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01/11 16:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Total Revenues $109.7 million, up 24% year-over-year. On a constant currency basis, total revenues grew 21% year-over-year. Reasons for growth include strong SaaS performance and increased services revenue.
SaaS Revenue $84 million, growing 38% year-over-year. SaaS represented 77% of total Q3 revenues, up from 69% a year ago. On a constant currency basis, SaaS revenues grew 35% year-over-year. Growth attributed to strong demand and increased adoption of SaaS solutions.
Services Revenue $13.8 million, representing 13% of total revenues and growing 27% year-over-year. Growth exceeded expectations due to increased demand for services.
Term License and Support Revenue Declined 21% year-over-year, representing 10% of revenues compared to 16% a year ago. Decline attributed to a shift towards SaaS solutions.
Maintenance Revenue Approximately $840,000, representing 1% of total revenues. No specific year-over-year change or reasons mentioned.
North America SaaS Revenue Grew 36% year-over-year, representing 83% of total North America revenues. Total North America revenues grew 14% year-over-year. Growth impacted by softness in the public sector and lower mix of term license revenue.
EMEA SaaS Revenue Grew 42% year-over-year, representing 89% of total EMEA revenues. Total EMEA revenues grew 35% year-over-year. On a constant currency basis, SaaS revenues increased 35%, while total revenues increased 28%. Growth driven by strong SaaS adoption.
APAC SaaS Revenue Grew 34% year-over-year, representing 53% of total APAC revenues. Total APAC revenues grew 25% year-over-year. On a constant currency basis, SaaS revenues increased 33%, while total revenues increased 24%. Growth attributed to increased SaaS adoption in the region.
ARR (Annual Recurring Revenue) $390 million, representing year-over-year growth of 26%. Net new ARR in Q3 was $22.4 million, growing 19% year-over-year. Growth driven by strong SaaS adoption and channel contributions.
Gross Profit $82.4 million, representing a gross margin of 75.1% compared to 77% in Q3 of 2024. Decline in gross margin attributed to a higher mix of services revenues.
Non-GAAP Operating Income $24.1 million, representing an operating margin of 22%, up from 20.1% in the prior year. Improvement driven by sales efficiency and increased channel contributions.
Operating Cash Flow $55.6 million for the first 9 months of the year, compared to $56.1 million in the prior year. Includes one-time tax payments of approximately $7 million in Q1.
Free Cash Flow $52.6 million for the first 9 months of the year, compared to $53.8 million in the prior year. Includes one-time tax payments of approximately $7 million in Q1.
Agentic AI Governance: AvePoint has enhanced its Confidence Platform to provide visibility and lifecycle control of AI agents, ensuring auditability and transparency. It also offers unified protection across multi-SaaS and multi-cloud environments, operational efficiency insights, and embedded responsible AI practices.
Operational Efficiency Command Center: Launched a new feature within the AvePoint Confidence Platform to track policy violations, agent remediation speed, and workspace status, helping organizations measure governance impact and improve efficiency.
Backup-as-a-Service: Expanded offerings to include applications like monday.com, Docusign, Smartsheet, Okta, Confluence, and infrastructure like Google GCP VMs.
New Partnerships: AvePoint secured partnerships with a Fortune 500 financial services corporation, a global food and beverage company, and a major Japanese telecommunication company, expanding its market reach and ARR.
Regional Growth: SaaS revenues grew significantly across regions: 36% in North America, 42% in EMEA, and 34% in APAC, with ARR growth of 21%, 28%, and 33% respectively.
Revenue Growth: Total revenues for Q3 were $109.7 million, up 24% year-over-year, with SaaS revenue growing 38% year-over-year.
Channel Contribution: 56% of total ARR came through the channel, up from 53% a year ago, supporting profitable growth.
Customer Retention: Dollar-based trailing 12-month gross retention rate was 88%, with net retention rate at 110%.
Focus on AI Governance: AvePoint is positioning itself as a leader in agentic AI governance, emphasizing risk mitigation, operational efficiency, trust, and competitive advantage.
Future Governance Evolution: Plans to evolve governance from visibility to autonomous workflows, expand to ecosystem governance, and treat governance as a strategic enabler.
AI Governance Risks: The introduction of agentic AI systems poses risks related to data exposure, compliance gaps, and lack of trust. These risks are exacerbated by the complexity of multi-cloud and multi-SaaS environments, where sensitive data can be accessed without full visibility or defined life cycles.
Delayed AI Rollouts: 86% of surveyed organizations have delayed AI rollouts by up to 12 months due to security and governance concerns, highlighting the challenges in adopting AI technologies securely.
Data Governance Challenges: Organizations face challenges in managing the sprawl of sensitive data driven by fragmented tech stacks and reliance on hundreds of SaaS apps, leading to compliance and auditability issues.
Public Sector Revenue Softness: Revenue growth in North America was impacted by softness in the public sector, as U.S. federal agencies navigate changes and uncertainties, including the potential impact of a government shutdown on deal timing.
Retention Rate Challenges: Retention rates were impacted by public sector softness, with gross retention rate (GRR) and net retention rate (NRR) showing slight declines, indicating challenges in maintaining customer loyalty and upselling.
Regulatory and Compliance Risks: Organizations that neglect proper governance of agentic AI face potential regulatory issues, compliance violations, and audit gaps, which could delay operations and lead to rework.
Revenue Expectations: AvePoint expects total revenues of $110 million to $112 million for Q4 2025, representing growth of 23% to 26%. For the full year, total revenues are projected to be $414.8 million to $416.8 million, reflecting growth of 25.8% at the midpoint.
ARR Projections: The company anticipates total ARR of $412.8 million to $418.8 million for the full year 2025, representing growth of 27% at the midpoint. On an FX-adjusted basis, ARR growth is expected to be 25% at the midpoint.
Non-GAAP Operating Income: For Q4 2025, non-GAAP operating income is expected to be $21 million to $22 million, with a non-GAAP operating margin of 19.1% to 19.6%. For the full year, non-GAAP operating income is projected to be $77.3 million to $78.3 million, reflecting a margin of 18.7% at the midpoint.
Market Trends and Strategic Focus: AvePoint is focusing on governance of agentic AI, emphasizing areas such as autonomous governance, ecosystem governance, and strategic governance. The company aims to lead in these areas by evolving its platform to include automated governance workflows, support for federated agents, and strategic governance capabilities.
Regional Performance Expectations: North America revenue growth is expected to be impacted by softness in the public sector and lower term license revenue mix. EMEA and APAC regions are expected to continue strong ARR growth above 20%.
Rule of 40 Metric: The full-year guidance reflects a Rule of 40 score of 46, an improvement from the 44 guided last quarter and 38 at the beginning of 2025.
share repurchase program: We repurchased 528,000 shares in the third quarter for approximately $8.4 million. Year-to-date, we have repurchased 1.7 million shares for approximately $27 million and have approximately $123 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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