liabilities and other liabilities |
( |
) | ( |
) | ||||
| Deferred revenue |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
||||||||
| Investing activities |
||||||||
| Maturities of investments |
||||||||
| Purchases of investments |
( |
) | ( |
) | ||||
| Capitalization of internal-use software |
( |
) | ( |
) | ||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Investment in notes |
( |
) | ( |
) | ||||
| Net cash (used in) provided by investing activities |
( |
) | ||||||
| Financing activities |
||||||||
| Repurchase of common stock |
( |
) | ( |
) | ||||
| Proceeds from stock option exercises |
||||||||
| Repayments of finance leases |
( |
) | ( |
) | ||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Effect of exchange rates on cash |
( |
) | ||||||
| Net (decrease) increase in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information |
||||||||
| Income taxes paid |
$ | $ | ||||||
| Unpaid redemption of noncontrolling interest |
$ | $ | ||||||
See accompanying notes.
1. Nature of Business and Organization
AvePoint, Inc. (collectively with its subsidiaries, hereinafter referred to as “AvePoint,” the “Company,” “we,” “us,” or “our”) was incorporated as a New Jersey corporation on July 24, 2001 and redomiciled as a Delaware corporation in 2006.
AvePoint provides a cloud-native software platform that organizations rely on to optimize operations, manage critical data and secure the digital workplace. As companies around the world embrace the new normal of hybrid work, they must build and deliver a new, seamless workplace experience for knowledge workers, centered around an extensive portfolio of SaaS solutions and productivity applications aimed at improving collaboration across the organization.
Our principal corporate headquarters are located in Jersey City, New Jersey, with our principal operating headquarters in Richmond, Virginia and additional offices in North America, Europe, Asia, Australia and the Middle East.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and include the accounts of the Company and entities consolidated under the variable interest and voting models. All intercompany transactions and balances have been eliminated. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted.
In the opinion of management, these financial statements contain all material adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024.
These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021, and the related notes included in our most recent Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (“Annual Report”).
The Company's significant accounting policies are discussed in Note 2 to the consolidated financial statements included in the Annual Report. There have been no significant changes to these policies during the three months ended March 31, 2024.
Comparative Data
Certain amounts from prior periods have been reclassed to conform to the current period presentation, including:
| • | The reclassification of gain (loss) on earn-out and warrant liabilities to be included in other income, net on the condensed consolidated statements of operations for the three months ended March 31, 2023. | |
| • | The reclassification of interest income, net to be included in other income, net on the condensed consolidated statements of operations for the three months ended March 31, 2023. |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The amounts of assets and liabilities reported in our condensed consolidated balance sheets and the amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for the determination of standalone selling price for revenue recognition, allowance of doubtful accounts, deferred contract costs, valuation of goodwill and other intangible assets, income taxes and related reserves, stock-based compensation, purchase price in a business combination, and earn-out liabilities. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.
Foreign Currency
Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income, net in the Company’s condensed consolidated statements of operations. Transaction losses totaled $
Cash and Cash Equivalents
The Company maintains cash with several high credit-quality financial institutions. The Company considers its investments with original maturities of three months or less to be cash equivalents. These investments are not subject to significant market risk. The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts. The Company maintains cash balances used in operations at entities based in countries that impose regulations that limit the ability to transfer cash out of the country. As of March 31, 2024 and December 31, 2023, the Company’s cash balances at these entities were $
Prepaid Expenses and Other Current Assets
The prepaid expenses balances as of March 31, 2024 and December 31, 2023 were $
Goodwill
No events or circumstances changed since the acquisitions that would indicate that the fair value of our reporting unit is below its carrying amount.
Deferred Contract Costs
We defer sales commissions that are considered to be incremental and recoverable costs of obtaining or renewing SaaS, term license and support, services, perpetual license and maintenance contracts. Changes in the anticipated period of asset benefit or the average renewal term are recognized on a prospective basis upon occurrence.
Amortization of deferred contract costs of $
Revenue Recognition
The Company derives revenue from four primary sources: SaaS, term license and support, services, and maintenance. Services include installation services, training and other consulting services.
Term license revenue recognized at point in time was $
Accounts receivable, net is inclusive of accounts receivable, and current unbilled receivables, net of allowance for doubtful accounts. We record an unbilled receivable when revenue is recognized prior to invoicing. We have a well-established collection history from our direct and indirect sales. We periodically evaluate the collectability of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on the age of the receivable, expected payment ability, and collection experience. As of March 31, 2024 and December 31, 2023, the allowance for doubtful accounts was not material.
We record deferred revenue in the condensed consolidated balance sheets when cash is collected or invoiced before revenue is earned. Deferred revenue as of March 31, 2024 and December 31, 2023 was $
The opening and closing balances of the Company's accounts receivable, net, deferred revenue and deferred contract costs are as follows:
| Accounts | Deferred | |||||||||||
| receivable, | Deferred | contract | ||||||||||
| net (1) | revenue | costs | ||||||||||
| (in thousands) | ||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | |||||||||
| Balance, March 31, 2024 | ||||||||||||
(1) Includes long-term unbilled receivables.
There were no significant changes to the Company’s contract assets or liabilities during the three months ended March 31, 2024 and the year ended December 31, 2023 outside of its sales activities.
As of March 31, 2024, transaction price allocated to remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $
Stock-Based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. To date, we have issued both stock options and restricted stock units. The Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award and recognizes the cost ratably over the requisite service period, net of actual forfeitures in the period.
We estimate the fair value of stock options using the Black-Scholes valuation model. The Black-Scholes model requires highly subjective assumptions in order to derive the inputs necessary to calculate the fair value of stock options. To estimate the expected term of stock options, the Company considers contractual terms of the options, including the vesting and expiration periods, as well as historical option exercise data and current market conditions to determine an estimated expected term. The Company’s historical experience is too limited to be able to reasonably estimate an expected term. Expected volatility is based on the historical volatility of a group of peer entities. Dividend yields are based upon historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected term.
Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet effective
In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)” (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendment in this ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. We are currently evaluating the impact ASU 2023-07 will have on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures (Topic 740)” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The amendment in this ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted. We are currently evaluating the impact ASU 2023-09 will have on our consolidated financial statements and related disclosures.
3. Goodwill
The changes in the carrying amounts of goodwill were as follows:
| Goodwill | ||||
| (in thousands) | ||||
| Balance as of December 31, 2023 | $ | |||
| Acquisitions | ||||
| Effect of foreign currency translation | ( | ) | ||
| Balance as of March 31, 2024 | $ | |||
4. Intangible assets, net
Intangible assets consist of acquired intangible assets and self-developed software. Amortization expense for intangible assets was $
A summary of the balances of the Company’s intangible assets as of March 31, 2024 and December 31, 2023 is presented below:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| March 31, | December 31, | |||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Technology and software | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Customer related assets | ( | ) | ( | ) | ||||||||||||||||||||
| Content | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
As of March 31, 2024, estimated future amortization expense for intangible assets, net is as follows:
| Year Ending December 31: | ||||
| (in thousands) | ||||
| 2024 (nine months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total intangible assets subject to amortization | $ | |||
5. Accounts Receivable, Net
Accounts receivable, net, consists of the following components:
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Trade receivables | $ | $ | ||||||
| Current unbilled receivables | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
6. Line of Credit
The Company maintains a loan and security agreement (the “Loan Agreement”) with HSBC Bank USA, National Association, (“HSBC”) as lender, for a revolving line of credit of up to $
7. Income Taxes
The Company had an effective tax rate of
The change in effective tax rates for the three-month period ended March 31, 2024 as compared to the three-month period ended March 31, 2023 was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, the impact of foreign inclusions, stock-based compensation and changes in valuation allowance in certain jurisdictions.
