AvePoint, Inc. (AVPT)

“We expect non-GAAP operating income of $18.7 million to $19.7 million.”

“As a result, for the second quarter, we expect total revenues of $120.3 million to $122.3 million or growth of 19% at the midpoint.”

“That definitely is an impact and will gives us the confidence today to sit here and see that we have a pathway to that 26% growth.”

“our growing conviction in our 2029 goal of $1 billion in ARR remains as strong as ever.”

“We would not be surprised to see this dynamic continue, especially given the recent elevated demand for migrations we called out last quarter.”

“We see some nice growth rate that's going to propel really the second half of the year, particularly in public sector.”

“In the short term, and even in our guidance for not only Q2, but Q3, we've kind of assumed that this new paradigm for at least what we saw in Q1 would be fairly consistent for the rest of the year.”

“Right now, we're guiding to the low 90s in terms of non-GAAP operating income. I would expect us to be generating free cash flow north of $100 million for the year.”

“Finally, on a Rule of 40 basis, the midpoint of our updated full-year guidance is a 44%.”

“Lastly, we now expect full-year non-GAAP operating income of $91.5 million to $94.5 million, which includes the Q1 beat of $700,000, offset by an FX headwind of $2.2 million.”

“We now expect total revenues of $509.4 million to $515.4 million or growth of 22% at the midpoint.”

“For the full-year, we now expect total ARR of $523.4 million to $529.4 million or growth of 26% at the midpoint.”

“So that gives me the confidence that 2026, although the operating margins are relatively flat, we will be set up to deliver expanded margins moving forward.”

“I want to reiterate that there is no change to our long-term target of 25% to 30% non-GAAP operating margins, while reminding you of our prior commentary that the margin trajectory between now and 2029 will not be perfectly linear.”

“We have said before that our ambition is big, reaching $1,000,000,000 ARR by 2029.”

“So on the tech side, we are not slowing down in terms of or reducing headcount.”

“What we have historically seen is that Q1 is generally a step down, and it is usually our lowest quarter in terms of ARR, sequentially from Q4. And then we would see a pickup in Q2, and then the second half of the year is generally stronger than that first half of the year. And so I think we are going to see that same kind of play out—exactly similar to what we have seen in the past.”

“I think we would expect to see the similar kind of growth next year where, again, we would expect this to be—as Tianyi kind of alluded to—continue to be top of mind for our customers and be part of their strategy. So, again, we would expect this to continue to grow.”

“And so we believe that with some of those initiatives, we are naturally seeing some pickup in terms of GRR, which will offset any headwind coming from migration in GRR.”

“So I think our free cash flow is still going to be above what we would consider our non-GAAP operating income. So I think that trend would continue, and we would expect to see that in 2026.”

“And, importantly, as I mentioned, we expect that stock-based compensation will further decline as a percentage of revenues in 2026 and thus GAAP operating margins will, in fact, expand this year.”

“Lastly, with regard to margins, we expect that 2026 will be an investment year, specifically focused on strengthening our go-to-market strategy through meaningful increases in marketing spend.”

“Third, the delta between our guidance for ARR and revenue growth is driven by two factors: our services business, which is excluded from ARR and which we expect to grow at a slower rate than in 2025, and our term license revenue, where we expect growth to be roughly flat versus 2025 and thus we will realize less upfront revenue in 2026.”

“This expansion was driven by the improvements I discussed earlier, as well as our management of stock-based compensation expense, which is now less than 10% of our revenues, and which we expect will further decrease as a percentage of revenue in 2026.”

“This dynamic could put modest pressure on GRR in 2026.”

“For the full year, we continue to expect total ARR of $412.8 million to $418.8 million or growth of 27% at the midpoint.”

“Our target is to get to that $1 billion target in 2029.”

“And it's obviously one of the reasons that we're actually increasing guidance is seeing that healthy demand continuing, obviously, not only in Q2, but we're seeing that for the rest of the year as well.”

“Q2 also represents a major milestone for AvePoint, our first quarter to surpass $100 million in revenues. The entire AvePoint team deserves credit for this achievement, which reflects the enormous market opportunity ahead of us and marks another step on our path to $1 billion in ARR by 2029.”

“To remind you, our updated long-term targets for GRR and NRR are 90% plus and 115%, respectively, and we are pleased to show steady progress on these critical customer metrics.”

“Q2 marks another quarter of progress toward our longer-term target of 30% of revenues.”

