Conference Transcript - AVPT 2026-06-02

Marc Griffin, Head of Investor Relations

TJ Jang, who's the CEO of AppPoint, and Jamie Arrestia, who's VP of Investor Relations. Before we begin, I'm required to inform you that a complete list of research disclosures or potential conflicts of interest is available on our website at WilliamBlaire.com. TJ's going to go through some slides, and then we'll have a little fireside chat.

TJ Jiang, CEO

All right, good. Good afternoon. Hi, everyone. I think most of you are probably familiar with the story, so I'll just go real quick. That includes our latest quarterly earning updates. So from a financial glance, currently we're at $435 million recurring revenue. Our forecast revenue for the remainder of the year by the end of the year will well exceed half billion mark. So right now the SaaS mix has pretty much completed our entire SaaS subscription. So the mix is about 80% of total revenue now, and the growth of SaaS revenue is 38%. In terms of the profitability, we continue to show very strong profitability. This year, our estimated free cash flow is almost $100 million on over $520 million revenue. So the last 12-month total revenue is $444 million. And from a rule of 40 perspective, where we're redefining as essentially profitability and revenue growth, AR growth and profitability is 45 percent. So from also from a gap profitability perspective, we're already there as well, because we did a very good control around SBC to make sure that overall, not only are we. for cash profitable, but also GAAP profitable. And also very encouraging to continue to see our cohort, 100,000 and above AR customers continue to increase at a nice clip. And this is also happening globally. In all the region we operate, which is Western Europe, Middle East, North America, and Asia. By Asia, we mean Japan, Singapore, Australia, New Zealand, South Korea. and also emerging markets in Aegean, including India. So overall, our business is really focused around helping companies to secure their collaboration with confidence. So our core business has always been around data management, data curation, data governance. And, of course, in the age of AI, this is an even more urgent issue because ultimately for corporates to turn AI into something meaningful for their business, for their industry, they need to do refinement training to leverage their corporates of proprietary data. And because enterprise historically stored data all over the place, we all have that experience. So that data consolidation, the proper data classification tagging, and ultimately access control and lifecycle management becomes core prerequisite to AI deployment. So the easiest way to visualize this is actually this. So everybody know about the layer cake of the AI infrastructure, from foundation layer to intelligence layer. the easiest way to think about how we increasingly becoming relevant to enterprises large and small is that we are forming the trust layer between data and model ultimately enterprise data is their proprietary moat and that's how they compete and distinguish themselves against other businesses and we help them organize that content this is all unstructured data that's your emails your chats your contracts cetera that's 80% of all data out there and that data growth is very, very rapid, thanks to of course, a lot of AI slop as well. But ultimately, we allow organizations to better organize their data from access control delegated governance model. And then that would then be fed into their AI models to have concrete AI output. So the things that we cover are visibility of AI agents, what agents are running in your environments, what do they have access to, what other programs they talk to, what other interface they talk to, and then surface out the cost profile of these AI agents. So effectively allow enterprise to actually control both AI risk as well as AI cost. So this whole concept of trust in AI and the AI output is something that we fundamentally help enterprise organize. So this is the benefit of what we offer. So it's in one singular SaaS offering. We are in 18 different instances of data centers, whether it's a Microsoft Azure data centers or Google GCP data centers or AWS data centers, as well as U.S. government and Singapore government data centers. It's a singular SaaS platform that offers these capabilities around data resiliency, which is backup recovery archiving, ransomware attack detection recovery, AI damage detection recovery, modernization, data integration, data analytics, data migration. data would never stop moving so that that that's forever a space that that's part of the story customer moving their data from google to microsoft on box to to to google etc to on-prem to cloud even tenant to tenant from acquisition divestiture perspective and lastly control it's really access control governance lifecycle management previously it's focused on unstructured data now is focused on applications like agents before we we we we became we cut our teeth on low-code no-code application platform like power platforms power apps now it's agents so we actually launched our agent pause product at the same time as microsoft launched agents 360 so that better together story but more importantly we do this for multi-cloud not just microsoft we also cover Google, as well as AWS. So this multi-cloud ecosystem, increasingly multi-model ecosystem, is something that also really important to our customers. So the key takeaway, we win based on the platform play. We view the whole end-to-end data management story as one singular story, story, not separate story of backup, GRC governance and migration, but a singular story. Because we think the evolution and disruption that AI brings to the table is actually forcing this convergence of different needs into a singular basically solution offering that vendors like us can fulfill. Also we have customers that see us as very much as an important aspect of their AI infrastructure So we are in these AI conversations, it's not because it's not the, oh, we're so focused on AI, we have no time to talk to you, but please come to the conversation to help us organize and reduce risk and increase exposure on how do we do cost management for AI. And thirdly is we actually do this successfully across all segments. Large enterprise, which is 53% of our recurring. We define as 5000 above employee companies, as well as small to medium businesses. So that's increasingly a very fast growing segment for us. Small business 500 and below and then mid market is 500 to 5000. So we actually are successful in growing all three segments and across all geos. That's also very unique for a company of our size. So effectively, while we're still relatively small this year, we'll break through the 500 million AR mark. We have all the scaling and all the foundations laid down to be a much larger global data management vendor. um so so yeah so that's that's our story and the the going forward you will see a lot more messaging coming out on this uh very important ai trust layer that we play increasingly position us very well for accelerated growth all right great very compact um so yeah i mean that's the

