Good morning, everyone and welcome to the AvePoint Third Quarter 2021 Earnings Call. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

Thank you, and good morning. With me today from AvePoint are TJ Jiang, Chief Executive Officer, and Jim Caci, Chief Financial Officer. TJ will begin with a brief review of the business results for the third quarter ended September 30, 2021. Jim will then review the financial results for the third quarter followed by the company's outlook for the fourth quarter and full-year of 2021. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties, that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor Statements contained in our press release for a more complete description. All materials in the webcast are the sole property and copyright of AvePoint with all rights reserved. Please note, this presentation describes certain non-GAAP measures including non-GAAP operating income and non-GAAP operating margin, which are not measures prepared in accordance with the U.S. GAAP. The non-GAAP measures are presented in this presentation as we believe they provide investors with a mean s of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP. Listeners who do not have a copy of the quarter ended September 30, 2021 press release may obtain a copy by visiting the Investor Relations section of the company's website. Now, I'd like to turn the call over to TJ.

Thank you, Erica. And good morning, everyone. Welcome to our third quarter earnings call. Our team delivered again, record results with revenue of 54 million, up 36 % year-over-year, driven by continued strong demand from customers to make their digital collaboration more compliant, productive, and secure. Subscription revenue grew 79 % year-over-year, representing 74 % of our total revenue in the quarter, compared to 56 % of total revenue a year ago. Organizations accelerated their shift to cloud-based collaboration in response to high pre -work demands. However, many organizations still have a long road ahead of them. This shift hasn't been easy. Complex requirements, prolific amounts of legacy data, and processes all create challenges. Our migration and transformation products allow us to capture the customer as they began their cloud journey. Within address additional yields with our platform as they mature their SaaS operations. As a result, our subscription growth is a healthy mix of our product portfolio. For example, we recently completed a three-year digital transformation initiative for a critical U.S. government agency with more than 100,000 users, and one of the largest on-premise collaboration environments in the world. This long-time customer also successfully transitions from leveraging our hybrid software to our FedRAMP authorized SaaS platform this quarter, which enables them to collaborate security, and prevent data loss in Microsoft 365. We're proud that our technology enables our customer's mission, and that government officials are safer, thanks to the security, availability, and integrity of their sensitive data during and after their cloud transformation. Total ARR, an important indicator to track the health of our business, grew 32 % year-over-year. We had great momentum in our business in the third quarter with a number of customers spending more than $100,000 in ARR, up 37 % year-over-year. The tailwind of organizations…

Thank you, TJ. And good morning, everyone. Before we begin, I'd like to take a moment to express how exciting it is to return to AvePoint. I've always been a strong believer in the long-term growth prospects of the market and AvePoint's unique position within the industry. Our continued execution against our targets resulted in another strong quarter of growth. As I review our third quarter results today, please note that I'll be referring to non-GAAP metrics unless otherwise noted. A reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website. Total revenues for the third quarter ended September 30, 2021 were 54 million, up 36 % year-over-year. Within this, subscription revenue, which includes both SaaS and term license revenue was $40 million, constituting 74 % of total revenue up 79 % year-over-year. Our continued execution against our targets resulted in another strong quarter of growth. As TJ mentioned earlier, subscription revenue has become a much more substantial share of our overall revenue year over year. SaaS revenue was $22 million constituting 42 % of total revenue, and up 59 % year-over-year. Turned license revenue, constituting 32 % of total revenue was up 114 % year-over-year. As a result of the timing of hybrid cloud projects and a seasonally stronger third quarter for U.S. federal public sector customers, given their fiscal year-end and their propensity to do on-premises and hybrid deals versus SaaS only. As a reminder, the SaaS portion of our subscription revenue is recognized ratably over the length of the contract. While the term license subscription has a higher percentage of revenue recognized upfront. As a result of this, revenue may fluctuate, and we believe that ARR is a more useful metric to track period-to-period progress of our business as…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. We will pause for a moment as callers join the queue. The first question is from Brian Essex from Goldman Sachs, please go ahead.