“Yes. What we’ve got in the plan, like you’ve seen over the past couple of years, we’ve seen that term license continue to decline, right. It declined not only as a percentage of revenue, but also in actual dollars. And so we would expect that to continue again in 2025 where we’re going to see a further deterioration in dollars and obviously even a greater decline in percentage of revenue.”

“And I would suggest that that same kind of that mix will probably be similarly played out in 2025.”

“And then operating income, I do think here we may see a little bit more flattening out. It’s still going to be seasonal as you’ve seen this year, but I do think there’s an opportunity for that to be a little bit more flat and kind of be more correlated with the revenue.”

“leave us well positioned to continue delivering value to AvePoint’s shareholders while we progress toward our Rule of 40 and GAAP profitability targets in 2025.”

“we now expect full year non-GAAP operating income of $45.8 million to $46.8 million or an operating margin of 14% at the midpoint, which represents a year-over-year expansion of 590 basis points.”

“So, that 90% target is, I would say, at this point, probably a medium-term. So, we are looking at the next couple years of trying to get to that 90%.”

“You're right, our longer-term target is 90-plus percent.”

“our focus has been on controlling the controllable, and the team’s ongoing execution positions us well to continue delivering value to AvePoint shareholders, as we progress toward our Rule of 40 and GAAP profitability targets in 2025.”

“As we discussed, the channel contribution to our incremental ARR will fluctuate from quarter to quarter, but we expect the channel contributions to total ARR to continue increasing each quarter.”

“And lastly, we now expect full year non-GAAP operating income of $30 million to $32 million, or an operating margin of 9.5% to 10%.”

“So, it's experimentation phase. We see a ton of that, and that adds obviously to the number of increases of conversations and opportunities in the pipeline, but I would say the real dollar value, we won't see it most likely until next year.”

“And while we do not expect the same levels of margin expansion each year going forward, we do see a clear path to achieving GAAP profitability and Rule of 40 status in 2025.”

“We remain confident in our ability to achieve our medium-term GRR target of 90% plus.”

“To remind you, the channel contribution to our incremental ARR may fluctuate from quarter-to-quarter, but we expect the channel contribution to total ARR to continue increasing each quarter.”

“This level is consistent with the 12% of revenue in 2022 and we expect this level to hold as we continue to make investments in targeted geographies, in past and future acquisitions, and in the ongoing enhancements to our platform.”

“And like GRR, we continue to make progress toward our medium-term NRR target of 110% to 115%.”

“Lastly, we now expect non-GAAP operating income of $20 million to $21 million. This represents an operating margin of 7.6% and year-over-year margin expansion of nearly 900 basis points.”

“Going forward, we would expect to see improvements in our overall gross margin as services, which is our lowest margin business, continues to become a smaller portion of our revenue base.”

“we expect the channel contribution to total ARR to continue increasing each quarter. In turn, this should continue driving ARR growth and operating efficiencies as we have seen through the first three quarters of this year.”

“Second, we will meet conditions necessary to be deemed a large accelerated filer as of December 31, 2023.”

“And as we see more and more examples of customer expansion, like TJ described, we expect this trend to continue.”

“While this percentage may fluctuate from quarter-to-quarter, we expect the overall channel contribution to continue increasing, in turn, driving ARR growth and operating efficiencies.”

“As a reminder, our plan is to utilize $50 million for the year in repurchasing shares.”

“What we expect will tighten substantially overtime is the delta between recurring revenue growth and ARR growth, which we saw in Q1 with recurring revenues growing 20% and ARR growing 26%.”

“we are well positioned for steady margin expansion in 2023 and beyond.”

“As we look ahead, our long-term expectation is that services will continue to decline and represent approximately 10% of our revenue.”

“And so we've had some favorable impact there. And so we would expect to see that positively impact going forward.”

“And then I would expect to see similar to '22, but I would also expect to see incremental growth as we continue to move through the year.”

“But I would say -- so it is definitely built into there because when we look at ARR, so I think we've talked about this before... it's definitely a couple of percentage points that it's going to impact '23 on the ARR side.”

“So we're continuing to invest heavily in R&D, and you won't really see a slowdown there going forward.”

“So we're definitely expecting to see significant synergy and efficiency coming from there.”

“We're continuing to expect to see acceleration on the SaaS front.”

“Lastly, our improved profitability should also lead to better cash flow from our operations this year.”

“I think our target has been that services winds up being about 10% of our business.”

“So I think one thing to think about is if you look at our operating expense growth for the first two quarters, we grew 35% year-over-year in the first two quarters, but Q3’s growth rate was 21% and we're guiding Q4 for only 10% growth year-over-year.”

