AvePoint, Inc. (AVPT) September 2026 Conference Transcript

All righty. Jim Fish with Piper Sandler. Good morning, everybody. Thanks again for joining us. With us, we have TJ and Jim from AvePoint. Appreciate you guys joining us here in Nashville. So maybe just to set the stage, the question we've been asking everybody here is, as we head into year-end, how is IT spending kind of looking? How are our sales cycles? What's the impact of AI on budgets, and how does that benefit you guys?

So, yeah, I mean, from a demand climate, it's continuing to be robust, what we see. Last year, the theme of the day was token maxing. This year, the theme of the day is agentic AI. But, of course, cost is a paramount concern, as well as risks AI agents are causing. so we see a very strong demand around hygienic governance hygienic management so from that perspective I think from IT budget these are top of mind for sea levels so it's almost a separate conversation we do see enterprises are blowing through their AI budgets fairly quickly in the beginning of the year but That has required a lot more attention now in outcome-based measurements around AI spend. So there is a fair amount of discipline around that. But overall, the awareness around risk and cost management of AI, it's really top of mind.

I literally was talking to my own CIO last night about agentic governance. So funny you bring that up. I guess, how is AdPoint's platform specifically discovering, controlling, and securing data flows for AI agents compared to traditional human access? And as we think about AI use cases, whether it's DSPM, resilience control, which ones are really the, can we rank kind of the priorities here?

Yeah, the good thing is this has been something we've been doing for a decade plus, coming from an enterprise content management heritage and being able to do this in cloud at scale. Firstly, to help enterprises manage human access of data. So the better curation, classification, and cataloging and starting in the regular industry and then now becoming a very common request in the commercial side in the non-regular industry because folks are realizing the quality of the foundational data is super important to drive good refinement training and refinement outcome for AI deployments. So we have historically have helped companies manage employee data access, employee sharing and oversharing IP leakage and access control, so data security posture management, for example, for all unstructured data in the productivity side, whether it's Office 365 and now Google Workplace. But now with AI, it's really employees operating at machine speed almost because when you buy code an AI agent, by default, that agent inherits your entire permission structure, and now quickly folks are realizing that's not a good idea to have something essentially move at machine speed on your behalf and be able to access all the systems and all the data that a human you have access to, but then you have no control over how it's been shared, how it's been act-on. That's becoming a problem. The top of mind now is to first discover all the agents running in company environment, including shadow AI, by the way. There's a fair amount of that happening where employees are getting their consumer subscription of cloud, even using open cloud on devices. Those are effectively unsanctioned use cases where corporate data could be leaked back to the model providers. And that's becoming another serious concern. So effectively, the top of mind today is the risk side of it first discover what actual risk exposure you have in the first place and then bring them under management bring them you know under governance shut down the shadow AI usage because the IP leakage consideration as well and of course cost management so security is top of mind for sure and then you know DSPM security posture management that auditability of information access, it's corollary to that because what we do also is to recover when AI does do specific damage to the internal environment or, you know, shut down, you know, runtime.

Maybe for you on this, in terms of blending what I've asked here together, how quickly can AI governance, DSPM kind of translate into net new ARR? How is AvePoint selling this in terms of is it an add-on or is budget being created? Can you walk us through that?

TJ was just alluding to have a product that we recently released for GA back in January, Agent Pulse, and we initially monetized it as a bundled strategy in our control suite. So when you think about governance, we added this agentic AI tool, our Agent Pulse tool, and included it in the bundles. So it was not sold to accelerate customer adoption of our bundle strategy. But there was so much demand coming from customers that have a specific agent problem, kind of what TJ just alluded to, in terms of I don't even know how many agents are in my environment. And so before I solve my whole control suite environment, my whole governance strategy, can you first help me identify what rogue agents might be running around in my environment? And so we released in July Agent Pulse as a standalone SKU. So that's been really popular right now from customers. So the monetization of that, what we tried to do is keep it very simple. Most licensing for the past 40 years has been seat-based licensing. So what we did is to reduce friction was we didn't go consumption for all the reasons we just talked about in terms of people trying to budget for consumption. We kept it a seat-based license to make it simple, reduce friction, make it easier for procurement departments to get it through. And that seems to be really resonating with our customers.

Do you see that stand-alone versus bundled kind of, how does that mix play out over time, do you think?

