Conference Transcript - AVPT 2026-06-11

Rudy Kessinger, Analyst — D.A. Davidson

Great. My name is Rudy Kessinger. I cover security infrastructure software here at Davidson. With me today, we have CEO of AvePoint TJ and Head of Investor Relations, Jamie. Thank you guys for joining us. Good. We'll jump right into it. You guys have been around a long time, actually, since I think we were founded in 2001. And I still find, even though you have a couple, several public competitors and you're reaching some scale, that a lot of investors are still somewhat unaware of you. So just talk us through the company story, where you started and where you're at today. Let's start there. Yeah, thank you, Rudy.

TJ Jiang, CEO

Yeah, so we often got this commentary like we're the best company people never heard of. So we started in the Microsoft Office space, specifically Microsoft SharePoint, which is their enterprise content management platform. Initially, we started with data backup, data archiving, data migration, and then governance. And when Microsoft went to cloud in early 2011, we were the first to invest aggressively there, taken our entire portfolio product from on-prem to become SaaS. And today, we're the largest Microsoft Office Cloud ecosystem player when it comes to unified SaaS data integration, data backup, data archiving, and governance player. We started in the space that we started in is regular industry because those are the ones, especially government, banks, care about policies of data access, data retention, record management, etc. That's where we started. What we see, though, is increasingly, once we went to cloud, we were able to actually be more accessible because the maintenance cost of subscribing to SaaS vendors is much lower. We became much more accessible to small to medium-sized businesses around the world. So not only do we now sell to a large enterprise, we also have nearly 50% of small and medium businesses fully recurring. So that's a really good development. And then second to that is this whole emergence of Gen AI. Folks are realizing that in order for AI to actually know anything intelligent about your company, it needs to grind on your proprietary data. And this is the key. And also unstructured data. And most companies, their data scatter everywhere. Emails, share drives, Box, Dropbox, CRM systems. So to be able to organize that in a meaningful way, to remove the out-of-the-day trivial redundant data, to control the access also so that your marketing team doesn't have access to your finance data, doesn't have access to your HR data, that becomes something that's essentially table stakes in the age of AI. Because before, AI can be secured by obscurity, you can't find it anyway. Now, it's actively surfaced out by AI. So this is where all of a sudden everyone, every industry, not just regulated, realized that the data foundation is very, very important to successful AI deployment. So today, how we actually position ourselves as part of the AI infrastructure. So you have the AI energy layer, chips layer, data layer, model layer, and application layer. We're between the data and model. Effectively, we help enterprises better carry their daily state, better manage access control, better manage the lifecycle and retention of data. Therefore, they have better AI output. of course last year's theme was people using ai this year's theme is ai using ai effectively agentic era so that then accelerates a lot more shadow ai risks and of course now also ai cost in the last three months people saw that as anthropic plan to go public the price spike is real so of course when anthropic increased prices by five six hundred percent everyone else follows. So what we see is that intentionality now finally settles in. Every CFO has to worry about consumption-based, token-based budgeting. So that means there's a lot more intentionality towards responsible and cost-effective AI deployment. So all of that works very well

Rudy Kessinger, Analyst — D.A. Davidson

in our wheelhouse. Yeah. Well, I'll come back to AI in a bit. I want, actually, if you could, expand on your partnership with Microsoft and how you differentiate for M365 and the Microsoft ecosystem because I think some investors they hear the significant concentration in Microsoft, they view it as a risk I know you guys obviously view it as a strength and an opportunity so expand on the partnership there and the opportunity there that still remains