The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances. In making such an assessment, management would consider all available supporting data, including the level of historical taxable income, future reversals of existing temporary differences, tax planning strategies, and projected future taxable income.
8. Leases
The Company is obligated under various non-cancelable operating leases primarily for office space. The initial terms of the leases expire on various dates through 2030. We determine if an arrangement is a lease at inception.
The components of the Company’s operating lease expenses are reflected in the condensed consolidated statements of operations as follows:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Lease liability cost | $ | $ | ||||||
| Short-term lease expenses (1) | ||||||||
| Variable lease cost not included in the lease liability (2) | ||||||||
| Total lease cost | $ | $ | ||||||
(1) Short-term lease expenses include rent expenses from leases of 12 months or less on the transition date or lease commencement.
(2) Variable lease cost includes common area maintenance, property taxes, and fluctuations in rent due to a change in an index or rate.
Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We elected to combine fixed payments for non-lease components, for all classes of underlying assets, with our lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities.
During the three months ended March 31, 2024 and 2023, right-of-use assets obtained in exchange for new operating lease liabilities amounted to $
Other information related to operating leases is as follows:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Cash paid for amounts included in the measurement of the lease liability: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
As of March 31, 2024, our operating leases had a weighted average remaining lease term of
| Year Ending December 31: | ||||
| (in thousands) | ||||
| 2024 (nine months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future lease payments | $ | |||
| Less: Present value adjustment | ( | ) | ||
| Present value of future lease payments (1) | $ | |||
(1) Includes the current portion of operating lease liabilities of $
9. Commitments and Contingencies
Legal Proceedings
In the normal course of its business, the Company may be involved in various claims, negotiations and legal actions. Except for such claims that arise in the normal course of business, as of March 31, 2024, the Company was not a party to any other litigation for which a material claim is reasonably possible, probable or estimable.
Guarantees
In the normal course of business, customers in certain geographies or in highly regulated sectors occasionally require contingency agreements, which are secured by certificates of deposit. As of March 31, 2024, letters of credit have been issued in the amount of $
10. Earn-Out and Warrant Liabilities
Company Earn-Out
Certain holders of common stock and certain holders of options shall be issued additional shares of AvePoint’s common stock, as follows:
| • | | |
| • | | |
| • | |
The rights described above are hereafter referred to as the “Company Earn-Out Shares”. To the extent that any portion of the Company Earn-Out Shares that would otherwise be issued to a holder of options that remain unvested at the date of the milestones described above, then in lieu of issuing the applicable Company Earn-Out Shares, the Company shall instead issue an award of restricted stock units of the Company for a number of shares of AvePoint’s common stock equal to such portion of the Company Earn-Out Shares issuable with respect to the unvested options (the “Company Earn-Out RSUs”). In evaluation of the Company Earn-Out Shares and Company Earn-Out RSUs, management determined that the Company Earn-Out Shares represent derivatives to be marked to market at each reporting period, while the Company Earn-Out RSUs represent equity under ASC 718, Compensation-Stock Compensation (“ASC 718”). Refer to “Note 13 — Stock-Based Compensation” for more information regarding the Company Earn-Out RSUs.
In order to capture the market conditions associated with the Company Earn-Out Shares, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out Shares’ (as defined below) contractual life based on the appropriate probability distributions. The fair value was determined by taking the average of the fair values under each Monte Carlo simulation trial. The Monte Carlo model requires highly subjective assumptions including the expected volatility of the price of our common stock, and the expected term of the earn-out shares. Significant increases or decreases to these inputs in isolation could result in a significantly higher or lower liability. Under this approach, the fair value of the Company Earn-Out Shares on July 1, 2021 was determined to be $
| March 31, | December 31, | |||||
| 2024 | 2023 | |||||
| Term (in years) | ||||||
| Volatility | % | % | ||||
Private Warrants to Acquire Common Stock
On July 1, 2021, the Company granted
The private placement warrants are non-transferable and any transfer to an unrelated party would cause the warrants to be converted into public warrants. Consequently, the fair value of the private placement warrants is equivalent to the quoted price of the publicly traded warrants. Under this approach, the fair value of the private placement warrants on July 1, 2021, was determined to be $
11. Mezzanine Equity and Stockholders’ Equity
The Company has one class of capital stock: common stock. The following summarizes the terms of the Company’s capital stock.
Common Stock
Pursuant to the Company’s restated Articles of Incorporation, the Company was authorized to issue up to
Share Repurchase Program
On March 17, 2022, the Company announced that its Board of Directors authorized a new share repurchase program (the “Share Repurchase Program”) for the Company to buy back shares of its common stock. Under the Share Repurchase Program, the Company has the authority to buy up to $
Sponsor Earn-Out Shares
On July 1, 2021, the Company modified the terms of
| • | 100% of the Sponsor Earn-Out Shares shall vest and be released if at any time through July 1, 2028, AvePoint’s stock price is greater than or equal to $15.00 (as adjusted for share splits, share capitalization, reorganizations, recapitalizations and the like) over any 20 trading days within any 30 trading day period; and | |
| • | 100% of the remaining Sponsor Earn-Out Shares that have not previously vested shall vest and be released if at any time through July 1, 2028, the Company consummates a subsequent transaction. |
The Sponsor Earn-Out Shares are currently outstanding and receive all benefits of regular shares with the exception of the fact that the shares are held in escrow and restricted from transfer until the vesting conditions described above are met. Consequently, the shares are classified as equity.
Public Warrants to Acquire Common Stock
On July 1, 2021, the Company issued
Redeemable Noncontrolling Interest
During the three months ended March 31, 2024, the redeemable noncontrolling interest shareholder of MaivenPoint Pte. Ltd. (“MaivenPoint”), a consolidated subsidiary of the Company, submitted notices of exercise of their put option to cause MaivenPoint to repurchase their shares at a price of approximately $
There are
12. Growth Equity Fund
On February 28, 2024, the Company and Lumens Capital Partners Ltd. (“LCP”) established A3V JV Co. (the “Venture”), with each owning an equal share of the Venture. In addition, the Company entered into a separate agreement with LCP to form A3 Ventures Fund 1, L.P. (the “Fund”). The Fund is a Cayman Islands-exempted limited partnership, aimed at investing in companies in the growth equity phase and mature cashflow generating businesses with strong growth potential. The Fund looks to invest in companies situated in enterprise software markets aligning with the professional expertise and geographical presence of both the Company and LCP.
The Venture wholly owns A3V GP Co. (“GP”), which serves as the general partner of the Fund. As a limited partner, the Company committed to contribute $
As of March 31, 2024, the operations of the Fund and the Venture have not materially impacted the Company’s financial position, financial performance, or cash flows.
13. Stock-Based Compensation
The Company maintains the 2021 Equity Incentive Plan (the “2021 Plan”). As of March 31, 2024,
The Company records stock-based compensation in cost of revenue, sales and marketing, general and administrative and research and development. Stock-based compensation was included in the following line items:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Cost of revenue | $ | $ | ||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total stock-based compensation | $ | $ | ||||||
Stock Options
The compensation costs for stock option awards are accounted for in accordance with ASC 718. Stock options vest over a -year service period and expire on the anniversary of the date of award.