Yeah, it's a great point. So I would say for what we see is almost an entry point. So right now there are problems in companies' environments where there's an agent problem, where we know there's agents running around in the environment, but maybe we don't know how many we don't know who owns them we don't know what they have access to we don't know what kind of security risk so there's an immediate crisis for CIOs CTOs to get a handle on hey what's happening with these agents and so even though they may recognize I have a bigger governance problem with all of my data I have an immediate crisis with I may have agents that are really putting me at risk. And so the idea of us introducing it as a standalone SKU was to address really that use case, which is how do we affect somebody's immediate problem before trying to solve the bigger problem? They have an immediate problem, and can we address that? And the answer is yes. So we decided, hey, let's reduce the sales cycle because if you're just addressing one specific use case and a problem, usually the sales cycle is shorter. And so that's what we've seen so far. And, again, that was the driver of really releasing it in July.

And, look, AvePoint built a great business on the Microsoft ecosystem, SharePoint included. You brought up Google just a few minutes ago. How is that entry, we'll call it, it's been a few years now, but, like, how has that kind of gone moving beyond the Microsoft ecosystem? What does the exposure look like today? What could it look like a couple years from now?

Yeah, so we have parity now. What we cover for Office Cloud is now on Google Workplace. It's really the go-to-market. We recently now got elevated within Google to be their global ISP partner, so their product partner. So that's a big change for us. That's very encouraging. So we are actually, we do have an eight-digit relationship with Google while we have a nine-digit relationship with Microsoft. but the Google side is equally important. We have seen the first half of the year Google Enterprise business making really meaningful inroads into large commercial accounts as well as public sector accounts with Gemini, with Nobook LM as hero SKUs. So I think that, and also we follow our customers and there's movement in our customer base between the two productivity clouds. So that bodes very well for our modernization capabilities and, of course, then the resiliency and control capabilities for Google Workplace. So we maintain that route today. It's still just under 10% of our overall mix that the opportunity is there. So the Office Cloud estimates just under 500 million user seats. Google Cloud, it's about 300-plus million user seats. So it's smaller but sizable. So we actually continue to invest into the go-to-market side of it.

And you guys have done a pretty good job around mid-market and enterprise and moving upmarket. Are there any common denominators that are driving this increased upmarket momentum around the confidence platform?

So we actually started the enterprise, and then we moved downmarket effectively. So this year we'll exceed half billion AR, but for a sub-billion AR company, it's rare to see a company be able to be successful in enterprise as well as SMB. So we have achieved that over the last, effectively since we've gone public on NASDAQ. We really invest into channel and be able to change the way we go to market. So same technology, but make it frictionless for SMB to consume our services and products. Specifically for small businesses with less than 500 employees, we are targeting this specialization called managed service providers. So they're analogous for us to be SMB. So we never directly touch a two-man or four-people company because that's not cost-effective for us. What we do is we focus on MSPs as our end customers, and these are basically outsourced IT for small businesses. And they will be managing hundreds, if not thousands, of customers. And then what we did was make it very easy for them to procure our software on a monthly basis, on a pool licensing basis, so they can add and drop users at will. And effectively, they're using our software to scale their business to improve profit margins. So one of our top MSP crayons now, of course, Software One, they're head of North America, said for every dollar they invest in our software, it generates $5 of managed services business for them. And for an entity like that, Software One, managed services is their highest margin business, right, versus getting 1% or 2% distributing Microsoft software. So they're very excited to expand that, and we have a few very large MSPs in that space that's already in the millions of AR contributions to us, really expanding the SMB space. So effectively, that's how we unlocked SMB. So for Microsoft, SMB is 40% of their overall revenue. For Google, it's even bigger when we talk about Google productivity suites. So for us now, just 20% of our AR, and it's our fastest growing segment. So we're very excited to be able to continue with the strength that we have in the large enterprise, in the regular industry, but then now really be able to unlock SMB use cases, the fat tail. We used to call that long tail, but the amount of logo and the number of business in that segment is massive. So we're able to unlock that with go-to-market through MSPs.