TJ Jiang, CEO

It's interesting, right? When we first went public in 2021, people view Microsoft as a risk and then Of course, as Microsoft became one of the first movers, their partnership with OpenAI, at one point, everyone viewed that as very positive because they were dominating the news headline. At that time, Google was in code red. Now Google is doing super well with Gemini and Notebook LN. And Microsoft is now in turn of code red. So now that worry surfaced out again. We have been an ecosystem player for the last 20 plus years in the Microsoft ecosystem. Now we're active in the Google ecosystem as well as Salesforce ecosystem and AWS ecosystem as well. because the world is multi-cloud but we're never dependent on microsoft for business microsoft never resell anyone's product us or any other party but we are part of that trillion dollar ecosystem where we help customers complete the last mile problem right help them activate workloads whether it's purview whether it's e5 whether it's copilot so in that sense we're actually very complementary to what Microsoft offers. Oftentimes, when Microsoft releases new offerings, we are a very small group of launch partners because every hyperscaler, Microsoft, Google included, they rely on a robust and rich ecosystem to form their overall stickiness and competitive mode against other hyperscalers. So this is where we play. We are complementary. We don't compete against Microsoft. We are helping our customers to complete that story. So that's the relationship with Microsoft, right? So it's actually a complementary relationship. And now customers are very much increasingly more multi-cloud. And as we expand our footprint within existing accounts, we now support multi-cloud so that we have increasing strategic value to our customers.

Rudy Kessinger, Analyst — D.A. Davidson

And then just maybe one more on Microsoft before I shift gears. there's also a lot of investor questions around seat-based models and specifically with m365 i think in the backup space potential price compression as you've seen a number of competitors at m365 as well so what are you seeing from that dynamic i think i think maybe just go a step further what percent of seats are still not backed up by third-party vendors and m365

TJ Jiang, CEO

by third-party vendors yes that's a very good question so microsoft office cloud have roughly We have about 500 million in the seats, between 400 to 500. We cover tens of millions. So we're not yet in the 100 million range yet, but we want to get there quickly. But we still think there's room for growth. We know based on our cloud consumption, based on our existing contract with Microsoft, we are one of the largest. So we have, for example, a much larger Azure contract than many of the other backup vendors out there. Partly because many of them are not fully SaaS. Many of them are still very much, like a Bean, for example, is not SaaS yet. And part of that is that Microsoft is not a primary source of revenue for them that they're getting into, but there's still space. However, having said that, so Microsoft recently released Backup Express, which is a snapshot technology. We also incorporate that as part of our backup stack. There are aspects of backup where you do need to snapshot the entire environment. And there are aspects of it, we have to do much real-time incremental backup and recovery. Because, you know, you think about when you have a cyber attacker or AI damage, there's a small blast radius. It's not the entire environment. You do need more real-time recovery capabilities. So it actually forms the entire stack. Microsoft told us that we actually sell more of their underlying SNAP capability than themselves. Because Microsoft sellers out there are trying to sell E7 licenses. They're not specifically focused on a base-level backup that also doesn't do everything. It's just a base-level coverage. So from that perspective, we have some of the fundamental core Microsoft capabilities in our product portfolio, like I mentioned. You know, when customers have a purview, we actually complement purview. We use purview, you know, labeling. And when they don't, we have products that will classify and tag and govern data for you. So most customers in the world are mixed license types. To today, right, E5 license has been out how many years? Eight years, et cetera. The penetration rate is less than 20%. Co-pilot has been out, what, four years? The penetration rate now is about 5%. So while, you know, Microsoft, Google, Salesforce, they all want to sell the highest license type to all their customers. Customers are actually pretty sophisticated these days. So they will pick and choose on the level of investment that's right for them. And this is where we come in, right? Fundamentally, we exist and we thrive because we solve two issues for our customers that the hyperscaler would never do. One, we help them maximize their existing investment across different license types, across different workloads. Hyperscalers don't do that. They want you to buy the most expensive of everything because they're becoming utility companies. Just like, you know, if no one's in the house, the utility company, rather, you leave the air condition on. Second, customers are multi-cloud because they want to choose the best of hyperscalers. So you throw a stone at an enterprise customer, they most likely use email from Microsoft, but then they use probably CRM from Salesforce. They probably use compute from AWS, and they'll most likely now start to use Gemini on top of their Microsoft infrastructure. And we see that happen in the enterprise as well as public sector. So because of that, you know, this multi-cloud flavor is something we then help customer address. We can manage and govern and secure data across multi-cloud, including even Atlassian, Monday.com, and many other data sources. And this is something that the hyperscaler would never do, right? Microsoft wouldn't want to cover anything on Google and vice versa. So these are two fundamental differences of objectives that ultimately we are very aligned with our own customer success and we will continue to grow and thrive in that space.