On March 5, 2024, the Company granted
| March 5, | ||||
| 2024 | ||||
| Expected life (in years) | ||||
| Expected volatility | % | |||
| Risk-free rate | % | |||
| Dividend yield | — | |||
To estimate the expected life of stock options, the Company considered the vesting term, contractual expiration period, and market conditions. Expected volatility is based on historical volatility of a group of peer entities. Dividend yields are based upon historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life. Based on these inputs, the grant-date fair value was determined to be $
As of March 31, 2024, there was $
As of March 31, 2024, the Company had
Restricted Stock Units
Under the terms of the 2021 Plan, we have issued restricted stock unit awards with a continuous employment condition only (“Time-Based RSUs”), and restricted stock unit awards with a continuous employment condition that are also contingent on the Company meeting certain performance goals (“PSUs”, and together “RSUs”). Both types of RSU awards vest over a -year period from the grant date.
Company Earn-Out RSUs
The compensation costs for Company Earn-Out RSUs are accounted for in accordance with ASC 718. In order to capture the market conditions associated with the Company Earn-Out RSUs, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out RSUs’ contractual life based on the appropriate probability distributions. The fair value was determined by taking the average of the fair values under each Monte Carlo simulation trial. Under this approach, the grant-date fair value of the Company Earn-Out RSUs on July 1, 2021, was determined to be $
14. Financial Instruments
Fair value is defined by ASC 820, Fair Value Measurement (“ASC 820”) as the price that would be received upon selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| • | Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| • | Level 3 — Unobservable inputs for the asset or liability. |
| March 31, 2024 | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Cash Equivalents: | ||||||||||||||||
| Certificates of deposit (1) | $ | $ | $ | $ | ||||||||||||
| Money market funds | ||||||||||||||||
| Short term investments: | ||||||||||||||||
| Certificates of deposit (1) | ||||||||||||||||
| Other assets: | ||||||||||||||||
| Notes receivables (3) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Earn-out shares liabilities: | ||||||||||||||||
| Earn-out shares (2) | $ | $ | $ | $ | ||||||||||||
| Other non-current liabilities: | ||||||||||||||||
| Warrant liabilities (2) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Cash Equivalents: | ||||||||||||||||
| Certificates of deposit (1) | $ | $ | $ | $ | ||||||||||||
| Money market funds | ||||||||||||||||
| U.S. treasury bills | ||||||||||||||||
| Short term investments: | ||||||||||||||||
| Certificates of deposit (1) | ||||||||||||||||
| Other assets: | ||||||||||||||||
| Notes receivables (3) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Earn-out shares liabilities: | ||||||||||||||||
| Earn-out shares (2) | $ | $ | $ | $ | ||||||||||||
| Other non-current liabilities: | ||||||||||||||||
| Warrant liabilities (2) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
(1) The majority of certificates of deposit are foreign deposits.
(2) Refer to “Note 10 — Earn-Out and Warrant Liabilities” for further details.
(3) During 2023, the Company extended a credit facility to LCP with a total commitment of up to $
The following table presents the reconciliation in Level 3 instruments which consisted of earn-out shares liabilities which were measured on a recurring basis.
| Three Months Ended March 31, | ||||
| 2024 | ||||
| (in thousands) | ||||
| Opening balance | $ | |||
| Total gains or losses from the period | ||||
| Included in other income, net | ( | ) | ||
| Reclass from Earnout-RSU | ||||
| Closing balance | $ | |||
15. Segment Information
The Company operates in segment. Its products and services are sold throughout the world, through direct and indirect sales channels. The Company’s chief operating decision maker (the “CODM”) is the Chief Executive Officer. The CODM makes operating performance assessment and resource allocation decisions on a global basis. The CODM does not receive discrete financial information about asset allocation, expense allocation or profitability by product or geography.
Revenue by geography is based upon the billing address of the customer. All transfers between geographic regions have been eliminated from consolidated revenue. The following table sets forth revenue by geographic area:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Revenue: | ||||||||
| North America | $ | $ | ||||||
| EMEA | ||||||||
| APAC | ||||||||
| Total revenue | $ | $ | ||||||
The following table sets forth revenue generated by countries which represent more than 10% of total consolidated revenue:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Revenue: | ||||||||
| United States | $ | $ | ||||||
| Singapore | ||||||||
| Germany | ||||||||
16. Other income, net
Other income, net is disaggregated as follows:
| Three Months Ended March 31, |
||||||||
| 2024 |
2023 |
|||||||
| (in thousands) |
||||||||
| Gain (loss) on earn-out and warrant liabilities |
$ | $ | ( |
) | ||||
| Interest income, net |
||||||||
| Profits on securities |
||||||||
| Foreign currency exchange loss, net |
( |
) | ( |
) | ||||
| Other, net |
||||||||
| Other income, net |
$ | $ | ||||||
17. Loss Per Share
Basic loss per share available to the Company common stockholders (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding for the period. In computing diluted EPS, the Company adjusts the denominator, subject to anti-dilution requirements, to include the dilution from potential shares of common stock resulting from outstanding share based payment awards, warrants, earn-outs and the conversion of convertible preferred shares. The Company’s Sponsor Earn-Out Shares described in “Note 11 — Mezzanine Equity and Stockholders’ Equity” are considered participating securities and have no contractual obligation to shares in the loss of the Company. As such, the weighted-average impact of these shares is excluded from the calculation of loss per share below. As losses were incurred during all periods presented, no earnings per share exists for the Sponsor Earn-Out Shares.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands, except per share amounts) | ||||||||
| Loss per share available to common shareholders, excluding sponsor earn-out shareholders | ||||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net (loss) income attributable to noncontrolling interest | ( | ) | ||||||
| Total net loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average common shares outstanding | ||||||||
| Effect of dilutive securities | ||||||||
| Weighted average diluted shares | ||||||||
| Basic and diluted loss per share available to common shareholders, excluding sponsor earn-out shareholders | $ | ( | ) | $ | ( | ) | ||
To arrive at net loss available to common stockholders, the Company deducted net (loss) income attributable to the redeemable noncontrolling interest.
For the three months ended March 31, 2024 and 2023, the Company’s potentially dilutive securities were deemed to be anti-dilutive given the Company’s net loss position. As such, basic loss per share is equal to diluted loss per share for the periods presented.
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported:
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Stock options | ||||||||
| RSUs | ||||||||
| Warrants | ||||||||
| Company Earn-Outs | ||||||||
| Total potentially dilutive securities | ||||||||
18. Related Party Transactions
The Company has entered into indemnification agreements with its executive officers and directors. These agreements, among other things, require AvePoint to indemnify its directors and executive officers to the fullest extent permitted by Delaware law, specifically the Delaware General Corporation Law (as the same exists or may hereafter be amended) for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of the Company’s directors or officers or any other company or enterprise to which the person provides services at the Company’s request.
19. Subsequent Events
No material subsequent events occurred since the date of the most recent balance sheet period reported.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2 of this Quarterly Report) (“MD&A”) summarizes (and is intended to help the reader understand) the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (our “Annual Report”) and our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report.