Marc Griffin, Head of Investor Relations

com the final comment that you made there does lead into my first question which is I think the case for why you're an AI winner sounds like it's at that trust layer. Maybe just elaborate on, at this point, what you're seeing from customers. What is holding them back in terms of AI adoption, and how do you help accelerate their opportunity there?

TJ Jiang, CEO

Yeah, so the story of last year is human using AI. The story of this year is AI using AI, right, so eugenic explosion. So otherwise also known as shadow AI. So business users are Vibe coding their own agents and running amok. Either it's their own consumer addition, they just swipe a credit card, or they're using enterprise cloud and just do their own thing, and then very quickly they recognize that that before they even get an ROI, the cost is going through the roof. So the hair on fire problem for most CEOs that we talk to out there, one is AI risk, the other one is AI cost. So recognizing that there's a real cost now, and of course, Anthropic now set the precedent. All the other providers are now increasing their costs in a massive way. Just take Microsoft GitHub Copilot, for example, now the new introduction of consumption-based Github cost now is basically increased by six times, 6x. And that's just Github.

Marc Griffin, Head of Investor Relations

Because it was a flat fee before.

TJ Jiang, CEO

It was a flat user seat based fee. Now it's consumption model. And even that is still cheaper than cloud. So that's why Microsoft two weeks ago shut down all cloud usage across the entire Microsoft. So that gives you a sense of the two sides of the equation. There is risk about AI running wild and causing damages. On the other side, there's this real cost concern. It's no longer AI replacing employees. It's actually AI, one, could cost far more than an employee, and two, we have yet to drive to that concrete business ROI yet.

Marc Griffin, Head of Investor Relations

do you think that i mean i guess the the obvious question is like is this unsustainable for for for enterprises right now i mean just like the comments that we've seen out there from the uber cto saying that they've burned all of their ai budget in four months i mean like what how does

TJ Jiang, CEO

this how's this going to play out it's not sustainable because before every uh approximate approximation for AI adoption is a token maxing, right? So clearly that's not working. So we all heard some enterprise last month burn through $500 million in one month. We don't know whether that's AWS or Microsoft, but you know, it's one of the bigger guys. That's token maxing. So that's not sustainable. But then neither is today's paradigm of, okay, everyone was only allocated this much token usage and after that i cap you and you cannot use ai anymore that's also not sustainable um so i think what what's interesting is now more than ever vendors like us that you know company go to to say hey help us take stock discovery everything that's out there and then bring them under management and alert us on cost and subsequently of course everyone's working towards this token optimization story because you don't really need cloud expensive call to summarize your email for you for example and you see also Microsoft now releasing small models and AI they call it six small models with open ways yeah this week they released that specific for coding for translation for graphic generation open ways models that any enterprise can take and run and tweak to it for their own needs so there's going to be that more bifurcation of hey is this good enough small models frontier models versus truly heavy-duty research-orientated expensive model consumption so i think that more that maturity will take time to settle so in the meantime first order of business is to take stock and try to discover all the shadow ai that's running out there and then don't forget all the little cloud agent open claw agents that's running on your desktops uh you know that that endpoints that enterprise now need to go discover and bring