Rudy Kessinger, Analyst — D.A. Davidson

Super helpful. So you guys have, as you mentioned, you've expanded to Google, Salesforce, Atlassian, other SaaS applications in terms of your coverage and what you can protect. So talk to me about the level of traction you're seeing there. i guess when you know when might might we hear you guys say you know 10 20 of new businesses coming from those products and also how are you enhancing the go-to-market motion from a sales enablement from a partner enablement from a marketing standpoint so your customers know that ad point is not just the microsoft company now they protect everything just talk about all

TJ Jiang, CEO

that that's a great question so we have given guidance to say we will consistently grow 26 6% CAGR on AAR for the next few years, get to that 1 billion AAR as fast as we can. And when we do that, we expect the non-Microsoft revenue mix will be 30 plus percent, right? Versus today's less than 10%. So that's the guidance. Now in terms of the product coverage, we already have that today. Everything is the business challenge and momentum is about go to market. So each ecosystem, whether it's Google or AWS versus Microsoft, they're different. They're different players. They're different go-to-market players, partners, and different channel. So that's what takes time to kind of not only get the tech ready, but also go-to-market. We do have direct customers. So the most recent earnings, we highlighted that this Middle East conflict in the early days when AWS Regional Data Center got taken down. we see a massive spike several hundred percent increasing orders on resiliency from our Middle East customers and the massive spike also from our European customers and therefore non-Microsoft workloads because we cover them. So one, these type of trigger events make people realize enterprise customers realize they cannot just rely on hyperscalers for everything and two, they need a highly available cloud-based resilience partner to help them recover. Because now we also have supply chain shocks on hardware, right? So SaaS-based solution is much more resilient and high-speed recovery than non-SaaS-based solution, right, from an upgrade and maintenance perspective. So this is where from a direct perspective, we have that demand. But where we're going to see real momentum is this channel play, which we invest aggressively since we've gone public, we're able to buy our investment in China. We're able to lower our sales and marketing costs from 44% of revenue to now 31% of revenue. So all of that saving goes straight to the profitability of the business. So we're able to continue this robust double-digit growth while maintaining double-digit profitability. We're now GAAP profitable as well. We control S&P C very well. And that's something we feel is very unique. That also makes us very

Rudy Kessinger, Analyst — D.A. Davidson

resilient going forward on the supply chain shocks it is a important distinction i think versus your other public competitors in the backup space 80 of your revenue is sass so i'm curious um roughly i think yes that's right but um how is a higher memory prices higher hardware prices longer lead times for for on-premise boxes how is that impacting your business if at all because certainly there are some puts and takes with with some of your other larger competitors.

TJ Jiang, CEO

So because, yeah, that's a great question. So our infrastructure is all hyperscale infrastructure, right? So we have 18 instances sitting in GCP, in Azure, in AWS data centers, as well as U.S. government data centers. So the nice thing about these hyperscalers, they're like very large airlines. They do their fuel hedging very well, multi-year hedging. Same thing, because hyperscalers have the capacity, they do their hardware pricing hedging very well. So when we do sign a multi-hundred million dollar contract, for example, with Microsoft, we are guaranteed pricing at a better discount than most people can buy on a smaller contract. So that guaranteed pricing shield us away from any of these type of supply chain shocks. So that works very well for us. We don't have our own infrastructure. We are a true SaaS company that's asset-light. So 88% of our revenue is recurring. Outside of that SaaS, that 8%, 7% to 8%, that's term license, but that's still subscription. So the only term licensing is really just a revenue recognition distinction on the accounting side. If a customer uses any non-cloud assets, we have to call it some term. And this happens often with government customers. So yeah, from that perspective, we feel that we have advantage. We're true asset light. We have this visibility into our cost management. Of course, increasingly, we also now use tokens. that's something that we are actively managing when it comes to token optimization yeah got it