First Quarter 2024 Business Highlights
| ▪ |
Total annual recurring revenue (“ARR”) increased 23% year-over-year to $274.5 million as of March 31, 2024; |
|
| ▪ |
Total revenue increased 25% year-over-year to $74.5 million for the three months ended March 31, 2024; | |
| ▪ | SaaS revenue increased 44% year-over-year to $51.3 million for the three months ended March 31, 2024; | |
| ▪ | Added three new FedRAMP (moderate) Authorized products to the more than 20 that have achieved this certification to support the US Public Sector; also achieved compliance with HITRUST CSF v11.0.1 for the AvePoint Confidence Platform, supporting the global healthcare industry and evolving its existing SOC 2 Type II certifications; and | |
| ▪ | Announced new analytical capabilities of the Company’s tyGraph product that enable customers to identify areas of high collaboration within the organization and pinpoint for readiness for Copilot for Microsoft 365. |
Overview
AvePoint provides a cloud-native data management software platform that organizations rely on to manage and protect critical data, optimize IT operations, achieve meaningful cost savings, and efficiently secure the digital workplace. Companies around the world have adopted a hybrid work model, and they are now tasked with delivering a seamless and secure workplace experience for knowledge workers, centered around an extensive portfolio of Software-as-a-Service (“SaaS”) solutions and productivity applications.
The adoption of this portfolio of solutions is a substantial and ongoing challenge for most organizations, which for decades had used only a small number of multi-purpose on-premises applications to drive business outcomes. However, to deliver an efficient digital workplace today, companies must manage this range of applications – and the associated explosive growth and sprawl of critical data – with a platform offering that is well governed, fit for purpose, easy to use and built on automation.
In addition, many organizations are beginning to realize the potential of generative artificial intelligence (“AI”) to drive competitive advantage and value creation, including (1) extracting greater value from complex datasets, (2) making more informed business decisions, (3) reducing employee workloads, and (4) improving the overall customer experience. While these data-driven improvements are expected to lead to stronger revenue growth and operational efficiency, successfully leveraging this new technology is in turn dependent on first addressing data management challenges that all organizations face. Specifically, for AI-driven projects to succeed, companies must apply robust strategies across the data estate to manage the information lifecycle, properly govern and secure their data, and ensure its compliance. These are the core business problems that AvePoint has been solving for more than two decades, and why we believe AvePoint is well positioned to be a key enabler of generative AI adoption within enterprises in the coming years.
AvePoint’s Confidence Platform empowers organizations – of all sizes, in all regions, and across all industries – to optimize and secure the solutions that most commonly establish and underpin the digital workplace. As our customers seek to rapidly reduce costs, improve productivity and make more informed business decisions, they depend on our platform for data-driven insights, critical business intelligence and ongoing operational value through automation.
Key Business Metric
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Total ARR ($ in mil) |
$ | 274.5 | $ | 222.4 | ||||
| Annual Recurring Revenue |
We calculate our ARR at the end of a particular period as the annualized sum of contractually obligated Annual Contract Value (“ACV”) from SaaS, term license and support, and maintenance revenue sources from all active customers.
As of March 31, 2024 and March 31, 2023, total ARR was $274.5 million and $222.4 million, respectively, representing growth of 23%.
Growth in ARR is driven by both new business and the expansion of existing business. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue, and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers. |
Components of Results of Operations
| Revenue |
We generate revenue from four primary sources: SaaS, term license and support, services, and maintenance.
SaaS revenues are generated from our cloud-based solutions. Term license and support revenues are generated from the sales of on-premise or hybrid licenses, which include a distinct support component. Both SaaS and term license and support revenues are primarily billed annually. SaaS and term license and support are generally sold per user license or based upon the amount of data protected. SaaS revenue is recognized ratably over the term of the contract. For term license and support revenues, the license component is generally recognized upfront at the point in time when the software is made available to the customer to download and use, and the support component is recognized ratably over the term of the contract.
Services revenue includes revenue generated from implementation, training, consulting, license customization and managed services. These revenues are recognized by applying a measure of progress, such as labor hours, to determine the percentage of completion of each contract. These offerings are not inherently recurring in nature and as such are subject to more period-to-period volatility than other elements of our business. Services revenue from managed services are recognized ratably or on a straight-line basis over the contract term.
Maintenance revenue is a result of selling on-going support for legacy perpetual licenses. It also includes recurring professional services such as technical account management. Maintenance revenue is recognized ratably over the term of the maintenance agreement, which is typically one year. |
|
| Cost of Revenue |
Cost of SaaS and cost of term license and support consists of all direct costs to deliver and support our SaaS and term license and support products, including salaries, benefits, stock-based compensation and related expenses, overhead, third-party hosting fees related to our cloud services, depreciation and amortization. We recognize these expenses as they are incurred. We expect that these costs will increase in absolute dollars but may fluctuate as a percentage of SaaS and term license and support revenue from period to period.
Cost of maintenance consists of all direct costs to support our legacy perpetual license products, including salaries, benefits, stock-based compensation and related expenses, overhead, depreciation and amortization. We recognize these expenses as they are incurred. We expect that cost of maintenance revenue will decrease in absolute dollars as maintenance revenue declines but may fluctuate as a percentage of maintenance revenue.
Cost of services consists of salaries, benefits, stock-based compensation and related expenses for our services organization, overhead, IT necessary to provide services for our customers, depreciation and amortization. We recognize these expenses as they are incurred. |
|
| Gross Profit and Gross Margin |
Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue.
Gross profit has been and will continue to be affected by various factors, including the mix of our revenue, the costs associated with third-party cloud-based hosting services for our cloud-based subscriptions, and the extent to which we expand our customer support and services organizations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors but should increase in the long term as SaaS revenue continues to increase as a percentage of total revenue. |
|
| Sales and Marketing |
Sales and marketing expenses consist primarily of personnel-related expenses for sales, marketing and customer success personnel, stock-based compensation expense, sales commissions, marketing programs, travel-related expenses, overhead costs, depreciation and amortization. We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand. Incremental sales commissions for new customer contracts are deferred and amortized ratably over the estimated period of our relationship with such customers. We plan to continue our investment in sales and marketing by hiring additional sales and marketing personnel, executing our go-to-market strategy globally, and building our brand awareness. |
| General and Administrative |
General and administrative expenses consist primarily of personnel-related expenses for finance, legal and compliance, human resources, and IT personnel, as well as stock-based compensation expense, external professional services, overhead costs, other administrative functions, depreciation and amortization. Our general and administrative expenses have increased as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services. |
|
| Research and Development |
Research and development expenses consist primarily of personnel-related expenses incurred for our engineering and product and design teams, as well as stock-based compensation expense, overhead costs, depreciation and amortization. We have a geographically dispersed research and development presence in the United States, China, Singapore and Vietnam. We believe this provides a strategic advantage, allowing us to invest efficiently in both new product development and increasing our existing product capabilities. We believe delivering expanding product functionality is critical to enhancing the success of existing customers while new product development further reinforces our breadth of software solutions. |
|
| Other Income, net |
Other income, net consists primarily of fair value adjustments on earn-out and warrant liabilities, realized gain/loss for securities, and of foreign currency remeasurement gains/losses. |
|
| Income Taxes |
We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, administrative practices, principles, and interpretations in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions. The foreign jurisdictions in which we operate have different statutory tax rates than those of the United States. Accordingly, our effective tax rate could be affected by the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate. |
Results of Operations
The below period-to-period comparisons of operating results are not necessarily indicative of results for future periods.