Yeah, so maybe circling back to you brought up Microsoft 365 and Google, about 800 million-ish seats, let's call it. Yeah. Why is it now? Why aren't we getting, you know, we're only at like, I think, tens of millions, up to 100 million, maybe, if you look at some of the estimates out there in terms of penetration around governance behind it. What's the catalyst that kind of moves us from, you know, 10, 20 percent penetration rate to 50, 100 percent? Like, why is it? Why aren't we getting there faster?

That's a great question. I think the number one reason was it used to be customer think that the hyperscaler solve all their problems, right? When you go to cloud, the cloud vendor is supposed to provide everything for you, but in reality, they don't, right? Even this morning, Wall Street Journal reported that when the AWS data center got taken out during the beginning of the Middle East conflict, Like, they're permanent data loss. But when you talk to hyperscaler, they're supposed to have, you know, real-time synchronization, real-time failover among regional data centers. That's actually not happening. So that's shocking to customers, right? When they're actually using these hyperscaler offers and they realize that the coverage, the baseline coverage is very, very thin. So when you actually need to have the proper governance and control, and it's very severely lacking. So, fundamentally, the value we provide to the market, it's also orthogonal to what hyperscalers' interests almost, right? First and foremost is we actually help customers maximize their investment into their cloud. So, if you leave it to hyperscalers, they will want you to buy the most expensive licensing for every type of SKU you have. Shocking, right? But most customers, of course, are smarter than that. They have a blend licensing. And, for example, in Office 365 context, there's E1, E3, E5, now E7. Most customers, you know, E5 SKU has been out for a number of years. The penetration is still just 20%. So vast majority of customers have E3 and E1 licenses. E1 is basically a kiosk license. You don't even have, the worker doesn't even have a laptop, right? It's just a mobile device. And the E7, of course, you know, your C-suites can use it. So how do you actually have the consistent data governance and control and resiliency across all these license types? It's a problem that we solve. The hyperscaler is not in their interest at all, right? Secondly is customers are multi-cloud today by definition. And because of that, we also support multi-cloud. But that's also not in hyperscaler's interest to support other hyperscalers. So that competitive dynamic always exists, right? Google would not help Microsoft. Microsoft would not help, you know, Amazon. So there lies the opportunity for us to be a value-added provider for our customers to make sure that it doesn't matter where their data applications and agents reside in which cloud infrastructure, they're covered, right, have that consistency. So this is why there's always space for a third-party ecosystem player like us to provide a better value for the customer.

Yeah, so you brought up where I want to take the conversation next, which was competition. And, you know, there's been a lot of moving pieces in the space between governance, backup, resiliency, those kinds of things. What's going on competitively and why is that point growing the rate it is versus kind of the others out there?

Yeah. So firstly, we focus on very much profitable growth. So we feel that we need to be disciplined as we grow and still maintain very healthy and expanding margins to be cash generating to be ready for anything that the market may bring, right? The market is quite volatile, so making sure that we have profitable growth is key to us. And secondly, we don't have a holistic competitor. We come from an enterprise content management background, So we view information management from birth to retirement as a continuation of a problem set, right? So it's not just a resiliency or backup problem. It's not just a governance problem. It's not just a integration migration problem that historically industry is set up to do. So there's these industry silos, right? There's also different players in enterprise versus SMB and different players in different regions. So because where we came from, we went target large enterprise and we went global because of the high-touch requirement, and then we went to cloud earliest in the Microsoft cloud space, and now we're multi-cloud, we feel that we have the end-to-end story. We do see that our competitors start to map that way. So you see a lot of the backup vendors start to gravitate towards the security side, and most recently, because it's very topical, start gravitate towards the governance side. And even governance players, I think yesterday, Varonis came out with a storage solution. They were never in storage ever before, so now they're in. So it's good to see that these, what we call them, point competitors are recognizing the importance of the end-to-end information management story to better enable AI, right? So because your AI is only as good as your data. So that's how we felt we have always been different, that we have a singular cloud-based platform that does all of it, and it's more of a holistic approach. So we do have point competitors, and we're different point competitors in different space also, enterprise versus SMB. We feel that we're uniquely positioned. Now that we're public, we're very profitable, strong balance sheet, we can scale. The next iteration of our evolution is to really scale globally, be successful at large enterprise, as well as SMB, and handling the whole information management problem set, of course, AI management problem set for our customers.

Yeah, and, you know, obviously you brought up Microsoft's own E1, E3, E5, E7, but you guys have your own kind of upsell iteration as well with Plus and Complete.