Hey, good morning and thank you for taking my question. Maybe TJ, if we could start with you around how the puts and takes that you've seen in the business over the past quarter. If we look at the business from a segment perspective, transformation, governance, and compliance. Where do you see in the greatest adoption and where do you anticipate that strength will be going forward?

Good morning, Brian. From the mix of these two, three segments, they're pretty consistent throughout the quarter. We continue to see folks are going to cloud the -- we actually -- we'll send you the research report on that. 92 % of the enterprise are today multi-cloud and 82 % are hybrid. And also 63 % of enterprise employees are saying that they prefer remote work, these are Mackenzie reports. These are our major trends that we continue to see in the field where enterprises are getting folks to go use more [Indiscernible] cloud collaboration platforms. So regardless of the hybrid work situation of folks return to work partially, at the end of the day, cloud is here to stay and our value proposition is firstly to move enterprise to cloud faster. And secondly, once they're in the cloud, to really focus around the collaboration, security and governance workloads. So, from that perspective, we see the mix to be consistent previous quarters. And even going to 2022, we see very similar trends.

Got it. That's super helpful. And just one follow-up on net retention rate. What were some of the primary puts and takes there if we think about churn versus cross-sell versus upsell, maybe just help us unpack that a little bit and understand some of the moving factors underlying that number.

Hey Brian, this is Jim. Thanks for the question. So, it's a good one, right? And we expect to see, as I've said earlier, we kind of expect to see some fluctuation from quarter-to-quarter, right? It's not a completely stable environment in terms of some customers. And what we really saw in Q3 was really a couple of customers that we're working within their journey and if those customers had converted and we're still working with them and we expect to conclude with them in Q4. We would've been consistent around a 111 % net retention rate. So, we don't really see any real massive change other than a couple of large customers, again, that we're really partnered with them, right? So, we're working with them as they evolve on their cloud journey. And so, we're not pushing them. We're not forcing them and -- but we're hoping that obviously in Q4, we're going to conclude with them in terms of their next steps. So, if they had been either converted or we had excluded them, we would've been right at the 111 % retention which we saw in Q2.

Great. And can you maybe just expand on the term converted. Is this a take on to transformation and then you're going to cross -- up-sell across the platform, or just to get a better understanding of that description?

Yes. There are multiple scenarios. There's some regulated customer as well as government customer going from fully on - prem environments to government data centers or to public cloud. There's that transition period where we actually get involved on the transformation project by the recurring revenue piece, for the on - prem environment had to shift over to the cloud stuff. So therefore, there's some contract renegotiation effectively to make sure that where -- they're licensed properly for the full SaaS management licensing. So, there's that one scenario. So essentially, transforming from on prem to cloud scenario. The other scenario we have seen is essentially collapsing of multiple environments into singular tenants or vice versa, where single tenants getting to multi-tenant. So, these are either consolidation of environments into cloud of multiple on - prem environments and -- or in the divestiture situation. So, these introduces, again, these type of conversations on the renewals. So what Jim is referring to is -- essentially, we had a couple situation like that. That's now pushed into Q4, where we continue to work with the customer to guide them. But overall, our guidance remain is that we are from -- in our perspective, moving to the right and up direction and our goal is to get to the industry best practice for 120 % NRR.

Got it, very helpful color. Thank you, TJ.

The next question is from Jason Ader from William Blair. Please go ahead.

Thank you. Good morning, everyone. First question, for me, is just on the housekeeping item which is, is there any impact from FX in the quarter?

Yes. no significant impact from FX.

Okay, and do you price in dollars globally?

So, in dollars, we price -- no, in selected regions we use local currency. So, in U.S. we use dollars in Japan we use yen, in Singapore we use Singapore dollars, in Germany we actually use euros, in Burton whereas UK we used pounds, so we actually use -- for the major market we service, we use the local currencies. In Australia, Australian dollar. So far, we have not seen major effects impact.

Okay. And then just, TJ, on the quarter. Can you talk about some of the highest growth products in the quarter? Where -- were you really excited by the growth? And then maybe some comments on growth by vertical or by region. Just differences across verticals and regions where you're seeing the strength right now.