Comparison of Three Months Ended March 31, 2024 and March 31, 2023
Revenue
The components of AvePoint’s revenue during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Revenue: |
||||||||||||||||
| SaaS |
$ | 51,311 | $ | 35,512 | $ | 15,799 | 44.5 | % | ||||||||
| Term license and support |
10,005 | 10,904 | (899 | ) | (8.2 | )% | ||||||||||
| Services |
10,481 | 9,747 | 734 | 7.5 | % | |||||||||||
| Maintenance |
2,737 | 3,409 | (672 | ) | (19.7 | )% | ||||||||||
| Total revenue |
$ | 74,534 | $ | 59,572 | $ | 14,962 | 25.1 | % | ||||||||
Total revenue increased 25.1% to $74.5 million for the three months ended March 31, 2024, primarily as a result of an increase in SaaS revenue. For the three months ended March 31, 2024, SaaS revenue increased 44.5% to $51.3 million, as we saw strong customer demand for this offering. For the three months ended March 31, 2024, SaaS revenues represented 69% of total revenue, up from 60% of total revenue in the prior year. The increase in SaaS revenue was partially offset by an expected decrease in both term license and support and maintenance revenue.
Services revenue is expected to fluctuate as the offerings are not inherently recurring in nature. Additionally, maintenance revenue is expected to continue declining as we have shifted away from the sale of perpetual licenses and towards SaaS and term licenses. Without perpetual license sales, there will be limited opportunities to sell maintenance contracts to new customers. Existing customers have and will continue to transition to SaaS and term licenses, which will continue the decline in maintenance revenue.
Revenue by geographic region for the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| North America |
$ | 29,895 | $ | 24,436 | $ | 5,459 | 22.3 | % | ||||||||
| EMEA |
22,806 | 19,488 | 3,318 | 17.0 | % | |||||||||||
| APAC |
21,833 | 15,648 | 6,185 | 39.5 | % | |||||||||||
| Total |
$ | 74,534 | $ | 59,572 | $ | 14,962 | 25.1 | % | ||||||||
For the three months ended March 31, 2024, North America revenue increased 22.3% to $29.9 million, driven by a 41.9%, or $6.8 million, increase in SaaS revenue, partially offset by a combined $1.3 million decrease in term license and support, services, and maintenance revenues. EMEA revenues increased 17.0% to $22.8 million, driven by a 46.5%, or $5.9 million, increase in SaaS revenue, partially offset by a combined $2.6 million decrease in term license and support, services and maintenance revenues. APAC revenues increased 39.5% to $21.8 million, driven by a 47.0%, or $3.2 million, increase in SaaS revenue, a 36.7%, or $2.3 million, increase in services revenue, a 72.7%, or $0.9 million, increase in term license and support revenue, partially offset by a $0.2 million decrease in maintenance revenues.
Cost of Revenue, Gross Profit, and Gross Margin
Cost of revenue, gross profit, and gross margin during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Cost of revenue: |
||||||||||||||||
| SaaS |
$ | 9,770 | $ | 7,895 | $ | 1,875 | 23.7 | % | ||||||||
| Term license and support |
416 | 461 | (45 | ) | (9.8 | )% | ||||||||||
| Services |
10,073 | 9,351 | 722 | 7.7 | % | |||||||||||
| Maintenance |
183 | 183 | — | 0.0 | % | |||||||||||
| Total cost of revenue |
$ | 20,442 | $ | 17,890 | $ | 2,552 | 14.3 | % | ||||||||
| Gross profit |
54,092 | 41,682 | 12,410 | 29.8 | % | |||||||||||
| Gross margin |
72.6 | % | 70.0 | % | — | — | ||||||||||
| GAAP cost of revenue |
$ | 20,442 | $ | 17,890 | $ | 2,552 | 14.3 | % | ||||||||
| Stock-based compensation expense |
(871 | ) | (670 | ) | (201 | ) | 30.0 | % | ||||||||
| Amortization of acquired intangible assets |
(241 | ) | (242 | ) | 1 | (0.4 | )% | |||||||||
| Non-GAAP cost of revenue |
$ | 19,330 | $ | 16,978 | $ | 2,352 | 13.9 | % | ||||||||
| Non-GAAP gross profit |
55,204 | 42,594 | 12,610 | 29.6 | % | |||||||||||
| Non-GAAP gross margin |
74.1 | % | 71.5 | % | — | — | ||||||||||
Cost of revenue increased 14.3% to $20.4 million for the three months ended March 31, 2024, primarily driven by a $1.7 million increase in personnel costs and a $1.2 million increase from higher aggregate hosting costs resulting from increased SaaS revenue.
Operating Expenses
Sales and Marketing
Sales and marketing expenses during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Sales and marketing |
$ | 29,939 | $ | 26,851 | $ | 3,088 | 11.5 | % | ||||||||
| Percentage of revenue |
40.2 | % | 45.1 | % | — | — | ||||||||||
| GAAP sales and marketing |
$ | 29,939 | $ | 26,851 | $ | 3,088 | 11.5 | % | ||||||||
| Stock-based compensation expense |
(2,284 | ) | (2,201 | ) | (83 | ) | 3.8 | % | ||||||||
| Amortization of acquired intangible assets |
(112 | ) | (157 | ) | 45 | (28.7 | )% | |||||||||
| Non-GAAP sales and marketing |
$ | 27,543 | $ | 24,493 | $ | 3,050 | 12.5 | % | ||||||||
| Non-GAAP percentage of revenue |
37.0 | % | 41.1 | % | — | — | ||||||||||
Sales and marketing expenses increased 11.5% to $29.9 million for the three months ended March 31, 2024, primarily driven by a $3.0 million increase in personnel costs.
General and Administrative
General and administrative expenses during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| General and administrative |
$ | 16,868 | $ | 14,648 | $ | 2,220 | 15.2 | % | ||||||||
| Percentage of revenue |
22.6 | % | 24.6 | % | — | — | ||||||||||
| GAAP general and administrative |
$ | 16,868 | $ | 14,648 | $ | 2,220 | 15.2 | % | ||||||||
| Stock-based compensation expense |
(4,967 | ) | (4,382 | ) | (585 | ) | 13.4 | % | ||||||||
| Non-GAAP general and administrative |
$ | 11,901 | $ | 10,266 | $ | 1,635 | 15.9 | % | ||||||||
| Non-GAAP percentage of revenue |
16.0 | % | 17.2 | % | — | — | ||||||||||
General and administrative expenses increased 15.2% to $16.9 million for the three months ended March 31, 2024. The increase was primarily driven by a $1.4 million increase in personnel costs and a $0.4 million increase in software expense.
Research and Development
Research and development expenses during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Research and development |
$ | 10,486 | $ | 9,015 | $ | 1,471 | 16.3 | % | ||||||||
| Percentage of revenue |
14.1 | % | 15.1 | % | — | — | ||||||||||
| GAAP research and development |
$ | 10,486 | $ | 9,015 | $ | 1,471 | 16.3 | % | ||||||||
| Stock-based compensation expense |
(1,336 | ) | (851 | ) | (485 | ) | 57.0 | % | ||||||||
| Non-GAAP research and development |
$ | 9,150 | $ | 8,164 | $ | 986 | 12.1 | % | ||||||||
| Non-GAAP percentage of revenue |
12.3 | % | 13.7 | % | — | — | ||||||||||
Income Tax Provision
Income tax expense during the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended |
||||||||||||||||
| March 31, |
Change |
|||||||||||||||
| 2024 |
2023 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Income tax expense |
$ | 2,157 | $ | 1,978 | $ | 179 | 9.0 | % | ||||||||
AvePoint’s income tax expense for the three months ended March 31, 2024 was $2.2 million, as compared to a tax expense of $2.0 million for the three months ended March 31, 2023. The effective tax rate was 1,062.6% for the three months ended March 31, 2024, compared to (27.5)% for the three months ended March 31, 2023. The change in effective tax rates was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, certain jurisdictions with separate tax expense calculated, impact of foreign inclusions, stock-based compensation, and changes in valuation allowance.