Rudy Kessinger, Analyst — D.A. Davidson

okay i want to chip gears to your control suite or your governance security solutions because this is an area where i feel like even sometimes myself i get a little confused right so just help us understand like where exactly you play there are you a data governance player are you a data security player are you both yeah who do you compete with what's your competitive advantage why do you win

TJ Jiang, CEO

there yeah so we have come from an enterprise content management space so in the old days you think about open text documentum right of course microsoft view themselves as that as well so that's our core dna so what that means is we have to care about the entire life cycle of unstructured data whether it's your emails your chats your contracts your your you know internet portals your project can start all the workloads in office so that means going from data ingestion right data creation or data migration classification tagging workloads uh workflows to then resiliency backup recovery ransomware detection and recovery and then to then um governance so that's life cycle management how long does this data asset live for how long does this chat channel live for how long does this data room live for we even have a data room product in that regard um how long does this project live for internally externally when does access begin and when does access shut off and when this person moved from department to department who do then we recertify this asset right so all of these things that we do pre-gen AI days now matter even more in gen AI days because what AI does is actually exemplify accelerate right all these issues uh at a much faster pace because ai is always running so this is why you know what we do today matters to our customers because we do the end to end we don't just do governance we don't just monitor access control and do remediation we also recover for you if you actually ai have damage or external bad actors have damage or internal bad actors leak data right so that's why we we say that from data ingestion, data integration, data migration is basically another word for data movement. Data will never stop moving from platform to platform, from tenant to tenant. Think about acquisitions, divestitures. Think about moving from Google to Microsoft, from Box to Microsoft to Google, from Salesforce to other CRM systems. So we think all of this holistically as one problem set. So thanks to AI, all of these areas are converging. So we used to have very different players in different space, competing competitors. So in migration, people who only do migration. In backup, who only do backup. In governance, who only do governance. Increasingly, that's converging, and we see that, and we are the first mover in that space. And it's good to see that industry recognizes this different aspect of the same problem set. So you see that some of the backup players are now going towards last few years, security. They're buying security companies to get into the data security posture management that Gartner talked about, which we're in as well. But now this year, thanks to the AI cost and AI, agenic era of shadow AI, now all these guys all start talking about governance. But what do they mean by governance? They don't really have a robust end-to-end, highly scalable to hundreds of thousands of employee governance framework that we have always been running for 10 plus years, right? So, for example, when, you know, Deloitte deployed co-pilot for Teams, they first deploy our governance solution for Teams first, so that the co-pilot in Teams doesn't recommend things to you that you're not supposed to have access to. Regular industry care about this. Banks care about this. Government care about this. And then also when, you know, some other very large organization, they want to discover the tens of thousands of agents running in their environment, want to bring them under control, they come to us, right? So we operate at that level and at scale. And interestingly, we also take that capabilities and sell that capability to small businesses via managed service providers. So we're able to both attack the large enterprise, true enterprise-grade software, but also offer them to small businesses. So this is where we see we have an advantage, a segmentation advantage, a global presence advantage, and also this end-to-end thing that we truly do what we say and already have all the aspects ready for this agentic era. So you do have every company that you compete with coming out with this AI. Everyone's now coming out with the same language.

Rudy Kessinger, Analyst — D.A. Davidson

So your guy's agent Paul's capability that GA'd several months ago. Tell us about that. Why it's semi-fariated? why you have a right to win there. And then I got a second part on that.

TJ Jiang, CEO

So Agent Paul's only GA'd Q1 this year, right? So not seven months ago. It's like three months ago. Well, several, I think it's.

Rudy Kessinger, Analyst — D.A. Davidson

Yeah, yeah, several months ago.

