Conference Transcript - AVPT 2026-05-28

Joe Gallo, Analyst — Jefferies

Awesome. Thanks, everyone, for joining. I'm Joe Gallo, cover cyber at Jefferies. Delighted to have AvePoint's CEO, TJ, as well as CFO, Jim Cassie. Thanks, guys, for joining us today. Maybe just for those less familiar in the room, to start the conversation, walk through the evolution of AvePoint from servicing Microsoft Exchange and SharePoint back up to the full three product suite that you have today.

TJ Jiang, CEO

Yeah, it's quite an evolution, starting from on-prem, Microsoft Exchange, and SharePoint, which is the Microsoft's enterprise content management platform, to cloud, at which point we then effectively expand the total addressable market to entirety of Office, beyond just Exchange and SharePoint. Then we also, beyond just resiliency, which is backup recovery, archiving, we also do the governance control, because that's the core focus of our customer set at the time, which is regulated industry, banks, governments, et cetera. And then, of course, this whole data continuous movement. Data will never stop moving, so this data migration, data integration. So fast forward to today, we are the largest ecosystem player for Microsoft Office Cloud. But of course, the world is multi-cloud. So we're making very aggressive moves into Google, into Salesforce, and also going after IaaS and PaaS coverage in Azure, GCP, AWS. And really, how we are transforming is really because of our pedigree and background in data management, data curation, data governance, we are now effectively viewed by our customers and partners as a critical part of the AI infrastructure stack when it comes to trust, when it comes to governance, AI trust, governance, AI security. That's all encompassing. it's not just a genic monitoring but it's also security what does agents have access to it's also recoverability from from the damages whether before is ransomware or bad actor now it's agents that could wipe out your entire environments or making changes and also getting to end endpoints where you can have open cloud running on endpoints that's not necessarily in the cloud be able to discover and bring that under management so it's actually a much broader portfolio of solutions and the demand drives come from not only large enterprise but also small to medium businesses which are being managed actively by managed service providers whether they are pure managed service providers or even managed security service providers so increasingly we see this whole security angle around what we do not just data security posture management, but also cloud security posture management, and then endpoint management. So the surface area is getting much larger, so it's very exciting. And because we have the credibility of being global, being a trusted vendor in the large enterprise space, we're seeing demand to continue to be very strong. Awesome.

Joe Gallo, Analyst — Jefferies

And you mentioned AI. So Mythos came out. I think it scared a lot of people. It drove a lot of customer concerns. AI adoption clearly has a governance angle. The control suite's 26% of ARR, but you noted last quarter that it was 40% of the pipeline. Is that all AI? Is that something different? Maybe just walk through the recent customer conversations and how AI is impacting the business.

TJ Jiang, CEO

So it's really because the rush to do AI deployments and AI realization in enterprises large and small, The realization then is, you know, to have good AI, you must have a pristine and solid data foundation, whether it's curation of that quality of data, classification, tagging, but also siloing of that access so that you are not recommending things that you're not supposed to have access to. So we see last year's people using AI, this year's AI using AI, so agenic era. So the costs become a massive issue. Because we also monitor the cost of agents. Before, obviously, it's utilization of cloud workloads. Now it's utilization of agents and who are the ones creating the agents, and what sensitive data that these agents are actively going after and touching and updating, and also what other agents that they talk to, what type of agent pipeline and what type of connectivity that they have. So this is now top of mind for every C-level around AI security and AI risk. So that's bringing a lot of us into so much conversations, and our Agent Paul solution allowed them to be able to really first discover and bring them under management and have a handle, because what is happening right now in enterprise, large and small, is shadow AI is becoming a real issue.

Joe Gallo, Analyst — Jefferies

I want to come back to Agent Paul in a second, but a lot of people always talk about, hey, you're 90-ish percent levered to Microsoft. Can AI actually accelerate the move to other infrastructures?