In assessing the need for a valuation allowance, the Company has considered all available positive and negative evidence including its historical levels of income, expectations of future taxable income, future reversals of existing taxable temporary differences and ongoing tax planning strategies. If in the future, the Company determines it is more likely than not that deferred tax assets will not be realized, the Company may set up a valuation allowance, which may result in income tax expense in the Company’s condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss.
Certain Non-GAAP Financial Measures
We believe that, in addition to our financial results determined in accordance with GAAP, non-GAAP operating income (loss) and non-GAAP operating margin are useful in evaluating our business, results of operations, and financial condition.
Non-GAAP Operating Income (loss) and Non-GAAP Operating Margin
Non-GAAP operating income (loss) and non-GAAP operating margin are non-GAAP financial measures that our management uses to assess our overall performance. We define non-GAAP operating income (loss) as GAAP operating income (loss) plus stock-based compensation and the amortization of acquired intangible assets. We define non-GAAP operating margin as non-GAAP operating income divided by revenue. We believe non-GAAP operating income (loss) and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics eliminate the effects of stock-based compensation which has had historical volatility from period to period due to marked-to-market securities, and of acquired intangible assets, which are unrelated to current operations and are neither comparable to the prior period nor predictive of future results. We believe the elimination of the effect of variability caused by stock-based compensation expense and the amortization of acquired assets, both of which are non-cash expenses, provides a better representation as to the overall operating performance of the Company. We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to our peers, (b) to set and approve spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, and (e) to assess financial discipline over operational expenditures.
Non-GAAP operating income (loss) and non-GAAP operating margin should not be considered as an alternative to operating income, operating margin or any other performance measures derived in accordance with GAAP as measures of performance. Non-GAAP operating income (loss) and non-GAAP operating margin should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
The following table presents a reconciliation of (i) non-GAAP operating income (loss) from the most comparable GAAP measure, operating income, and (ii) non-GAAP operating margin from the most comparable GAAP measure, operating margin, for the periods presented:
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| (in thousands, except percentages) |
||||||||
| GAAP operating loss |
$ | (3,201 | ) | $ | (8,832 | ) | ||
| GAAP operating margin |
(4.3 | )% | (14.8 | )% | ||||
| Add: |
||||||||
| Stock-based compensation |
9,458 | 8,104 | ||||||
| Amortization of acquired intangible assets |
353 | 399 | ||||||
| Non-GAAP operating income (loss) |
$ | 6,610 | $ | (329 | ) | |||
| Non-GAAP operating margin |
8.9 | % | (0.6 | )% | ||||
Liquidity and Capital Resources
As of March 31, 2024, we had $215.5 million in cash and cash equivalents and $3.8 million in short-term investments.
Our short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation. In addition, we extended a credit facility with a remaining commitment of $2.6 million, and committed $50.0 million to a growth equity fund. Our long-term capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, and the timing of new product introductions.
We currently maintain a loan and security agreement (the “Loan Agreement”), dated as of November 3, 2023, with HSBC Bank USA, National Association, (“HSBC”) as lender, for a revolving line of credit of up to $30.0 million with an accordion feature that provides up to $20.0 million of additional borrowing capacity we may to draw upon at our request. The line currently bears interest at a rate equal to term SOFR plus 3.00% to 3.25% depending on the Consolidated Total Leverage Ratio (as defined in the Loan Agreement). The line carries an unused fee ranging from 0.50% to 0.55% depending on the Consolidated Total Leverage Ratio. The line will mature on November 3, 2026. We are required to maintain a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Loan Agreement) as well as a maximum Consolidated Total Leverage Ratio, tested by HSBC each quarter. We pledged, assigned, and granted HSBC a security interest in all shares of our subsidiaries, future proceeds and assets (except for excluded assets, including material intellectual property) as a security for the performance of the loan and security agreement obligations.
We believe that our existing cash, cash equivalents and short-term investments, our cash flows from operating activities, and our borrowing capacity under our credit facility with HSBC are sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing. The sale of additional equity would be dilutive to our stockholders. Additional debt financing could result in increased debt service obligations and more restrictive financial and operational covenants.
Cash Flows
The following table sets forth a summary of AvePoint’s cash flows for the periods indicated.
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| (in thousands) | ||||||||
| Net cash provided by operating activities |
$ | 7,756 | $ | 1,250 | ||||
| Net cash (used in) provided by investing activities |
(1,542 | ) | 862 | |||||
| Net cash used in financing activities |
(12,961 | ) | (690 | ) | ||||
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2024 was $7.8 million, reflecting AvePoint’s net loss of $2.0 million, adjusted for non-cash items of $11.0 million and net cash outflows of $1.3 million from changes in its operating assets and liabilities. The primary drivers of non-cash items were stock-based compensation which reflects ongoing compensation and an increase in the mark to market value of earn-out and warranty liabilities. The drivers of changes in operating assets and liabilities are seasonal in nature. These drivers are related to a decrease in accounts receivable due primarily to the timing of customer invoices and a decrease in prepaid expenses and other current assets primarily related to prepaid insurance, a decrease in deferred revenue and a decrease in accrued expenses primarily due to accrued bonuses, commissions and VAT/sales tax payable.
Net cash provided by operating activities for the three months ended March 31, 2023 was $1.3 million, reflecting AvePoint’s net loss of $9.2 million, adjusted for non-cash items of $9.3 million and net cash inflows of $1.2 million from changes in its operating assets and liabilities. The primary drivers of non-cash items were stock-based compensation which reflects ongoing compensation partially offset by a decrease in the mark to market value of earn-out and warranty liabilities. The drivers of changes in operating assets and liabilities are seasonal in nature. These drivers are related to a decrease in accounts receivable due primarily to the timing of customer invoices and a decrease in prepaid expenses and other current assets primarily related to prepaid insurance and offset by a decrease in accrued expenses primarily due to the payment of accrued bonuses and commissions.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2024 was $1.5 million. It primarily consisted of $0.5 million of purchases of property and equipment, $0.4 million of purchases of short-term investments, and $0.4 million from the capitalization of internal use software, and partially offset by $0.2 million in the maturity of short-term investments.
Net cash provided by investing activities for the three months ended March 31, 2023 was $0.9 million. It primarily consisted of $1.6 million due to the maturity of short-term investments, partially offset by $0.3 million from the capitalization of internal use software and $0.2 million of purchases of property and equipment.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2024 was $13.0 million. The primary driver of cash used in financing activities was $13.7 million in repurchases of common stock under the previously announced Share Repurchase Program that authorizes us to repurchase up to $150 million of our common shares (the “Share Repurchase Program”), partially offset by $0.8 million of proceeds from the exercise of stock options.
Net cash used in financing activities for the three months ended March 31, 2023 was $0.7 million. The primary driver of cash used in financing activities was $1.8 million in repurchases of common stock, partially offset by $1.1 million of proceeds from the exercise of stock options.
Indebtedness
Credit Facility
We maintain a line of credit under Loan Agreement with HSBC, as the lender. See “Note 6 - Line of Credit” in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.