TJ Jiang, CEO

Yeah, yeah, but we did do preview since end of last year. It's a very robust set of cloud capability that allow customers to discover whatever that's running in their environment, whether it's cloud, Gemini, or, you know, co-pilot agents, and then bring them under control. What do we mean by that? by basically controlling what kind of access these agents will have, what system they're allowed to talk to, what kind of data they have access rights to, and also at the same time alert customers on their consumption, their token consumption, and shut them down if they need to. But the difference of our governance framework that's highly scalable to hundreds of thousands of employees is that we actually do this concept of delegated administration. We allow business users to add context to the data and to the agents that they have because IT doesn't know what business users use things for. So IT always is afraid to shut things down, right? So IT always becomes the last layer of defense when it comes to costs, when it comes to some of the misclassification. So our governance SaaS framework has been running for 10 plus years for some of the biggest organizations and for governments of the world. That's our differentiation and that's our robustness. And of course, now that applies to the agentic era in spades, right? So agents, the hair on, I was actually just sitting down with a CISL of Tamasic two weeks ago in Singapore, and she said this is a priority of priorities, right? The hair on firebomb for all large enterprise, CISOs, and even board-level conversation is one of AI risk, and the second is AI cost management. Because shadowed AI is happening everywhere. Everyone's spinning off their own little agents, even people using little hard drives to spin off open cloud. So because now we've gotten into the device management, we can then go to device level to uncover and discover if they're running agents locally. So that's also important to monitor and manage. So this is why we feel we have the right to claim that AI trust layer in the AI infrastructure story because we have truly all the capabilities. There are still some gaps I want to fill, especially when it comes to multi-cloud. But we think that we actually, obviously everyone's moving and accelerating at the speed of AI. Two-thirds of our employee population are dev. So we're moving very quickly. You will see a lot more product releases coming out of AppPoint in the next few months and quarters to really lean into that whole AI trust layer story.

Rudy Kessinger, Analyst — D.A. Davidson

So the comment you guys made at Agent Pulse, I think on this most recent earnings call, was that 50% of the control suite pipeline, control suite I believe is about 40% of your total pipeline, 50% of that pipeline is now for bundles, which include the Agent Pulse capability. But I believe Agent Pulse is still not, it's not something you're directly monetizing. But how do you envision it impacting numbers?

TJ Jiang, CEO

So we do monetize it in the sense that in order to buy the get agent pause, you have to buy this. We have the good, better and best bundle. You have to buy the best bundle, right? That then gravitates, allow us to elevate the deal sizes for control. And when we talk about 40% of the pipeline being controlled, that's already a market step up. because you look at since last year, our blended revenue contribution from control is 26%, right? Resiliency is like close to 60%. So what we see is the trajectory to have far more control mix in our customer sets, our partner sets. And within that, there is a very high inclusion of Agent Pulse, which elevates the deal sizes for control. The demand for Agent Pulse is quite high. we're actually already looking at i can say this because my cfo started to say this to specifically skew that on its own and sell that on its own yeah got it okay um

Rudy Kessinger, Analyst — D.A. Davidson

you guys guidance this year calls for organic air growth fx adjusted to accelerate from 23 percent q1 to 26 percent uh at your end yeah you know what's informing that what's giving you confidence in it? Because I think some investors look at that to steep ramp and that new AR growth, especially in the second half. Talk about what drives the achievement of that. First of all, we completed

TJ Jiang, CEO

13 quarters of our performance. That means we say we're going to do something and we did it and a little better. And then 12 consecutive quarter of double-digit new AR ad. So that should give people confidence that if we say we're going to do something this year, we'll do it. Now, why is there, you know, seemingly to say that level confidence for second half acceleration? It's one, our business is seasonal because we have a large enterprise component. We have a large government component. So Q2 is bigger than Q1. Second half is bigger than first half. And Q3 is our public sector year end, U.S. public sector year end. And Q4 is most of our large commercial enterprise year end. So last year, our public sector is pretty flat. And we actually even call it out, right? Beginning of last year, we say, hey, we see the noise in the space. We anticipate a 2% ARR hit, and we were correct, right? We give the guidance, and we also hit and be the guidance. So this year, just that reverting back itself will give you that accelerator. Just revert back to me, right? Things going back to normal. Public sector will grow again, not like last year. So that itself goes. And then also, obviously, we have the natural seasonality across other sites of business. This is why second half will be bigger than first half has always been.