How is that upsell motion working out for you guys, and what features or functions are really resonating with customers to move them off the Essentials package? yeah well and it's not just essentials to like it's across suites to is really where we see the movement you know many customers start with us the beauty of where we sit right now and in providing a platform is there are many entry points for a customer to join the family they can maybe start with a migration product if that's the issue they're dealing with or it may start with agent pulse they're dealing with a specific agent issue that they're they're trying to wrap their head around or it may be backup maybe something as simple as they need to back up their environment in the example that TJ gave earlier so that that for us has been really the beauty of being able to solve multiple problems across the dynamic and you know for us it's you know our upsell motion doesn't come from selling more seats it's coming from that cross sell motion in terms of providing additional solutions and really the biggest avenue comes from multiple products it's I'm selling you something today maybe in the backup environment and tomorrow I'm selling you the governance solution that goes hand-in-hand with that backup and then again maybe now it's agents being also how are you governing those agents so that's really been a really solid motion in terms of what we're seeing growth for existing customers and as you would expect you know we have customers that have been with us for a long time and as they spend more time with this they consume more products they grow with us we like those cohorts we're seeing significant improvement when we look at a customer who stays with us so I just want to highlight that again playing to our strength right this entire information management story is a singular story so So for example, now in Microsoft Cloud, they have this new agent capabilities co-worker.

So every time it touches a file, it creates a new version of a file. So agents will touch files at machine speed, right? You all of a sudden have a thousand versions of the same file. And the storage in Office Cloud is actually very expensive. It's not the same cost as Azure storage. so we actually have already solutions that help customers in real time optimize storage costs by removing older versions out-of-date you know based on policies content in real time so we actually have a basically storage ROI for our customers and of course we also have the license management ROI for our customers so these problem also related it's not just a backup conversation or archiving conversation, search optimization conversation. It's also risk management, right? When AI does some damage, you'd be able to recover very quickly either at the entire cloud environment or down to a singular file, granular level or permission structure level. So we think that because these are very much interrelated problem sets now, you know, exacerbated by AI, it positions us very well as a singular end-to-end platform provider.

Yeah, and maybe just around sort of customer expansion. Look, you guys have been doing a phenomenal job on churn, and right now your net expansion rate's around 110. What gets it to 115? How do we think about that 110 breakdown between sort of data growth, cross-sell versus upsell at this stage?

Yeah, it's a great point. I think any, when you think NRR, you think of that existing customer growth, I think it starts with your gross retention. so right now our gross retention is standing around 89% we think with some of the measures we have in place that continues to grow and gets into the low night so we think there's at least another two points here over the next year or two where we can get that 89 to 91% and that includes our migration products which as you would imagine right if you're doing migration it generally has a start and an end so we include that in our GRR if we excluded that we pick up another two points just by excluding migration but but including it we think we go from 89 to 91 so those incremental two points flow into your NRR so immediately we think the 110 goes to 112 really without doing anything else other than retaining the existing customers they're improving that retention and then some of the things you talked about in terms of our cross cell motion across these platform this platform that we have we think there's a great opportunity to continue to motion it's not really going to come from an increase in seats that's not where we see most of the expansion even today or even for the past several years most of our expansion is coming from incremental products consuming more of the platform as opposed to more of one SKU and we would expect that to continue particularly with the the number of products we see coming to market today and also what we're expecting to in the future. And the other thing we're doing a better job of today than we did five years ago is bundling. So we used to essentially sell products as individual SKUs within the control suite. We're doing a much better job today of bundling solutions so that you're buying not just a single product, you're buying a solution which includes several products. And so that really resonates not only our own salespeople being able to sell it, but customers being able to consume it, because the end result for them isn't buying a product, it's buying a solution. I have a problem I'm trying to solve. How do you best solve that? And what we're finding more and more, it's a bundled solution. So those bundles have higher price points, which are then generating more profitability, more NRR for our existing customers. So those are the key drivers that are going to move us to that 115, our longer-term target.

Literally, I'm going to have to call you Steph Curry here as you hit the shot clock here, as it kicked out of the bureau on the nose. So awesome insights, guys. Good luck on the billion-dollar ARR goal and 27.5% margin target that you just outlined. Thanks for joining us, everybody.

Thanks, everybody.