The Loan Agreement provides for a revolving line of credit of up to $30.0 million and an additional $20.0 million accordion feature for additional capital we may draw upon at our request. Borrowings under the line currently bear interest at a rate equal to term SOFR plus 3.00% to 3.25% depending on the Consolidated Total Leverage Ratio (as defined in the Loan Agreement). The line carries an unused fee ranging from 0.50% to 0.55% depending on the Consolidated Total Leverage Ratio. Any proceeds of borrowings under the Loan Agreement will be used for general corporate purposes.
On a consolidated basis with our subsidiaries, we are required to maintain a minimum Consolidated Fixed Charge Coverage Ratio as well as a maximum Consolidated Total Leverage Ratio, tested by HSBC each quarter. Pursuant to the Loan Agreement, we pledged, assigned, and granted HSBC a security interest in all shares of our subsidiaries, future proceeds, and certain assets as security for our obligations under the Loan Agreement. Our line of credit under the Loan Agreement will mature on November 3, 2026.
To date, we are in compliance with all covenants under the Loan Agreement. We have not at any time borrowed under the Loan Agreement. The description of the Loan Agreement is qualified in its entirety by the full text of the form of such agreement, a copy of which is attached as an exhibit to our Annual Report.
Leasing Activities
We are obligated under various non-cancelable operating leases for office space. The initial terms of the leases expire on various dates through 2030. As of March 31, 2024, the commitments related to these operating leases is $14.7 million, of which $5.8 million is due in the next twelve months.
Operating Segment Information
We operate in one segment. Our products and services are sold throughout the world, through direct and indirect sales channels. Our chief operating decision maker (the “CODM”) is our Chief Executive Officer. The CODM makes operating performance assessment and resource allocation decisions on a global basis. The CODM does not receive discrete financial information about asset allocation, expense allocation, or profitability by product or geography. See the section titled “Notes to Condensed Consolidated Financial Statements” (Part I, Item 1 of this Quarterly Report) under the sub-heading “Note 15 – Segment Information” for more information.
Critical Accounting Policies and Estimates
Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on the reported revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that our management believes are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
While our significant accounting policies are described in more detail in the section titled “Notes to Condensed Consolidated Financial Statements” (Part I, Item 1 of this Quarterly Report), we believe the following critical accounting policies and estimates are most important to understanding and evaluating our reported financial results.
Revenue Recognition
We derive revenue from four primary sources: SaaS, term license and support, services, and maintenance. Many of our contracts with customers include multiple performance obligations. Judgement is required in determining whether each performance obligation is distinct. Our products and services generally do not require a significant amount of integration or interdependency; therefore, our products and services are generally not combined. We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation within each contract.
We use judgment in determining the SSP for products and services. For substantially all performance obligations except term licenses, we are able to establish the SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers. We typically establish an SSP range for our products and services which is reassessed on a periodic basis or when facts and circumstances change. Term licenses are sold only as a bundled arrangement that includes the rights to a term license and support. In determining the SSP of license and support in a term license arrangement, we utilize observable inputs and consider the value relationship between support and term license when compared to the value relationship between support and perpetual licenses, the average economic life of our products, and software renewals rates. Using a combination of the relative fair value method, or the residual value method the SSP of the performance obligations in an arrangement is allocated to each performance obligation within a sales arrangement.
Economic Conditions, Challenges, and Risks
The markets for software and cloud-based services are dynamic and highly competitive. Our competitors are developing new software while also deploying competing cloud-based services for consumers and businesses. Customer preferences evolve rapidly, and choices in hardware, products, and devices can and do influence how users access services in the cloud, and in some cases, the user’s choice of which suite of cloud-based services to use. We must continue to evolve and adapt to keep pace with this changing environment. The investments we are making in infrastructure, research and development, marketing, and geographic expansion will continue to increase our operating costs and may decrease our operating margins.
Our success is highly dependent on our ability to attract and retain qualified employees. We hire a mix of university and industry talent worldwide. We compete for talented individuals globally by offering an exceptional working environment, broad customer reach, scale in resources, the ability to grow one’s career across many different products and businesses, and competitive compensation and benefits.
Additionally, demand for our software and service is correlated to global macroeconomic and geopolitical factors, which remain dynamic and currently include multiple ongoing conflicts where the outcomes and consequences are not possible to predict, but could include regional instability and geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. These in turn could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
Our international operations provide a significant portion of our total revenues and expenses. Many of these revenues and expenses are denominated in currencies other than the U.S. dollar. As a result, changes in foreign exchange rates may significantly affect revenue and expenses. Refer to the section titled “Risk Factors” (Part I, Item 1A of our Annual Report) for a discussion of these factors and other risks.
Seasonality
Our quarterly revenue fluctuates and does not necessarily grow sequentially when measuring any one fiscal quarter’s revenue with another (e.g. comparing the fourth fiscal quarter of fiscal year 2023 with the first fiscal quarter of fiscal year 2024). Historically, our third and fourth quarters have been our highest revenue quarters, however those results are not necessarily indicative of future quarterly revenue or full year results. Higher third and fourth quarter revenue is driven primarily by increased sales resulting from our customers’ fiscal year ends. Additionally, new product and service introductions (including the timing of those introductions) can significantly impact revenue. Revenue can also be affected when customers anticipate a product introduction. Our operating expenses have generally increased sequentially due to increases in personnel in connection with the expansion of our business.
Recently Issued and Adopted Accounting Pronouncements
For information about recent accounting pronouncements, see “Note 2 - Summary of Significant Accounting Policies” in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.
Part I
Item 3
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We are exposed to potential economic risk from interest rates, foreign exchange rates, and concentration of credit. We have considered changes in our exposure to market risks during the three months ended March 31, 2024, and have determined that there have been no material changes to our exposure to market risks from those described in our Annual Report. However, we have provided the following information to supplement or update our disclosures in our Annual Report.
Interest Rate Risk
As of March 31, 2024, we had cash and cash equivalents, marketable securities, and short-term deposits of $219.3 million, which we hold for working capital purposes. Our cash and cash equivalents are held in cash deposits and money market funds. Due to the short-term nature of these instruments, we believe that it does not have any material exposure to changes in the fair value of our investment portfolio due to changes in interest rates. Declines in interest rates, however, would reduce our future interest income. The effect of a hypothetical 10% change in interest rates would not have a material negative impact on our condensed consolidated financial statements. To the extent we enter into other long-term debt arrangements in the future, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operation.
Foreign Currency Exchange Risk
Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars. In particular, the amount of cash, cash equivalents and marketable securities that we report in U.S. Dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period, the offset to which is substantially recorded to accumulated other comprehensive income on our condensed consolidated balance sheets and is also presented as a line item in its condensed consolidated statements of comprehensive income.
Concentration of Credit Risk
We deposit our cash with financial institutions, and, at times, such balances may exceed federally insured limits.
Part I
Item 4
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (in his capacity as “Principal Executive Officer”) and our Chief Financial Officer (in his capacity as “Principal Financial and Accounting Officer”), we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e)) under the Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024, due to the material weakness described below.
Notwithstanding such material weakness in internal control over financial reporting, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that our condensed consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (“GAAP”).
Previously Disclosed Material Weakness
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. As reported in our Annual Report, we did not maintain effective internal control as of December 31, 2023, as a result of a material weakness in our internal control over financial reporting for accuracy and completeness of information used. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Refer to our Annual Report for a description of our material weakness.