TJ Jiang, CEO

Absolutely. So the conversation that we have with our enterprise doesn't even involve Microsoft Copilot at all. It's all just about agentic deployments. It doesn't matter where the agents are created from, whether it's from Microsoft or Microsoft actually uses Copilot Studio and you could use now Cloud, right, in Microsoft Cloud, but also Gemini and Salesforce also have their own agent creation capabilities. so we are very agnostic on what platform that enterprises uses to create these agents it's really a matter of actually discover and bring them under control so the conversation is not really it's no longer just about my Microsoft estate it's really about my AI exposure and my AI risk so significantly tilting towards non-Office Cloud conversations what where Office Cloud still remain a important aspect of what we do is because Microsoft calls it work IQ and that's their competitive moat because the majority of enterprise unstructured data residing Office Cloud that's your emails in your OneDrives in your SharePoints in your chats and that that all the open office graph so all the metadata associated with that, all the signaling associated with those access are stored there. And that's where it drives the context for AI to then make recommendations or grind on, right? So that's where, because we also carry and manage and download a lot of the metadata from that perspective, that's something that we can help customers actually have a better deployment experience. Same problem exists in the Google space as well. And you kind of touched on it

Joe Gallo, Analyst — Jefferies

and your importance in the Microsoft ecosystem. But I'm just curious, you hear a lot about Purview. Any changes in the competitive landscape there or how customers are perceiving your value add?

TJ Jiang, CEO

So we have always been living with a market maker since the inception of that point. So we view Microsoft, Google, their market makers. And we are a very important part of that ecosystem that help ultimately our customers to drive of maximum ROI and value out of these hyperscaler tech stacks. So this is where increasingly, because now we talk about AI being more expensive, Microsoft Codework, which is cloud equivalent, now going to consumption model in addition to subscription model, GitHub also. We actually did internal calculation, for example. With our GitHub usage, all of a sudden, in the consumption-based model, it will go up 5x. so every company is facing this situation now so no longer this token economics note not all token are created equal so this is actually a we see it as a massive opportunity so whether it's for purview we have always been complimentary so if you have purview we will use purview tax and classification to drive our end user delegated administration framework and our platforms and if you don't have purview then we can use of course machine learning to go tag it for you so it's that mixed license type is that multi cloud posture that we drive value and ultimately this is where customers interest in the hyperscalers interest kind of diverge because hyperscalers today are very much like utility companies right they they are the power they're the water they're the gas providers whether you're home or not you know they are more than happy for you to continue to consume whereas customers that are much more savvy. They want to make sure that they get their maximum return out of their investment across whichever tech stack that they deploy. And this is where there's always value for a vendor like Appoint to come in and provide that.

Joe Gallo, Analyst — Jefferies

Maybe going back to Agent Pulse, if you look at cloud security, it took a long time to get going. Good things take time. When you think of Agent Pulse, when do you think we see that benefit, TJ? And then maybe Jim, Like, how are we thinking about the monetization or the upsell to other bundles and how that lays out this year?

James Caci, CFO

Yeah, maybe maybe I'll take the first part. So the way that we by the way, we just introduced Agent Pulse in Q1. So it was about midway through Q1. So when we think about what we saw so far is we've seen the way we're selling it is actually to bundle it with some of our other control suite products. So we've created these bundles, and what we've seen is an uplift in the uptake of those bundles in our pipeline. So that's been a real positive impact, and it's really been driven by that availability of Agent Pulse because it's only available in the upper-level packages. So we've seen now really good growth in that pipeline really taking place in Q1 and now in Q2. We've seen that continue. In terms of when does that convert, then we really think about the life cycle of an opportunity in terms of that pipeline. And so we would see that normally anywhere from three, six, nine months in terms of conversion rates. So the way we think about it, Joe, in terms of modeling and all those types of things, it's probably more of a Q3, Q4 impact than necessarily Q2. We'll see some impact in Q2, but a lot of that pipeline hits probably in Q3 and Q4. One of the things that we are interested in doing is that we ultimately probably roll out a direct SKU for Agent Pulse, but today it's only bundled. And I think once we introduce that direct SKU or single SKU, then I think that opens up another opportunity to accelerate growth where we'd have people that could individually just buy that SKU as opposed to a package.