So that's a great question. So, from a product perspective, clearly, we have the government's side. Q3 is the fiscal year-end for U.S. federal government. So there, we picked up a very nice seven-figure deal, as I mentioned in the earnings call script of an existing customer, more than 100,000 employees going to FedRAMP authorized environments. And also, from overall region perspective, we have very strong showing in APAC, as well as EMEA regions also in the Q3. Again, demonstrating this company's unique position as a truly global distributor business. We're 45 % of our business, North America and then nearly 30 % in Europe and rest of it in APAC. We continue to see strength in terms of -- you asked about vertical solution. We announced this large education solution deal. That's a Microsoft Office 365 and Teams integrated higher education solution target to institute of higher learning. That revenue recognition will come in the Q4 and subsequent because it is a multi-year as typical with government organizations. But we see a really big uptake in the education space. We're also seeing really good growth in manufacturing and automotive space especially in Germany, which we'll share more detail later. But overall, again, regulate industry, government, and now education is the vertical that's growing very well for us.

Great color. Thank you. And then on the product side, any more detail there? I know Teams governance has been really strong. Any other specific products that you want to call out?

Yeah, it's teams’ governance, it's backup as a service that continue to go very strong. But again, the amount of data we actually touch hundreds of petabytes of data. And it's really the unique offering and positioning of our platform where we always have this migration integration story. We always have the backup as a service story, data protection, and of course now teams’ governance and security. Increasingly, we do see customers also coming to us for essentially ransomware attack recovery story that ties very, very well with our backup in service store. We then released new product this quarter. In Q3, we released the Google Workspace Backup service offering in addition to salesforce backup as a service. That's now picking up growth as well. We have seen 3x increase in pipeline for those products -- new products. Also, lastly, we released the new product called [Indiscernible], which is in the Microsoft 365 license and entitlement management space. And that's also big demand within the enterprise segment where you're talking about tens of thousands of employees, and what kind of license, and what kind of entitlement to allot to, in a much more dynamic and resource-based way versus manual and script driven. So, we're very, very excited about that product set and we're also now actively working to expand that product set to cover other clouds.

Great, and then lastly from me for Jim. Do you have any early view on 2022? For us, I mean, you talked I know pre -IPO about, kind of a 30 % ARR growth being sustainable. Do you -- are you able to reiterate that? Any -- just early view on 2022?

Sure. I think it's early as you say, but we're pretty confident that mark is not going to change. We're pretty bullish on keeping that 30 %. We feel pretty strongly about that. So, I don't see any change there, but we're working through 2022. And we'll have some more insight in the future, but yes, I would say you could that 30 % is pretty consistent and we see that going forward.

And this is 30 % ARR as well as revenue growth?

Yes

Fantastic. Thank you, guys.

Thank you, Jason.

Thanks.

Our next question is from Kirk Materne from Evercore ISI. Please go ahead.

Thanks very much. TJ, Microsoft obviously just held it's Ignite Conference. Was there anything coming away from that -- from your perspective that you're bullish on? I know you guys have a very tight relationship, but was there anything incremental coming out of that conference that you would maybe highlight in terms of your opportunity over the next year?

Yes. Yeah. We think Microsoft continue to evolve quickly in providing value-added services and features. To the customer said, there's a very, very aggressive push on their side on Zoom compete. We see that Microsoft continue to strengthen their dominance in the enterprise space. To that regard, we see more convergence around governance, and also office for the frontline workers as a way to make a more accessible Microsoft solutions. And this for us is only helping to enlarge our total addressable market. And also raise the more need for governance solutions because now, these Microsoft 365 cloud solutions are much more accessible to the frontline workers, folks that doesn't even have computers. They're just using mobile devices and table. Overall, we see the opportunity for our growth to continue to enlarge and strengthen. And -- in so far as what Microsoft releases new services, we are always constantly looking at ways to make it more efficient in our SaaS offering to leverage those services. For example, more snapshot APIs are available for us to do back-up services far more efficiently. In the cloud space, it's all about consumption. At the same time, we're actually aggressively working to lower the cost of running our SaaS solutions as well. There is a lot of economies scale and experience that gets built over time. Overall, we will continue to innovate our productivity solutions.