2024 Remediation Plan
Our material weakness was not remediated as of March 31, 2024. Our management has been and continues to be committed to remediating this material weakness and has identified and implemented several steps to enhance our internal controls over financial reporting. We have implemented a remediation plan (the “2024 Remediation Plan”), which includes actions not limited to:
| ■ |
enhance the design of controls that address the accuracy and completeness of reports being utilized in the execution of internal controls; and |
| ■ |
establishing additional training to address the accuracy and completeness of data used controls and the level of documentation required to evidence control activities. |
We have implemented documented policies and procedures for, and are in the process of testing the implementation and operating effectiveness of, the newly designed controls. The material weakness in our internal control over financial reporting will not be considered remediated until the newly designed controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are designed and operating effectively. In addition, we may discover additional material weaknesses that require additional time and resources to remediate, and we may decide to take additional measures to address the material weaknesses or modify the remediation steps described above.
Changes in Internal Control Over Financial Reporting
Other than described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II
Items 1 and 1A
In the normal course of our business, we may be involved in various claims, negotiations, and legal actions. Except for such claims that arise in the normal course of business, as of and for the fiscal quarter ended March 31, 2024, we are not a party to any material asserted, ongoing, threatened, or pending claims, suits, assessments, proceedings, or other litigation for which a material claim is reasonably possible, probable, or estimable.
Refer to the information under the section titled “Risk Factors” of our Annual Report (Part I, Item 1A of our Annual Report) for information regarding the potential legal and regulatory risks (including potential legal proceedings and litigation) in which we may become involved.
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report, which risks and uncertainties could affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes to the risk factors previously disclosed in our Annual Report. We urge you to read the risk factors in our Annual Report.
Part II
Items 2, 3 and 4
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
During the quarter ended March 31, 2024, we did not issue any shares of our common stock or any other equity securities without registration under the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities.
On March 17, 2022, we announced that our Board of Directors authorized the Share Repurchase Program for us to buy back shares of our common stock. Under the Share Repurchase Program, we have the authority to buy up to $150 million of our common stock shares via acquisitions in the open market or privately negotiated transactions. The Share Repurchase Program will remain open for a period of three years from the date of authorization. Purchases made pursuant to the Share Repurchase Program may be conducted in compliance with Exchange Act Rule 10b-18 and/or Exchange Act Rule 10b5-1. Purchases made pursuant to the Share Repurchase Program will be conducted in compliance with all applicable legal, regulatory, and internal policy requirements, including our Insider Trading Policy. We are not obligated to make purchases of, nor are we obligated to acquire any particular amount of, our common stock under the Share Repurchase Program. The Share Repurchase Program may be suspended or discontinued at any time.
The following table presents information with respect to common stock shares repurchased under the Share Repurchase Program during the three months ended March 31, 2024:
| Period |
Total number of shares purchased(1) |
Average price paid per share(2) |
Total number of shares purchased as part of the Share Repurchase Program |
Approximate dollar value of shares that may yet be purchased under the Share Repurchase Program(3) |
| January 1, 2024 - January 31, 2024 |
523,238 |
$7.7922 |
523,238 |
$86,959,373 |
| February 1, 2024 - February 29, 2024 |
274,922 |
$7.8385 |
274,922 |
$84,804,387 |
| March 1, 2024 - March 31, 2024 |
960,690 |
$7.8180 |
960,690 |
$77,293,700 |
(1) All shares reported herein were purchased pursuant to the publicly announced Share Repurchase Program.
(2) Average price paid per share includes costs associated with the repurchases and excludes the 1% excise tax on stock repurchases enacted by the Inflation Reduction Act of 2022.
(3) The maximum remaining dollar value of shares that may yet be purchased under the Share Repurchase Program is reduced by the aggregate price paid for share purchases in addition to any fees, commissions, or other costs that may arise as a result of the purchase.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Part II
Item 5
On , , an of the Company, into a Rule 10b5-1 trading arrangement (the “Lu 10b5-1 Plan”). The Lu 10b5-1 Plan is intended to satisfy the affirmative defense of Rule 10b5-1(c). The Lu 10b5-1 Plan provides for the sale of up to
Growth Equity Fund
The Company formed AvePoint Ventures, LLC (“APV”), a wholly owned subsidiary, for the sole purpose of investing in A3 Ventures Fund 1, L.P., a Cayman Islands exempted limited partnership (the “A3V Fund”) formed and managed by Lumens Capital Partners, Ltd., a Singapore-based private fund adviser (collectively with its affiliates, “LCP”). On February 28, 2024, the Company entered into an agreement with APV and A3V Fund. APV shall serve as the cornerstone investor for the A3V Fund, which will focus its investments in companies (a) in the growth equity phase (i.e., “Series B” equity offerings and onwards) as well as mature cashflow generating businesses with strong growth potential; and (b) located in established enterprise software markets that map to LCP’s and the Company’s professional expertise and geographical footprint – in particular, USA, England, France, Germany, Japan, South Korea, Singapore, and Australia.
The A3V Fund will seek primarily controlling stakes in such portfolio companies, whether through equity, debt, or hybrid investments. LCP will manage the A3V Fund, and lead in the selection, monitoring and guidance of investments, seeking to enhance capital efficiency and business discipline through the scaling process until exit. APV shall assist LCP in managing the portfolio companies, using its professional expertise, as well as its software development and technology resources and platforms. In consideration for its participation in the A3V Fund as a cornerstone investor, APV will receive a portion of any performance allocations to be received by LCP in addition to any profits on its capital investments. APV will be entitled to appoint a representative to the limited partner advisory committee and will have certain consent rights with respect to fundamental matters regarding LCP and the A3V Fund. Other institutional investors and/or high net worth individuals will also be allowed to commit capital to the A3V Fund.
APV has committed US $50 million to the A3V Fund, which will be called as needed for portfolio investments and to pay fees and expenses of the A3V Fund.
The description above is qualified entirely by reference to Exhibit 10.1 related to the A3V Fund investment.
Part II
Item 6
The following exhibits are filed as part of, furnished with, or incorporated by reference into, this Quarterly Report on Form 10-Q, in each case as indicated therein.
Exhibit Index
| Incorporated by Reference |
||||||||||||
| Exhibit |
Description |
Schedule/ Form |
File No. |
Exhibit |
Filing Date |
Filed Herewith | ||||||
| 10.1 | Subscription Deed, dated between February 28, 2024, by and between AvePoint Ventures, LLC and A3 Ventures Fund 1 L.P. | X | ||||||||||
| 31.1 |
X | |||||||||||
| 31.2 |
X | |||||||||||
| 32.1** |
X | |||||||||||
| 32.2** |
X | |||||||||||
| 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
X | ||||||||||
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
X | ||||||||||
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
X | ||||||||||
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
X | ||||||||||
| 101.LAB |
Inline XBRL Taxonomy Extension Labels Linkbase Document. |
X | ||||||||||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
X | ||||||||||
| 104.1 |
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101). |
X | ||||||||||
| ** |
Furnished herewith. Any exhibit furnished herewith (including the certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto) are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AVEPOINT, INC. | ||
| Date: May 9, 2024 |
/s/ Tianyi Jiang |
|
| Name: |
Tianyi Jiang |
|
| Title: |
Chief Executive Officer (Principal Executive Officer) |
|
| Date: May 9, 2024 | /s/ James Caci |
|
| Name: |
James Caci |
|
| Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) |
|