TJ Jiang, CEO

Yeah, so I think when we talk about the pipeline, some people kind of get confused. so we're just total pipeline 40% of our total pipeline today is all control which is higher than before it because right now from a AR perspective it contribute about 26% out of all control over 50% are now included agent boss so that also tells you the speed of which we are getting introducing this brand new solution into the sales conversation so that's very very encouraging to see

Joe Gallo, Analyst — Jefferies

that's awesome to hear so it's probably a fifth of overall pipeline then so if I can do math correctly maybe going to the the core business you know the resilience suite what are the core drivers there you know how sustainable is growth on that side obviously I don't even think we've gotten to the the data growth explosion from AI but just maybe walk us through how we should think

TJ Jiang, CEO

about you know the core growth over the next year or two yeah i think we we actually have a lot of internal conversation as we continue to evolve our story into this infrastructure and security story increasingly we do not view resiliency as its own thing right so that's why a lot of investors come and say hey how do you guys compare to veeam how do you guys compare convo i think we DR focus is very different. Having said that, resiliency has had a very strong growth last quarter because of what's happening in the Middle East when, you know, Amazon Regional Data Center got taken out. A lot of customers realized hyperscaler alone cannot be relied on to provide DR, disaster recovery and redundancy. So we have seen very strong uptake for demand. but what the we feel the the ultimate power of our kind of a secret our superpower and secret sauce is that our platform play because resiliency is part of the equation of overall data management data security because when when you have data loss or outage you need to be able to recover from that right and of course increasingly the data that we have doing snapshots because every day we actually touch about a thousand petabytes of data and that forms a very good data store for us to actually act on that for a lot of different use cases when it comes to granular kind of taxonomy management governance and understanding of this massive blob of unstructured data what that represents for our customers. Increasingly, what we're getting demand from our customers, we want to know what's out there that's not impacting our production environment performance. So we take snapshot, and they can work on that, basically that copy. But ultimately, to be able to gain intelligence out of that using natural language. So we're moving away from just using a UI, UX, directly interfacing with tech type of experiencing to access our product and services to now an hygienic experience, allowing business users to directly accessing our product and services. And we think that's very, very exciting. So that allows us to expand the type of persona we can serve within the enterprise. So I think that's another new opportunity that allows us to surface.

Joe Gallo, Analyst — Jefferies

That's great to hear. You guys have very large government exposure, which I think speaks to just the scalability and importance of your offering. But it also is probably a little bit of a headwind last year with U.S. Fed, I'd imagine. I'm just curious what the latest and greatest is on Fed and government spending.

James Caci, CFO

Yeah, you're right, Joe. I mean, last year was a little tough year. Now, fortunately, our public sector practice is global. So we have a strong presence in Japan, Singapore, throughout Europe. So it's not just U.S., but you're absolutely right, particularly in the federal space last year was tough year we didn't really see any growth from that part of the business so definitely a definitely a headwind last year now what we're seeing this year is we're seeing some really nice pipeline growth good performance in q1 kind of where we expected it to be obviously for the federal business in the u.s q3 is a big quarter q3 and q4 in particular and so you know everything is lining up right now in terms of what we see in the pipeline what we see in terms of forecasting that we should have a nice strong recovery in public sector particularly in federal space in Q3 and Q4 so we feel good about it and it's one of the reasons we feel good about the pipeline and really our forecast in general which has us really accelerating growth in Q3 and Q4 and part of that acceleration is coming from the federal

Joe Gallo, Analyst — Jefferies

space. Maybe just go a little bit through that more, maybe both of you, but just, you know, you gave tremendously strong guidance, 26% constant currency ARR growth. It implies a bit of an acceleration on constant currency net new dollars. So federal is obviously one point of that. It sounds like agent pulse is pipeline driving, but it's early. What's the visibility that you have into guidance and what are the biggest drivers going forward well i think

James Caci, CFO

visibility is something we've been working on for the past really five years in terms of our forecasting methodology our crm systems that we utilize to try and track a lot of it is statistics right we all we're in this business all of us are kind of working through statistics and so for us it's a lot of what do we see in the pipeline how are things progressing through the pipeline how disciplined are we in terms of managing that pipeline and I think that discipline has really improved over the past several years it's one of the reasons I think that we feel really good about where we've been in terms of providing guidance meeting expectations delivering against what we committed to deliver so we feel good about you know the performance over the past really you know four years almost since being a public company and I think it's that discipline and consistency we spend a lot of time on forecast reviews we spend a lot of time reviewing what we think we're gonna do and that not only happens throughout the whole quarter we look at that for the full year we're actually looking multi years out in terms of where do we have quota capacity where do we not have quota capacity where do we think we need to be from a product point of view all of that stuff factors into to the methodology in terms of us being able to, number one, internally figure out where we're gonna be, but then also provide guidance externally. So I think it's a pretty systematic approach that has worked really well. We feel very comfortable with that methodology. And again, that kind of gives us the confidence to, when we put numbers out there, it's based on a lot of information that we've been reviewing and historical performance against that information.