That's great. And can you just talk about -- obviously, like 2 quarters ago, Microsoft talked about only about 8 % of its base was on the E5 version of Microsoft 365. When they're discussing, sort of up-selling them from the 3d 5, is that an opportunity for you to engage with those customers as well as they look to take a deeper or extend the relationship with Microsoft? Are you able to dovetail on those -- I don't know, call Microsoft upgrade discussions?

Hoping that's where view by the customer as more of a mutual and strategic outside partner in this sense. We, first and foremost help our customers maximize their ROIs on Microsoft tech investment to the extent that it makes sense for them. And also, we do actually have set up bundles and offerings for E1, E3, E5 license types. What we see out there is really a mix - license type reality. Most large enterprises will have a mixed proportional, where being E5 being the smallest percentage of the information workers for the C-suites and senior executives leveraging all the events functionality. So that's the reality, it's actually pretty messy out there in term of these types of deployment scenarios that actually allow us to really help. So often, we also help customers to advance their workloads with governors’ solutions to, again, address that mixed license type scenarios. So yes, we see an opportunity for sure from these motions to go to a different license type. But we also see that in reality, in there -- that is not very realistic to move everyone, especially large organizations to single license types and this is where we really help unify that governance story.

Right. And then just one last one for me for Jim. Jim, just -- you obviously talked about the hybrid deals you did in the third quarter on term license front. I assume if we're thinking about the fourth quarter, that was a bit of a, somewhat a spike, little bit of a jump in term license that you're not necessarily assuming will carry forward into the fourth quarter. Can you just talk about that? I guess -- I know you're not getting explicitly, but qualitatively how we should be thinking about term licenses, jumps around that obviously has an impact on under guidance as well.

Yeah. And I think that's where we were trying to, we didn't obviously raise guidance in Q4. Obviously, the terms in Q3 have a little bit of a spike, as you noticed, even a little bit more than we had expected. 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. But again, we're there to support the customer on their cloud journey. And so, there's a little bit of variability there in terms of do they go complete SaaS [Indiscernible] So we're working through some of those things, which again is why we didn't want to really change the guidance at all for Q4. But again, I would say be similar to Q3 from an expectation point of view. I'd keep that in mind.

I would just highlight that regardless -- yes, I'll just add a layer or more color. So regardless of term or SaaS, at the end of the day, it's all subscription license. It's only term when the customer also has some other data on - prem that they're protecting. But vast majority of the work load and data that we're helping our customers to manage and work on are in the cloud. So just because they have peace and bits of things on prem, it becomes a term license. Nonetheless, it's all subscription, and we've believed that ARR, Annual Recurring Revenue, is the right way to guide -- to see guidance towards the growth of our business. Because that cuts across this revenue recognition issue for term 606.

Got it. Thanks, guys. Appreciate it.

The next question is from Derrick Wood from Cowen and Company. Please go ahead.

Great. Thanks for taking my questions. I guess on that -- staying on that topic around ARR, try to look at net new ARR was about $8.5 million in Q3 and it was down from about $10 million in Q2. A year ago, you had seen sequential growth in that new ARR. So, can you just talk about, what -- whether this was a surprise or what's the seasonal factors we should be thinking about in Q3 and maybe why that was down sequentially? And then any color on how to think about Q4 would be helpful as well.