Marc Griffin, Head of Investor Relations

them under management so is there is there a bear case for these frontier models because of what you just said that they're going to be more optimization like a like is this the the hyperscalers in 2022 when everyone started optimizing their costs or or you think we're just so early that it's just like you're not a that it's just going to be such a massive pie that everyone wins for

TJ Jiang, CEO

like the time being well um i mean to be seeing what play out but so there's six major vendors that's all racing towards building the next largest language model microsoft aws meta OpenAI, Anthropic, and of course, XAI, and Google, right? Yeah, so they, you know, the differentiation between these large language models effectively, yes, today, Anthropic is the best one, but they're, what, three months or two months ahead or one month ahead. So that has to, that side is getting commoditized for sure. the ability to command premium dollars for workloads will have to over time change it was actually interesting I was at the Microsoft CEO summit where they invite their top 200 CEOs every year so they had the chairman of BlackRock on stage and he said even at BlackRock they don't have enough cash to run mythos against BlackRock's entire tech stack that's how expensive things are if blackrock can't afford to use ai who can so that's not sustainable but it remains to be seen how this whole thing is going to play out obviously now we have shortage of everything we have shortage of even memory chips let alone gpus never mind power so i think at the same time though there there is real maturity settling in in terms of enterprise usage of ai i think this is actually very healthy It will force enterprises to be laser-focused on actual outcome-based, ROI-based AI deployments. So the question, give everyone AI and just go crazy with it, those days are gone. So hopefully with this focus, we will actually see real business outcome-driven AI deployments

Marc Griffin, Head of Investor Relations

in the field. So is that I guess that's where you guys come in to help them sort of figure that stuff out. Where are you in the kind of AI journey for AppPoint with customers? Are you when you paint this picture of kind of a trust layer? Is this still kind of like like slide where I mean, the customer or customers actually deploying AppPoint for this stuff yet?

TJ Jiang, CEO

customers are deploying so that one large customer even to Massac head of you know security was telling us this is a priority of priorities so they're now trialing our agent pause solution so where we differentiate as we do cut multi-cloud because hyperscalers only care about themselves so but the customers have everything they have multimodal deployment approach and also you know shadow AI also introduces all kinds of flavors so it's important to go out and discover everything that's running in your corporate environment whether it's cloud or on-prem and bring them under control so that's very very topical and so much so that we did say you know all sudden 40% our pipelines in control versus before 26% of our businesses in that governance side now 40% of the entire pipeline is that and also when you're introducing these agentic governance flavors which we just released the same time as microsoft released agent 360 mid q1 it's already 50 of our total control cell in terms of pipeline building and also elevating our deal sizes in a very significant way so yeah we're very confident directionally this is going the right way um so i think the next couple quarters will play out for sure so it's moving the needle on pipeline right now and we'll be moving the needle on revenue within we we think so and uh yeah so jim actually mentioned because my cfo mentioned it i can say you know because he's a conservative guy he thinks this the demand is so high that we probably just uh also skew it as a standalone product currently our customer only gets it if they actually have the control bundle okay yeah what's the name of the product again it's called agent pulse agent pulse

Marc Griffin, Head of Investor Relations

right now okay okay great um uh let's talk about microsoft for a minute just i feel like we when we sit down with investors and talk about that point that's the always the number one question i don't know if you would agree with that jamie but it's always just like yeah it's just like um what's the relationship with microsoft you guys obviously have been a long time partner of theirs You have one of the, I think one of their EDPs is on your board, but I think there's always like a little bit of like discomfort when people are just like, are you too close to Microsoft? Can they like cut you out of the loop at some point, right? Just talk through the kind of Microsoft, you know, the partnership and like the overlap, you know, kind of in their product set versus your product set.