Joe Gallo, Analyst — Jefferies

You've classified 2026 as kind of the year of investment. You know, where are those investments going?

James Caci, CFO

Great question. And this came up in a bunch of our one-on-ones today so far. You know, if you look at maybe just a little context, if you go back to when we went public, we probably spent or we were spending that year about 44%, 45% of our revenue was spent on sales and marketing. about 20 low 20s was spent on gna we have long-term targets of getting those percentages down to 30 sales and marketing as a percentage of revenue and gna being about 10 r&d is consistently around 12 and we don't expect that to change we want to continue to invest in r&d but when we think about investments i think us as a company today the way that we're geographically dispersed we've done we often say this we've done the hard things first we built an organization that really could support a billion dollars plus in terms of the infrastructure we're in not only North America we're in all countries throughout Europe and EMEA APAC so when you think about a company that's 400 almost 450 million of ARR today the profile of our company mirrors something that's probably much larger maybe a billion plus in terms of our structure so i feel like we've done the investments on the overhead side to support a much larger business on this year when we talk about the investments we're making we're really speaking about sales and marketing i don't think we need to make those tremendous investments in the overhead of the business because we've really got the infrastructure but it's really about marketing it's about setting ourselves up to take advantage of the demand that we see and the opportunity that we see in front of us and that's really you know for the most part the biggest investment is a marketing spend. We often talk about, and you've probably heard us say this, Joe, or people have said it to you, like, you guys are the best company we've never heard of. You guys are executing, you're delivering, but I've never heard of you. And part of that is we're still relatively small at 450 million in ARR, but it's also that brand awareness. And so that's where we're going to invest some more dollars, continue to expand in our channel strategy where we can reach more opportunities than we're reaching today and I think that's the investment we're really talking you're gonna see it more in the sales and marketing dollars then you will see it in say you know GNA or even R&D R&D we're making big investments but I think consistent around that 12% is what we're gonna see

Joe Gallo, Analyst — Jefferies

and I'm pretty sure I know this answer but the investments you need in sales and marketing and that's not needed to hit your ARR forecast this year that's

James Caci, CFO

right if you think about the investments we're making this year based on our our really lead times in terms of closing deals most of those investments are going to impact 2027 and beyond so when we think about even if it's if it's internal resources in terms of people ramp up times all that stuff they're going to contribute in 27 we think about brand awareness or marketing campaigns again most of those are going to be contributing either latter part of 26

Joe Gallo, Analyst — Jefferies

but more than likely 27 and beyond and maybe just to follow up um on the investments which i think very logical given your growth profile and the opportunity but TJ like how are you utilizing AI Internally both you know to drive top line and and synergies on the cost

TJ Jiang, CEO

Yeah, so obviously we have we're the frontier firm, right? So we are we're a top Microsoft partner you will see that we will be the first launch partner for their and dash a security framework as well So we have to eat our own dog food So our dev teams are using github copilot. We're getting ready for this consumption cost increase. That's coming So obviously we have to start to really manage that cost very carefully. But also, obviously, marketing from content, legal from contract management, and finance as well. So our goal right now is to, to Jim's point, as we continue to grow, get to that, build an AR as fast as we can, we will continue to maintain that profitability and even widen that margin. so we're not adding additional costs to increase to do the proportional increase so that's key and then of course channel investment so our sales and marketing now as a cost of revenue latest quarters like 31% versus 44 you know a few years ago and you will see that will continue to drive that towards higher efficiency so I think overall AI adoption where we're decently pleased with that there still pockets of resistance because we are still very global company and from a sizing perspective we're sizable from an employee count but I think from overall even just velocity of product you will see the velocity productization it's a much much higher and this is actually consistent with what I have been saying even from beginning when everyone say hey you know with AI everybody will be cutting developers will be cutting employees we're not doing that and we don't see many doing that in our sizing right so yes the big tech are doing it but that's more revert back to me even I talked to senior leaders at Microsoft you know they have 220,000 employees they're not cutting developers developers are more productive so that means they can do more stuff they can go develop more product to go grow the top line and that's what exactly what we're doing as well we think the the software space is going to get so much bigger thanks to the acceleration so but the efficiency comes is that we're not going to add more cost to drive a higher top-line

Joe Gallo, Analyst — Jefferies

growth that's all the time we have today but guys greatly appreciate it thank you