Rudy Kessinger, Analyst — D.A. Davidson

Just remind us, I guess, what percent of AR is public? Excuse me, U.S. Fed. And then are you expecting U.S. Fed growth to outpace total AR growth this year? Like what's kind of the growth expectation in federal this year?

James Caci, CFO

So I think U.S. Fed is sort of mid to high single digits of the total AR. ARR. You know, in terms of specific growth, it probably will outpace almost just because the comp is, I think, benefiting us, obviously, because there really wasn't that much growth last year. Historically, I think we've sort of seen in Q3, you know, it grow in line with kind of the North America ARR growth. But I think, you know, this year, just given the dynamics that we're talking about, that we would expect it to potentially outpace the

Rudy Kessinger, Analyst — D.A. Davidson

total. Got it. Gross and net retention rates. Both have been improving the last several years. Still, though, gross retention, 89% FX adjusted, 91% if you adjust for that headwind from the migrations business, which of course is not permanent recurring business. But still lower than a lot of SaaS companies, or at least what people would consider top tier SaaS companies. I know that the long-term target is 90% plus in gross margins. When do you think you can achieve that and and what's more of the realistic ceiling if we're thinking about you know that 2029 target model can it get to 91 92 percent before adjusting for that two point headroom that's definitely our

TJ Jiang, CEO

goal uh that's our stated goal for uh our medium to long-term uh trajectory so we we do have a fair amount of smb business right that's contributed to them the churn uh but in our large enterprise segment we already exceeded those goals so of the now 91% GR outside of the migration of that 9% churn if you will half of it is actually down sell so that's effectively either C reduction or product reduction and then half of it 4.5% it's actually local churn and we see that mostly in the mid segment the SMB segment. So the way we remediate that is in the SMB segment, increasingly we're giving more and more business to the MSPs, so managed service providers. They become our end customers. And they also become SMB aggregators. So this way we don't touch any SMB customers directly. They're managed by these managed service providers. They're basically outsourced IT. They have managed services. And they love us because for every dollar they spend on our platform, they gain $5 managed services revenue. And that also alleviates this churn, right? So they're adding C-counts because they're adding companies. And there's also MSP roll-up in the PE world that's happening. So that's growing nicely. That's SMB, true SMB, less than 500 employees is already just about 20% are recurring. We think that has the opportunity to get to 30%, if not more, because for Microsoft, that's actually 40% of their revenue. So for mid-sized companies, we still use channel to sell to them. And the benefit of the channel is that we can scale quickly, but the downside of the channel is that you don't have too much of a direct relationship, so you could have risk of churn. So there we're actually looking at different AI-enabled, because they're still not that large. We cannot afford to have humans to cover them. So we're looking at different AI-enabled early warning systems to be able to enable our partners to give them, you know, saying, hey, this customer, they have gone quiet, or their activity become lower, you should take a look at it or we should go to take a look at it. So we're introducing more smarts there to make sure that we reduce that churn there. And lastly is continue fast-paced development and roll up new capabilities. That ultimately is what's going to improve as well because we need to matter, right? We need to be relevant to the customers, to the partners. So you will see a lot more capabilities coming from us in that regard to be even more a critical player in their whole AI journey.

Rudy Kessinger, Analyst — D.A. Davidson

Right. You brought up seats. So I do want to I do want to ask on that because I haven't yet. There's a lot of investor fears around seat based models, not only on seat reductions within the tech vertical, but also potential pricing pressures on a per seat basis or you guys having to evolve your pricing to a value based or outcome based pricing model. So on both of those, I guess, what percent of your seats come from the tech vertical today, and how are seat counts in general trending at renewal? And then second piece is just on the pricing point, how should we think about your pricing model going forward? Will it evolve from seat-based to something different?

