AvePoint, Inc. — Form 10-Q Summary
Business Context and Reporting Period
AvePoint provides enterprise collaboration, productivity, data governance, compliance, migration, and resilience software, primarily through its Confidence Platform supporting Microsoft 365 and other cloud collaboration platforms. The filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. The company operates as one global reportable segment.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $50.3 million | $38.8 million | 29.6% increase |
| Gross profit | $35.7 million | $28.0 million | 27.3% increase |
| Gross margin | 70.9% | 72.2% | Down 1.3 points |
| Operating loss | $(13.8) million | $(5.9) million | Loss increased |
| GAAP operating margin | (27.5%) | (15.3%) | Down 12.2 points |
| Non-GAAP operating loss | $(5.6) million | $(2.6) million | Loss increased |
| Non-GAAP operating margin | (11.1%) | (6.8%) | Down 4.3 points |
| Net loss | $(11.1) million | $(4.9) million | Loss increased |
| Net loss attributable to AvePoint | $(11.7) million | $(5.3) million | Loss increased |
| Basic and diluted loss per share | $(0.06) | $(0.14) | Improved due partly to higher share count and prior-period preferred-stock deemed dividends |
| Net cash used in operating activities | $(6.1) million | $(4.3) million | Higher cash use |
Revenue mix was SaaS $26.6 million, term license and support $10.2 million, services $8.9 million, maintenance $4.4 million, and perpetual licenses $0.2 million. SaaS revenue increased 45.4%, services increased 50.9%, and term license and support increased 16.9%. Maintenance declined 17.9% and perpetual license revenue declined 65.2%.
At March 31, 2022, cash and cash equivalents were $78.8 million and short-term investments were $181.3 million, for total cash and short-term investments of approximately $260.1 million. Total assets were $391.5 million, total liabilities were $140.4 million, and stockholders’ equity was $245.2 million. The company had an accumulated deficit of $387.0 million.
AvePoint had no borrowings outstanding under its HSBC revolving credit facility. The facility provides for up to $30.0 million of borrowing, with a $20.0 million accordion feature, bears interest at LIBOR plus 3.5%, and matures April 7, 2023. The company stated that it was in compliance with all covenants.
Material Changes Versus the Prior Comparable Period
- Total revenue grew 29.6%, led by SaaS, services, and term license and support revenue. Revenue increased in the United States, EMEA, and APAC.
- Gross margin declined to 70.9% from 72.2%, primarily reflecting higher hosting, personnel, and services delivery costs.
- Sales and marketing expense increased 40.2% to $27.1 million, reflecting higher headcount, marketing activity, and stock-based compensation.
- General and administrative expense increased 51.0% to $15.5 million, driven by stock-based compensation, public-company costs, insurance, professional services, and the I-Access acquisition.
- Research and development expense increased 56.1% to $6.4 million as the company expanded product development and related personnel.
- Stock-based compensation increased to $8.3 million from $3.3 million.
- Annual recurring revenue increased 30% year over year to $167.4 million. Core trailing-twelve-month dollar-based net retention was 108%, compared with 110% in the prior-year period.
- Cash used in investing activities increased substantially to $181.5 million, primarily because the company purchased $179.9 million of short-term investments and acquired I-Access.
- The company adopted ASC 842 lease accounting on January 1, 2022, recognizing approximately $13.9 million of operating lease right-of-use assets and $14.5 million of lease liabilities at adoption, with no significant reported income-statement or cash-flow effect.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
The filing does not provide clear quantitative revenue or earnings guidance. Management expects continued investment in sales and marketing, research and development, geographic expansion, and product development. It expects SaaS and term license and support revenue to increase as a percentage of total revenue, while maintenance and perpetual license revenue continue to decline as customers migrate to cloud and term-license offerings.
- On February 18, 2022, the company acquired I-Access Solutions for approximately $7.1 million, including $1.5 million of cash and $5.6 million of contingent consideration. The purchase-price allocation remained preliminary at March 31, 2022.
- A $3.3 million gain on earn-out and warrant liabilities reduced the reported pretax loss. The gain primarily reflected a decline in the fair value of Company earn-out shares and warrants and is not representative of recurring operating performance.
- The company authorized a share repurchase program of up to $150 million. It repurchased 135,000 shares for approximately $0.7 million during the quarter and reported 1.08 million shares repurchased for approximately $5.5 million through May 16, 2022.
- Operating lease commitments totaled approximately $15.6 million, including $4.3 million due within twelve months. Future purchase commitments under IT-solution contracts totaled approximately $2.9 million at March 31, 2022. Letters of credit outstanding totaled $0.9 million.
- AvePoint identified continuing material weaknesses in internal control over financial reporting involving financial reporting completeness and accuracy, nonroutine and complex transactions, and segregation of duties. Management was implementing a remediation plan, but stated that it could not assure timely or successful remediation.
- Management cited risks from competition, rapidly changing cloud and customer preferences, employee retention, foreign currency movements, seasonality, COVID-19, macroeconomic conditions, and geopolitical events including the Russia-Ukraine conflict. The company reported limited and largely immaterial direct exposure to Russia and Belarus at the filing date.
- The company believes existing cash, investments, operating cash flows, and available credit capacity will fund working capital and capital expenditure needs for at least the next twelve months. The filing does not provide a clear expectation for when the company will achieve profitability or positive operating cash flow.
- No material litigation was reported, and the filing states that there were no material changes to previously disclosed risk factors.
Important Facts for Investors to Verify
- Reconcile ARR growth with recognized revenue, deferred revenue, renewal performance, and the decline in dollar-based net retention to 108%.
- Assess whether rising sales, marketing, research and development, public-company, and stock-based compensation costs can be absorbed by recurring revenue growth.
- Separate recurring operating performance from the $3.3 million fair-value gain on earn-out and warrant liabilities.
- Review the preliminary I-Access purchase-price allocation, contingent consideration, put-option obligations, and potential future dilution or cash requirements.
- Monitor cash burn, the concentration of $260.1 million in cash and short-term investments, investment liquidity, and the absence of current debt borrowings.
- Track remediation of the material weaknesses in internal control over financial reporting and any related restatements or control disclosures.
- Evaluate the financial impact of the $150 million repurchase authorization while the company continues to report operating and net losses.