“We expect the current levels to continue in the near term due to some increased demand for migration services as customers seek to sunset legacy systems, shifting budget from CapEx to OpEx.”

“Over time, we expect this mix shift to continue driving overall margin improvement.”

“At the same time, as we shift more services business to our channel partners, we expect our services revenue to decline as a percentage of total revenues, which we saw in Q3 relative to Q2.”

“We now expect a non-GAAP operating loss of $3.2 million to $1.2 million.”

“We are seeing it already. So kind of alluding to some of the slowdown we saw at the end of Q2, but we are seeing in terms of the pipeline build and all of those kind of let's call the leading indicators that we would see going into Q3 and Q4 are really strong. And so give us that confidence that those numbers that you just alluded to for Q3 and Q4 are very attainable.”

“So I wouldn't expect any significant change there. I would expect it to be similar to Q2.”

“I would expect that we will spend roughly about $10 million as well in Q3.”

“We would still be - thinking about it the same way in a longer-term environment that our Q3 would be strong and our Q4 would ultimately be stronger.”

“Having said that though, we've now in Q3 starting to see that come down, because the market is cooling and we do see some tech companies announcing either hiring freezes or shedding of workforces. So, we see that churn pressure its going down, second half of the year.”

“It does take time for the new account owners of existing patched to introduce themselves to the customers and establish relationship to do the upsell and cross-sell...we expect that will uplift the upsell and cross-sell dollar values in the second half of the year.”

“We actually sold more migration product in the first half than we were anticipating...and we saw that in really Q1 and Q2, and we're expecting to see that continue for the second half of the year.”

“We did see at the end of the second quarter some elongation of some sales cycles. So we would expect to see that to continue into the second half of the year as well.”

“At the same time, we expect service revenue as a percentage of overall revenue to decline by transitioning more of these services to our channel partners, resulting in overall margin improvement.”

“We now expect the total FX impact to be approximately $4.8 million on our ARR and approximately $5 million on our revenue.”

“At the same time, we expect service revenue as a percentage of overall revenue to decline by transitioning more services revenue to our channel partners, resulting in overall margin improvement.”

“This portion of our channel business is expected to reach 10% of our total ARR by end of the year.”

“We expect our non-GAAP profitability to be in the range of a loss of $3.5 million to income of $1 million and we expect year-end ARR to be in the range of $212 million to $216 million.”

“And then last Confide is an extension to an industry use case of a secure data collaboration area within Microsoft 365... And we support Microsoft 365 now, and then the road map includes Google very short in the second half of the year.”

“So we won’t expect to see the same rate of growth in next year. We’re actually anticipating probably somewhere around 20% to 25% headcount growth, which is far less than what we incurred this year.”

“On an absolute dollar basis, we expect that the rate of expense growth will decrease in the future periods.”

“At the same time, we expect service revenue as a percentage of overall revenue to decline by transitioning more services revenue to our channel partners, resulting in overall margin improvement.”

“We expect to recognize the majority of this additional deferred revenue over the next eight quarters.”

“With AvePoint's true global presence across all their premium B2B software markets in North America, Western Europe, NZ, Singapore, Korea and Japan, we expect our strong channel growth momentum to continue, if not accelerate going forward.”

“It's no accident that we continue to guide ARR and revenue of 30 % growth year-over-year and while we increase our client-facing by 50 %.”

“So this is a 5-year deal that TJ is referring to. And we would expect in very little additional revenue in Q4.”

“We do expect Q4 to have a strong term component again. We've seen that in the past, so I would expect to see some comparable to Q3.”

“We expect that the rate of expense growth will decrease in future periods.”

“We intend to continue to invest in sales and marketing as we further drive awareness in the market and leverage our industry-leading position to capture significant opportunity”

“We expect to see our overall gross margins remain at approximately these levels, or slightly higher going forward.”

“That said, it will take time for our channel partners to ramp up productivity. And as such, while we may have incremental pipeline build across a subset of partners, we do not expect to see material contribution from the partner channel until second half, 2022.”

“We’re pretty comfortable that we’ll get to the industry benchmarking medium term.”

“As our remaining legacy perpetual customers eventually migrate to either a SaaS or term licensed solution, we expect our maintenance revenue to steadily decline over time.”

“Over time, we expect our professional service revenue will grow incrementally in dollar terms, but become a lower portion of our overall revenue mix as our software revenue growth.”