Hey, Derrick. Thanks for the question. I think as we're thinking about it, our goals in the beginning of the year, were really to achieve kind of 30 % year-over-year, which we've done. So, I feel, I think we feel really good about that. We've added a bunch of salespeople to the team as we've mentioned previously and we're expecting them to really have that impact. I don't know if there's any specific color around Q3, but we are definitely expecting to see improvements in that number as we move forward into Q4, and as all these kinds of the salespeople we've added become more ramped and kinder of get to their fully ramped stage. Yes. From my side, I would just layer in the color here. We have increased our client-facing workforce by 50 % in the last 9 months. One of the things that did catch us off guard a bit is the prolonged ramp-up period. This is actually what we recognize essentially at the beginning of Q3 already was that when everyone's working remote. Essentially, all of the new hires that we made, that come into the organization are all working remote. Most of them have yet to meet their hiring managers or their team colleagues. And we all know, as human beings, we actually all learn better in person doing those activities, and learn through experienced than just attending webinars, attending video calls. There's definitely a bit of that COVID and a video call fatigue happening. We're addressing that very aggressively. We have come back into hybrid work mode in Q4. That means employees coming back to when they're near one of our many offices around the world when allowed specially in regions with high vaccination rates. then they can actually come back 2 days a week to work with their team to ramp up more effectively. So that's something we're actively addressing. And at the same time, even in Australia, for example, in Melbourne, they're still going through doubts of lockdowns, so that's not helpful. But we do recognize that even with the best technology in collaboration, which we're obviously the forerunner here. This still cannot replace in-person interactions as certain junctures, especially for the new hires to ramp up. So that's something that we see. And that have some proxy relation to your question of, hey, your net new NRRs are not increasing as fast as before, and we're working aggressively to address that.

Yeah, that makes a lot of sense and so what I mean, the time to ramp the productivity has gotten a little bit longer. I guess since you've hired so many -- so much capacity over the last 9 months, when do you see that being more impactful to the model? Is it first half next year? Do you see that coming more into Q4 this year? any anymore color on timing?

Right. 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, we did create some buffer for us, ourselves. And we see that we'll work through the [Indiscernible] in Q4. And next year, we should be back to the ramp up expectations. But overall, our business model we shared is consistent and opportunity in front of us great for long term. So, this is really just a short-term kind of phenomenon that we're experiencing.

Great, make sense. Maybe squeeze 1 more on this $30 million contract. Pretty impressive then, can you walk us through what technology of yours that they're -- that you're going to be using to help build this and why you want this contract?

Yeah. That's a great question. So, this is a displacement of AWS. We actually built over the -- we starting back in 2016 of -- as we previously shared, our overall SaaS platform as one of data management and governance solution. And on top of that platform, because we do all these data orchestration and data insight, we start to then surface out and get into business solutions. So, we have business solutions around end-user chop up to restore their data and we have now insights and policies that end-user that we can engage end-users directly with. And along that line, we started to do vertical solutions. So, the manufacturing's, for example, for automotive, we're now getting to space of deal rooms, as well as a board meeting solution. Again, because of the massive adoption of Microsoft Cloud out there, and the education specifically, we have learned management, exam management, and this new deal, it's really based on top of that. And in addition to do some dynamics through C5 integration that allow us to do also training management. So, it's really leveraging our existing solution in education space of exam management, as well as learning management. Those are existing SaaS offerings and we -- because we integrate and right on top the Microsoft cloud, which itself, it's innovating, integrating very fast. And also leveraging such as Azure Cognitive Services to do machine learning, to do predictive analytics around our natural language processing, to essentially have smart teaching assistance to offer student different type of services through a single-channel instead of going to different portals to access different services by the school, and also doing digital exams online and all of that integrates into this cohesive learning management solution that sits on top of Microsoft Cloud because the schools already have Microsoft Cloud deployed and then that's an integrated solution that actually displaces AWS out of that account. It's actually a massive overall education, when -- as well as for our Singapore team to win this. It is based on our existing solutions.

Derrick, one more thing to that.

Yes?

One more thing, just thinking about the models and stuff. So, this is a 5-year deal that TJ is referring to. And we would expect in very little additional revenue in Q4. Q4 really is the planning phase of the project. And ultimately, the rollout of the technology will be planned. And then ultimately, we'll have a better sense as to what that revenue recognition looks like over the next 5 years. So, I would say that for modeling purposes, Q4 will be very little impact.

That's so helpful. Thank you.

[Operator Instructions]. The next question is from Nehal Chokshi from Northland Capital Markets. Please go ahead.

Yes. Thank you. Brian, you're new to AvePoint. I'd love to hear your perspective on any changes you plan to bring to AvePoint?