TJ Jiang, CEO

So like all major hyperscalers, Microsoft has an ecosystem. So we're part of that ecosystem. We don't depend on Microsoft for any of our revenue generation. Microsoft doesn't give us lead nor resell our software. We're part of the ecosystem. We close the last mile problem to ... Actually, it's in Microsoft favor because we actually help them light up more cloud workloads, whether it's co-pilot and before it's purview. And of course, with their expensive licensing type, now there's an E7 license, which is $100 per user per month. Agent 360 is $15 per user per month. Compared to before, the average cost of Office Cloud is $20 to $30 per user per month. That creates this gap among the customers of this mixed licensing type. And this is where vendors like us can come in close and help them maximize their investment. Increasingly, we see really strong uptake of Google in the enterprise. Gemini is a very very strong play for Google and interesting enough that you know Google historically very strong tech but they're they're weak on go to market on enterprise they're changing that by hiring a bunch of very senior business commercial leaders from Microsoft we know them very well so they're now doing the same playbook and we we are there as well so you will see that quickly we are becoming elevated as a global top-tier partner in the Google ecosystem because there are shortage of this type of enterprise-grade ecosystem player in the Google ecosystem. So same leaders, same playbook, we know how to go to the market there. So you will see a intentionality to really go multi-cloud because that's the reality of the world. The customers more and more are using multi-cloud, are using multiple models even, to get things done. So yeah, it's It's becoming more fractured, fragmented from a IT deployment landscape. So the more complexity, the better for us. We thrive on complexity, whether it's governance, regulations, data sovereignty, data privacy, and now of course, agentic risk and control.

Marc Griffin, Head of Investor Relations

That's where we actually thrive. So Microsoft today is still, I think, 90% or something of your business. maybe just talk about Google contribution, whatever you can talk, whatever you can disclose on that, and then where do you see it going over time?

TJ Jiang, CEO

Yeah, so we're actually increasingly sharpened the lens around this. We actually say Office Cloud is where we previously make 90% of our revenue. And increasingly, all the agents are actually not running in Office Cloud, right? Agents are running in Compute Cloud, which is Azure, GCP, AWS, and the compute side, what we call IaaS and PaaS is increasing a very fast-growing segment for us. So we think that outside of Microsoft Cloud, we should have numbers to show this. Obviously, everyone's asking for that. As we work our way to get to that 1 billion AR run rate as fast as we can, the mix will become at minimally 30% will be outside of the office cloud. Gotcha.

Marc Griffin, Head of Investor Relations

And for like the non, so the Azure and then kind of non-office stuff, what are you primarily selling to those environments, in those environments?

TJ Jiang, CEO

So it's, so compute side, you have also governance. So application governance, which to which actually agent governance is just one flavor. There's also, of course, resiliency, right? So entire DR of your computer environments. So when AWS data center, regional data center got taken out during the early stage of the latest Middle East conflict, we've seen a spike in demand for resilience, for cloud resilience, IAS and PaaS, in Middle East as well as in Europe. And we actually call that out at our latest earnings um so so that's where folks realize you know you cannot just rely on hyperscalar themselves to provide uh resiliency for you okay so data protection and governance for

Marc Griffin, Head of Investor Relations

azure aws workloads basically that's right okay gotcha all right um uh we had i was telling you earlier we had convolt and ronis present also earlier today Can you just talk about the competitive landscape, who do you see the most? You mentioned the difference between yourselves and some of these providers that are more narrow in their product capabilities, but how do you describe AvePoint from a competitive standpoint versus some of the other players that are out there?

