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01/11 16:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reveal strong financial performance and growth prospects. Revenue guidance is raised, driven by healthy demand and strategic investments in sales capacity. The MSP business and control suite show robust growth, and AI governance presents significant future opportunities. Despite some management ambiguity on certain issues, the overall sentiment is positive, supported by increased guidance and favorable market trends. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Total Revenues $102 million, up 31% year-over-year. On a constant currency basis, total revenues grew 27% year-over-year. Reasons for growth include strong SaaS performance and balanced regional contributions.
SaaS Revenue $77.3 million, representing sequential growth of 12% and year-over-year growth of 44%. On a constant currency basis, SaaS revenues grew 40% year-over-year. Reasons for growth include increased adoption of SaaS solutions and higher mix of SaaS in total revenues.
Subscription Revenues Grew 33% year-over-year in Q2. This was the fifth straight quarter of acceleration. Reasons for growth include strong SaaS performance and term license contributions.
ARR (Annual Recurring Revenue) $367.6 million, representing year-over-year growth of 27%. Net new ARR in Q2 was $22.1 million, the highest dollar amount ever added, representing growth of 42% year-over-year. Reasons for growth include strong customer acquisition and expansion.
Gross Retention Rate (GRR) 89%, a 2 percentage point improvement from a year ago. Excluding migration products, GRR would have been 91%. Reasons for improvement include higher average duration of subscription contracts.
Net Retention Rate (NRR) 112%, a 2-point improvement from a year ago and the highest NRR ever delivered. Reasons for improvement include success in selling more of the platform to existing customers.
Gross Profit $76.3 million, representing a gross margin of 74.8% compared to 76.2% in Q2 of 2024. The year-over-year decline in gross margin is primarily due to a higher mix of low-margin services revenue.
Operating Income $18.8 million, representing an operating margin of 18.4%, compared to $8.7 million or 11.2% in the prior year. This represents year-over-year margin expansion of more than 700 basis points. Reasons for improvement include efficiencies in sales and marketing and increased channel contributions.
Cash, Cash Equivalents, and Short-term Investments $430.1 million, including $70.4 million of proceeds from warrant exercises in the second quarter. Reasons for increase include warrant exercises and operational cash flow.
Free Cash Flow $18.3 million for the first 6 months of the year, compared to $23 million in the first 6 months of 2024. Reasons for decline include changes in operational cash flow dynamics.
Risk Posture Command Center: Launched in April, it provides real-time visibility into data security posture, actionable intelligence to reduce risk, and ensures compliance. It addresses challenges like ransomware and bridges gaps between technology teams and the C-suite.
Optimization and ROI Command Center: Launched in June, it offers CIOs visibility into underused licenses, redundant data, and cloud cost inefficiencies, enabling cost-saving opportunities while maintaining security.
Resilience Command Center: Launched in June, it provides monitoring and actionable insights for Microsoft 365 services, including storage consumption, backup oversight, and cost optimization. It also serves as a foundation for multi-cloud governance expansion.
Agentic AI governance capabilities: Expanded to secure AI agents like Microsoft 365 Copilot, including prompt tracking, access controls, and policy enforcement for AI-generated content.
Customer Wins: New customers include a global airline (100,000 users), a U.S. insurer (25,000 users), a global commodities trading firm (11,500 users), and a U.S.-based cancer research hospital (9,500 users). These customers adopted AvePoint solutions for governance, compliance, and AI adoption.
Customer Expansions: Existing customers like a global CPG leader (130,000 users) and a big 4 professional service firm (400,000 users) expanded their use of AvePoint solutions for cost reduction and AI rollout preparation.
Revenue Growth: Q2 revenue surpassed $100 million for the first time, growing 31% year-over-year. SaaS revenue grew 44% year-over-year, comprising 76% of total revenue.
ARR Growth: Annual Recurring Revenue (ARR) reached $367.6 million, growing 27% year-over-year. Net new ARR in Q2 was $22.1 million, the highest ever added.
Regional Performance: SaaS revenue grew significantly across regions: North America (38%), EMEA (50%), and APAC (48%).
Customer Retention: Gross Retention Rate (GRR) improved to 89%, and Net Retention Rate (NRR) reached 112%, the highest ever.
Channel Strategy: 56% of total ARR came through the channel, up from 52% a year ago, reflecting a strategic focus on leveraging channel partnerships for market reach and efficiency.
Multi-cloud Governance Vision: Resilience Command Center expansion planned for Google Workspace, Salesforce, and other ecosystems, aligning with the broader multi-cloud governance strategy.
Public Sector Uncertainty: Potential uncertainty in the public sector in the third quarter could impact revenue and operational performance.
Cybersecurity Threats: Advanced cyber threats like ransomware are growing in frequency and severity, posing risks to data protection and operational resilience.
AI Adoption Risks: Organizations face challenges in managing data security, governance, and compliance as AI adoption accelerates, which could lead to oversharing and compliance risks.
Regulatory Pressures: Increasing regulatory requirements demand robust governance and compliance frameworks, which could strain resources and operational efficiency.
Economic Uncertainty: Potential economic uncertainties in the second half of the year could impact demand and financial performance.
Supply Chain and Cost Inefficiencies: Organizations struggle with underused licenses, redundant data, and cloud cost inefficiencies, which could affect profitability.
Customer Retention Challenges: Retention rates are impacted by lower renewal rates for migration products, which could affect recurring revenue.
Revenue Growth: For Q3 2025, AvePoint expects total revenues of $104.6 million to $106.6 million, representing growth of 18% to 20%. On a constant currency basis, revenue growth is expected to be 16% to 18%. For the full year 2025, total revenues are projected to be $406.6 million to $410.6 million, reflecting growth of 23% to 24%.
ARR (Annual Recurring Revenue): Full-year ARR is expected to be $412.8 million to $418.8 million, representing growth of 26% to 28%. On an FX-adjusted basis, ARR growth is projected to be 24% to 26%.
Non-GAAP Operating Income: For Q3 2025, non-GAAP operating income is expected to be $18 million to $19 million. For the full year 2025, non-GAAP operating income is projected to be $68.3 million to $70.8 million, reflecting an operating margin of 16.8% to 17.2% and year-over-year margin expansion of approximately 260 basis points.
Rule of 40: The midpoint of the full-year guidance reflects a Rule of 40 score of 44%, an improvement from the 43% guided last quarter, driven by both ARR growth and operating margin expansion.
Public Sector Uncertainty: The company has accounted for potential uncertainty in the public sector during the second half of the year, particularly in Q3 2025.
share repurchase program: We repurchased 414,000 shares in the second quarter for approximately $7 million. Year-to-date, we have repurchased approximately 1.2 million shares for approximately $19 million and have just over $130 million remaining in our authorized share repurchase program.
The earnings call summary presents a mixed picture: strong revenue growth and ARR projections, but concerns about federal downsell and dependency on Microsoft. The Q&A reveals uncertainty in the federal sector and lack of clarity in management's responses. Despite optimistic guidance and new capabilities, the cautious ARR guidance and reliance on Microsoft temper enthusiasm. The stock's small-cap nature suggests potential for volatility, but overall, the sentiment remains neutral due to balancing positive growth prospects with existing uncertainties.
The earnings call summary and Q&A reveal strong financial performance and growth prospects. Revenue guidance is raised, driven by healthy demand and strategic investments in sales capacity. The MSP business and control suite show robust growth, and AI governance presents significant future opportunities. Despite some management ambiguity on certain issues, the overall sentiment is positive, supported by increased guidance and favorable market trends. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
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