TJ Jiang, CEO

So yeah, so in general, we don't see major seat reductions across our customers. Tech is about 8%, less than 8% of our recurring. and only we see big tech shedding seats, but that's more of an artifact they overhired in the last few years. I think last year the hype was overdone. AI is going to take over people's jobs and seed reduction and then all software companies are going to be gone. I think everyone now realizes that it's overdone, especially now we don't have enough tokens, we don't have enough chips, we don't have everything. And it turned out that AI could be, a very good AI could be more expensive than a person. So that actually focused companies to really look at responsible, cost-effective AI deployment. You can no longer do token maxing anymore. Because last year, all that experimentation is underwritten by the frontier model companies. This year, they have to actually make money. That's not happening anymore. So we don't see seed count reduction as a major trend. Having said that, we follow the hyperscalers who are market makers. On the productivity side, like email, it's seed-based for every employee that has email. On the compute side, we call IaaS PaaS, infrastructure service, platform as service, that's consumption-based. So think of Azure, think AWS, think GCP. Compute is think of Office Cloud. Think of, sorry, productivity is think of Office Cloud. Think of Salesforce. Think of Google Workspace. Those are C-based. And then now increasingly with agents, agents run on Compute Cloud and agents more consumption-based. So we already have a mixed license type. And lastly, you talk about outcome as a service. We do have a 12% revenue mixed as services. Previously, we say, hey, that's going to go down to under 10%. But increasingly, it's no surprise you see that Anthropic and OpenAI all started service businesses, right? Funny enough, you need humans to land AI. You need humans to be on-site, like the FDE model that Palantir does, to understand customer needs, to understand customer-specific environment, uniqueness, and complexity, and then stitch it together and continue to refine AI to work better for that customer. So that is something that we have, especially in Japan and Singapore, we have a very robust services business that does $30 million projects even to generate UIP. So now that capability, we can bring it to North America and EMEA as well, ANZ, for our biggest customers to act as that lander for AI governance and AI trust. So we call that outcome-as-a-service type of capabilities. That also allows us to stay ahead of the game, follow where the puck is going, continue to innovate. So we also are very unique as a product company that actually has a serious world-class services organization that will continue to deliver with our largest customers.

Rudy Kessinger, Analyst — D.A. Davidson

Last question, growth profitability balance from here. I mean, the last three years, you guys have sustained very much to your credit, mid-20s AR growth while taking EBIT margins I believe from negative 1% in 2022 to 19% last year. How should we think about that going forward you're obviously taking more of a breather on EBIT margin expansion this year if you see opportunities to sustain or accelerate growth beyond what you're guiding to this year should we expect more of a muted pace in EBIT margins or are you you know fully committed to that 29 target of 25 to 30 percent EBIT yeah that that target is something we're

James Caci, CFO

obviously still very much committed to this year as you point out you know the guidance is expected to be flat for non-GAAP operating margins, so effectively about 19% versus last year as we invest more in the business, as we've kind of talked about. The one thing I think that we are trying to emphasize more is also the fact that we are profitable on a GAAP basis, which we think makes us certainly unique, especially for a company of our size. We manage our stock-based compensation pretty effectively, we think, which is now less than 10% of revenues. So we actually – there's implied expansion of the gap margins this year. And then to get to the 25% to 30% longer term that we're talking about in 2029, I think, yeah, we would expect to see a resumption of the expansion taking place next year. But it doesn't need to – we have a very good sort of profitability infrastructure in place already where we can realize a lot of leverage from the sales and marketing line and G&A. to get us up to the, you know, the remaining 750 basis points, call it. So that will, I think, start to pick up again next year and, you know, resume over the next three years.

Rudy Kessinger, Analyst — D.A. Davidson

Got it. Okay. Well, thank you guys for the time.

James Caci, CFO

Thank you. Thanks, Rudy. Great to hear it.

Rudy Kessinger, Analyst — D.A. Davidson

Thank you.