Nice to meet you and thanks for the question. Yes, I think, again, I was with AvePoint several years ago. And so, coming back is a little bit of a homecoming. Obviously, the team has done a great job, grown the business and really executed really well. So, I don't think there's any major changes, I think it's just continuing to step up our game in terms of even being more successful in executing

better. And now as a public company, obviously, we've got some additional responsibilities both to you guys and to the public at large and, obviously, all the necessary required filings and stuff. I think we're really just trying to, again, improve on what's already been, what AvePoint has been executing on. I don't think any major changes, I do think we want to just continue to execute and execute at a high level. And good morning, TJ.

Yup.

I just want to highlight that, Jim, because he's been with us before and knowing a lot of our leadership team along with Sophia, who's know our Chief Accounting Officer. Literally, he's able to hit the ground running at 60 miles hour here, and it's perfect. There's no reintroduction of the company or when folks having conversations, our sales leaders, our chief technology officers, even folks that's working on the M&A side, they can have a very, very direct and in tune conversations without going through that phase of, hey, you know. Who are you? Getting to know you. That kind of thing. But overall, you noticed that we now have over $260 million cash on the balance sheet, we are actively enlarging the finance team to make sure that we deploy those capital effectively to bring shareholder value.

Great. And then in the quarter your incremental AR was very healthy, million. But that is a tick below the past two quarters of $10 million. Can you talk a little bit about the -- how you feel you did on that incremental ARR performance relative to prior quarters?

Yes. From my perspective, we -- you see our year from a seasonality perspective. We actually -- second half year has bigger numbers than first and we did -- had a tremendous ARR growth and second-half performance last year, and similarly this year. Relatively speaking, it may seem to be a bit of a compression, but overall guidance is the same for the year. We will be 30 % revenue as well as ARR growth.

Okay. I guess the question is, is that why does it seem to be a bit of a compression? Is there some sort of, I don't know, some sort of artifact in there? Or is there something actually fundamental that happened?

I think it's really, last Q3 and Q4 are very, very strong quarters, and similarly, this year. So, I don't think there's too much to read into it. There is a bit to read into the new -- net new [Indiscernible] that we just discussed. It has to do with a bit of prolonged ramp-up period for the new hires. But we're very confident that we're worked through that -- those kinks, this quarter.

Got it. Okay. And I think that is a very good point that, the year ago --

Yeah.

September and December quarters were very strong. And with that in mind, the reason why those were very strong with because Team was just starting to really ramp here. What are you seeing in terms of Teams adoption at this point in time? Are you seeing it be -- still continue, penetrate a lot new organizations or is it more about it going deeper and us being the catalyst to a greater compliance stature that organizations are taking?

That's a great question Nehal. We continue to see this $250 million monthly active Teams user to pick up more advanced workloads. The default usage pattern for Teams has been just video call and chats. Increasingly, we see adoption going further which are quite honestly in many cases enable our product. For example, the advanced workloads like document sharing, co-authoring, editing, internal, external sharing usually are enabled when the CISO and Risk Officer are more comfortable with the security and governance infrastructure laid out, especially in large enterprises. There we actually enable advanced workloads. So, we see that the total user continues to increase as Microsoft, you've probably seen some of the signaling coming from them, to even further aggressively push Teams especially you remember that Cloud PC initiative, where every instance of Cloud PC will come bundled in with Teams. So, we will see the Teams ' number continue to increase. But where we really provide value as to get that advanced workload flowing point. And also, we -- from a channel collaboration, we require data life cycle management. And this is the exact value our platform provides.

Great. Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Tj Jiang for any closing remarks.

Well, thank you everyone for attending our Q3 earnings call. We had a really strong quarter and we continue to be very bullish and confident in our execution. The marketing in front of us is massive. We actually are building up and ramping up our workforce to address that to take advantage of our first-mover advantage in the Microsoft enterprise SaaS space, as well as our platform advantage where we do have truly differentiated offering around collaboration, security and governance. And with that, we look forward to everyone, and wishing you a good, happy holiday season and the New Year. I believe the next time we'll sync in, talk to each other will be for the year-end earnings. So, thank you for your attending our earnings call. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.