AvePoint(AVPT) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenue for Q3 2023 was $72.8 million, up 16% YoY, exceeding the high end of guidance [18] - SaaS revenue grew 40% YoY to$ 41.9 million, representing 58% of total revenue, up from 48% a year ago [18] - Total ARR reached $250.6 million, a 23% YoY growth (25% adjusted for FX) [19] - Net new ARR in Q3 was$ 14.4 million, a 14% YoY growth after adjusting for prior year acquisition impact [20] - Gross margin was 73.7%, slightly down from 74% in Q3 2022 but improved from 71.1% in Q2 2023 [22] - Non-GAAP operating income was $9.3 million, with an operating margin of 12.8%, well above guidance [23] - Cash and short-term investments stood at$ 209.3 million at the end of Q3 [24] Business Line Performance - SaaS revenue growth was strong across all regions: North America (28% YoY), EMEA (51% YoY), and APAC (50% YoY) [18][19] - The company ended Q3 with 518 customers generating over $100,000 in ARR, a 16% increase YoY [20] - 50% of total ARR came through the channel, up from 47% a year ago, with 72% of incremental ARR in Q3 coming from the channel [20] Market Performance - North America revenue grew 8% YoY, driven by 28% SaaS growth, despite a 10% decline in term license revenue [18][31] - EMEA revenue grew 14% YoY, with SaaS contributing 72% of total revenue [19] - APAC revenue grew 35% YoY, with SaaS representing 43% of total revenue [19] Strategy and Industry Competition - The company is focusing on AI-driven solutions, particularly with the launch of AvePoint Opus, which integrates AI for information lifecycle management [11][16] - AvePoint is positioning itself as a key enabler of generative AI adoption by addressing data quality and governance challenges [8][9] - The company is leveraging its channel strategy to drive profitable growth, with increasing contributions from partners [20][21] Management Commentary on Operating Environment and Future Outlook - Management highlighted the accelerating digital revolution and the transformative potential of AI in business processes [7][16] - The company is optimistic about future opportunities, particularly in AI-powered solutions, but remains cautious about the macro environment [34][40] - Full-year guidance was raised, with expected total ARR of$ 261-263 million (22% YoY growth) and total revenue of $267.7-269.7 million (16% YoY growth) [25][26] Other Important Information - The company repurchased 6.6 million shares in 2023 for a total cost of$ 37.7 million [24] - Trailing 12-month gross retention rate was 87%, with a net retention rate of 108% in Q3 [21][22] Q&A Session Summary Question: Monetization strategy for AvePoint Opus - AvePoint Opus is both an incremental revenue driver and a strategic tool for customer retention and expansion, particularly in the context of AI readiness [27][28][29] Question: Geographic performance disparity - North America's slower revenue growth is attributed to a mix shift, with strong SaaS growth offset by declining term license revenue [30][31] Question: Impact of GenAI on demand - GenAI is still in early stages, but the company expects it to play a larger role in future quarters, especially with the rollout of Microsoft 365 Copilot [33][34] Question: Drivers of operating leverage - Operating leverage is driven by channel strategy, sales and marketing efficiency, and G&A expense optimization [35][36] Question: Demand environment and customer segments - The macro environment remains challenging, but demand has stabilized across enterprise, mid-market, and SMB segments [38][39][40] Question: Net revenue retention improvement - Improvement in net revenue retention is driven by customer expansions and cost optimization initiatives [41][42] Question: FX impact on ARR guidance - FX adjustments are expected to add 1-2% to ARR growth for the full year [43][44] Question: Cloud optimization and AI positioning - The company is well-positioned to address cloud optimization and AI readiness, with increasing engagement from CISOs and CIOs [45][46][47] Question: Q4 ARR and revenue guidance - Q4 ARR and revenue guidance reflect macro uncertainties and a pull-forward of term license revenue in Q3 [48][49][52][53] Question: Gross revenue retention - Gross retention is improving, with enterprise customers showing higher retention rates, but the company aims to reach 90%+ through various initiatives [54][55][56][57] Closing Remarks - Management expressed confidence in the company's ability to capitalize on AI opportunities and drive profitable growth [59]