TJ Jiang, CEO

So I think all the vendors have their own strength where they come from. So Varonis, their strength is really file share, security, monitoring, governance, remediation, right? Convo is a backup player. They back up everything under the sun, including they have appliances. That's why they're suffering from the memory chip pricing spike condition. So is Rubrik, and Rubrik came from the AWS world. But if you look at all these vendors, and we we come from the Microsoft Office cloud world right just as proxy our Azure consumption because I know this because we negotiate with Microsoft right we have a bigger economic relationship with Microsoft than out of these guys that shows you how much we actually consume and burn and then also gain revenue opportunity out of the office cloud and that's our core strength and if for the enterprise office cloud is your mission-critical platform we are the go-to partner we do many instances coexistence with the players you mentioned you also have Veeam who target SMB Conval is more enterprise so it's rubric Varonis is more enterprise we cover enterprise and SMB so and we're growing you know very well our public stated statement is that we'll continue you know, 26% AR growth for the next few years, while maintaining high profitability. We can do that because our core strength in that space. Of course, we are now expanding or investing aggressively into multi-cloud. We think that will allow us to have an even stronger story when it comes to that single pane of glass to be able to help you manage all your workloads, including AI across multiple vendors.

Marc Griffin, Head of Investor Relations

Gotcha, okay. The fact that you guys are playing in various segments of the market enterprise mid-market smb um you play in many re you know you're strong in a lot of different regions especially outside the us um you don't have like one vertical that's more than like what 15 of revenue or something right and no single customer more than two percent yeah so um i guess that like in some ways that's great in some ways like somebody might say well you're not focused so how do you respond to somebody that like where's the focus of the company from like a go-to-market standpoint?

TJ Jiang, CEO

So we do have dedicated division that focus on SMB, mid-market, enterprise, and then obviously dedicated regional coverage. We even, for public sector specifically, we have a vertical practice that's only focused on public sector housing Arlington, Virginia, in a security clear facility. So within the business we have domain focus, for sure. I think our, maybe to our own detriment, is that we historically have been very fiscally conservative. We built this business without barring any, and then so far we've done six small acquisitions since we've gone public. Now we have appetite to leverage our strong balance sheet, not only to do stock buyback, which we have done plenty, like last year did 50, so far as of earning that we went out, we did 70 already, and we topped up to another 150. So we're doing strong stock buyback because we think we're you know undervalued at the same time we still have a very strong balance that i can mention we generate 100 million free cash flow this year to do some meaningful inorganic expansion on extending our platform so that will then accelerate our timeline and growth because all the guidance we've given out it's all 100 organic so i think we built the to counter to kind of what you mentioned we feel that yes we were very physically disciplined and conservative but we took the time to really build solid foundations around the world around the segmentation coverage so now that we have the capital and potentially we can even use some leverage we can really take advantage of this golden window we have in front of us and get go faster i i understand that every you know that's the number one ask to show us how you're taking advantage of the ai tailwind and show faster acceleration acceleration and trust me we take

Marc Griffin, Head of Investor Relations

that to heart and that's our number one priority okay um the minute we have left i want to bring jamie in here just from an investor relations perspective um what do you think the most underappreciated when you talk to investors like what do people not get about the story because Because, like you said, it feels like you're not getting the respect that you would deserve from the type of growth, the consistent growth that you've shown.

Jamie Arestia, Head of Investor Relations

I mean, I think the balance that TJ just talked about with, you know, however you look at the business, the demand has been very strong and consistent is something you just don't see in a lot of companies, particularly of our size. and i think our our desire i think to get to to the point that tj was talking about of having this meaningful scale is real and i think is you know it's going to be seen this year and in the years to come just given how much how much demand there is and how i think focused our leadership team is on on sort of delivering that so uh that will help solve kind of that problem when you get

Marc Griffin, Head of Investor Relations

to that type of scale where it's like nobody can really deny that you have arrived so to speak. So I think we did 12 consecutive quarter of our performance. Now it's really size, right? So size

TJ Jiang, CEO

does matter. So we need to gain critical size as fast as we can. Awesome. Thank you everybody for

Marc Griffin, Head of Investor Relations

joining. Thank you guys for being here. We're going to go up to the breakout room for anyone interested and have a great rest of the day thank you thank you