AvePoint, Inc. 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. The filing is an annual report, not a standalone fourth-quarter filing. AvePoint provides a cloud-native software platform for IT operations, data management, governance, security, backup, modernization and digital workplace analytics. The company served more than 17,000 customers in over 100 countries and had 2,187 employees at year-end.
Financial performance and key metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $232.3 million | $191.9 million | Up 21.1% |
| SaaS revenue | $117.2 million | $85.6 million | Up 36.9% |
| Gross profit | $167.2 million | $139.2 million | Up 20.1% |
| GAAP gross margin | 72.0% | 72.6% | Down 0.6 points |
| GAAP operating loss | $(41.1) million | $(53.5) million | Improved by $12.4 million |
| GAAP operating margin | (17.7%) | (27.9%) | Improved by 10.2 points |
| Net loss | $(38.7) million | $(33.2) million | Loss increased |
| Net loss attributable to AvePoint | $(41.6) million | $(35.2) million | Loss increased |
| Basic and diluted loss per share | $(0.23) | $(0.48) | Improved |
| Non-GAAP operating loss | $(2.9) million | $6.0 million income | Margin declined |
| Non-GAAP operating margin | (1.2%) | 3.1% | Down 4.3 points |
| Year-end ARR | $201.7 million | $159.2 million | Up 27%; 32% on an FX-adjusted basis |
| Core TTM dollar-based net retention | 105% | 110% | 108% and 109% FX-adjusted |
Revenue growth was led by SaaS, which represented approximately 78% of the year-over-year increase. Term license and support revenue increased 12.3% to $57.2 million and services revenue increased 29.3% to $41.3 million. Maintenance revenue declined 24.5% to $15.9 million and perpetual-license revenue declined 67.2% to $0.8 million, reflecting the shift toward SaaS and term licenses.
Sales and marketing expense increased 9.2% to $109.8 million, general and administrative expense increased 9.5% to $64.9 million, and research and development expense decreased 3.9% to $30.5 million. Total stock-based compensation declined to $37.2 million from $59.5 million in 2021. The company recorded approximately $3.1 million of workforce-reduction costs, primarily severance, in 2022.
Cash flow, liquidity and capital structure
- Cash and cash equivalents were $227.2 million at December 31, 2022, compared with $268.2 million at year-end 2021. Short-term investments were $2.6 million.
- Net cash used in operating activities was $0.8 million, compared with $5.0 million provided in 2021.
- Net cash used in investing activities was $21.5 million, including $18.6 million for acquisitions and $3.9 million for property and equipment.
- Net cash used in financing activities was $17.1 million, primarily reflecting $19.9 million of share repurchases, partially offset by $2.8 million of option-exercise proceeds.
- The company had no borrowings outstanding under its HSBC revolving credit facility at year-end. The facility provided $30.0 million of capacity plus a $20.0 million accordion feature, bore interest at LIBOR plus 3.5%, and was scheduled to mature April 7, 2023.
- Shareholders’ equity was $229.1 million, and accumulated deficit was $416.9 million at December 31, 2022.
- The company repurchased 4.05 million shares during 2022 at an average price of $4.92, leaving approximately $130.1 million available under the $150 million repurchase authorization.
Management stated that existing cash, operating cash flows and borrowing capacity were expected to satisfy working-capital, capital-expenditure and debt-service needs for at least the next twelve months.
Material changes and strategic developments
- AvePoint completed four acquisitions during 2022, including I-Access, Essential and the tyGraph companies, adding SaaS, analytics, digital workplace and education technology capabilities. Year-end goodwill was $18.9 million and net intangible assets were $11.1 million.
- The company announced a planned 100 million Singapore-dollar international research and development hub to support SaaS demand.
- Deferred revenue increased to $101.5 million from $82.3 million, while deferred contract costs increased to $48.6 million from $38.9 million.
- The company adopted ASC 842 lease accounting on January 1, 2022, recognizing operating lease right-of-use assets and liabilities. The adoption had no significant effect on operations or cash flows.
- The company continued shifting away from perpetual licenses and maintenance toward SaaS offerings. Management expects maintenance revenue to continue declining.
Guidance, outlook, risks and unusual items
The filing does not provide formal 2023 revenue, margin or earnings guidance. Management expects SaaS revenue to continue increasing as a percentage of total revenue and expects to continue investing in product development, sales and marketing, customer success, partnerships and strategic acquisitions. Management also expects long-term gross-margin improvement as SaaS becomes a larger portion of revenue, although near-term margins may be pressured by hosting costs, personnel investments, public-company expenses and international expansion.
- Key operating risks include dependence on Microsoft and other technology partners, competition from first-party cloud platforms, partner-channel execution, customer renewals and macroeconomic reductions in IT spending.
- The company relies substantially on third-party hosting infrastructure, particularly Microsoft-operated facilities. Outages, cost increases, cyberattacks or service degradation could lead to credits, customer losses and additional liabilities.
- Data privacy, cybersecurity, intellectual property, foreign exchange, sanctions and international regulatory risks remain material.
- The company reported material weaknesses in internal control over financial reporting related to financial reporting completeness and accuracy, complex or nonroutine transactions, and segregation of duties. Management continued a remediation plan, but the weaknesses were not yet considered remediated.
- Fair-value gains on earn-out and warrant liabilities contributed materially to other income. Earn-out liabilities were $6.6 million at year-end, down from $10.0 million, and the company recognized a $4.5 million gain on earn-out and warrant liabilities in 2022.
- Redeemable noncontrolling interest increased to $14.0 million, principally related to minority interests and put rights in AvePoint EduTech.
- The company had $100.2 million of future minimum payments under IT-software purchase commitments, including $96.0 million due under a three-year commitment signed in December 2022.
- Subsequent to year-end, AvePoint granted 6.35 million RSUs and 1.13 million options with aggregate fair value of $29.6 million. A Delaware Court of Chancery order in March 2023 retroactively validated the company’s charter and securities issued in reliance on it.
Important facts for investors to verify
- Whether ARR growth and SaaS growth continue while core net retention remains near or above 100%.
- Whether the company achieves positive operating cash flow and improves non-GAAP operating margins despite continued investment and hosting-cost pressure.
- The status of the HSBC credit facility after its April 7, 2023 maturity date and any replacement or refinancing arrangements.
- Progress and independent validation of remediation of the disclosed material weaknesses in internal control over financial reporting.
- Integration results, revenue contribution and valuation assumptions for the 2022 acquisitions.
- The cash and earnings impact of the $96.0 million IT purchase commitment and other contractual obligations.
- Trends in maintenance and perpetual-license declines, deferred revenue, customer retention and customer concentration.
- Potential dilution from 29.2 million outstanding options, 8.5 million RSUs, 17.9 million warrants and 3.0 million earn-out shares or equivalent awards.