Good afternoon, everybody. Tim Moran, the cloud analyst here at Oppenheimer. My pleasure to be hosting AvePoint here for a fireside chat. We have Head of Investor Relations, Jamie Arestia. Is that how you pronounce it, Jamie? Sorry.
Yep, Arestia. Exactly.
Yeah, Arestia. Yeah, and so with that, Jamie, I know we have a lot of investors here that are a bit new to this story. Can you give a quick overview of what AvePoint does? What are the kind of big problems you're solving for your customers?
Sure, Tim, and thank you to you and Oppenheimer for having us at the conference today. So yeah, I would think about AvePoint as truly a global leader in data management and data governance software. We really offer a cloud-based platform to customers of all sizes, everywhere in the world, across all industries, and we can talk more about that, but we are really diversified in a number of ways, which we think there's a lot of value in that balance. We are really about helping organizations control and secure all of the information running through their digital systems. So for us, that's most commonly Microsoft 365, but it also is Google Workspace, Salesforce, and so on.
We really started in the early 2000s in the enterprise content management space, focused on information lifecycle management, and we really grew and expanded alongside Microsoft, which obviously offers a variety of digital workloads. And so today, we really offer end-to-end information and data management capabilities that help organizations do three things: prepare, secure, and optimize their data for use. This is what we've been doing since we got started.
Now in sort of this age of AI being a part of really what every customer is looking to harness in terms of that potential, the problems that we help solve, I think are really starting to become top of mind for our customers and prospects, in that we really believe that to effectively establish an AI-driven strategy across the organization, the key first step is making sure that your data estate is in good order. That you don't have, you know, kind of data open to everybody, that you don't have stale or redundant data feeding these large language models. So we can really help organizations clean up their data and get it ready for AI. And I think, you know, we can talk about our results, but I think that has driven another strong quarter of our results. We reported Q2 last Thursday.
And we've really, I think, since beginning of 2023, you know, we've focused on profitable growth, and I think there's a lot that has been a good story in terms of both our top-line trajectory and the margin expansion that we have been able to show. As a result of that, a lot of it is driven, I think, by, you know, more and more demand, not just for one-off solutions that we can help with, but for more and more of our platform, as we have conversations with customers that are more and more strategic today. So maybe I'll pause there. That's kind of a, you know-
No, that's-
Yeah.
Great, Jamie. I mean, we're hearing this segment of the market is on fire, stating the obvious, but can you just, on the quarter, describe what your maybe revenue growth and operating income growth was?
Yeah. So, we delivered, for Q2 about, 20% revenue growth, 23% ARR growth. Operating margin was 11%. All of those, I think, were well ahead of guidance. We don't guide ARR on a quarterly basis, but, on an annual basis, you know, the, the guidance was for a little under 21% and, we, you know, we did, 23% in Q2 after doing 23% in Q1. And so I think we're just seeing, you know, healthy levels of certainly demand and pipeline build. And as a result, not only did we outperform our guidance in Q2 and also in Q1, but we again raised our expectations for kind of what the full year would look like.
Most meaningfully, I think, on the operating income line, where previously our expectation for the year was about $31 million, or about a 9-ish% operating margin, or 10%, I should say, and we increased that to $39 million or about a, you know, a 12% margin for the year. So I think, you know, the focus on profitable growth is sort of delivering on both fronts, and that's been a priority for us, and that will continue to be the case.
If you don't mind, maybe a year or so ago, what were you growing revenues at, and what were the margins then?
So I will tell you, in '20... Let me just get the exact number. In 2023, revenue growth was 17%, and margins were 8%. And so we, you know, and I think it's we're a little bit, I don't know if we're unique or not, but ARR growth and revenue growth for us are a little- there's a little bit of a delta between the two, because we do have, you know, around $40 million or so of services business, in kind of our full year revenues that we don't include in ARR, because it's not strictly speaking, recurring. All of our other revenue streams, SaaS, term license, and maintenance are recurring and would go into ARR.
And so the services business is growing slower than the rest of the business, and that's deliberate because we, you know, I think we, we wanna get that down to around 10% of total revenues, and it has been steadily moving in that direction, but we're still only kind of in the 13% or 14% range. You know, it's obviously a much lower margin business, and so I think it's appropriate that we focus on much higher margin SaaS business and maybe steer more of that towards our partners, the services business that is. But, you know, everything in terms of the revenue performance by line has been kind of in line with our commentary and our expectations. And, you know, I think the growth has been stronger and stronger each quarter.
So, you know, we're looking on continuing that.
That's great. I mean, so do people realize that you're a, you know, play on AI, do you think, the investors? I mean, you know, realize.
I think, I mean, the hope is that obviously as we keep executing and delivering, that we gain kind of more of a reputation for that. I think for us, it's a little more, I don't know if it's unique or just sort of nuanced in that, you know, we don't necessarily have specific products that, you know, you can obviously look at, you know, the financial results and say, "Okay, that's purely driven by AI." You know, we have a few newer SKUs that are definitely tied to, You know, for example, we have a new product that can measure engagement and usage of Copilot for Microsoft 365 across the organization. I think that's very clearly something that, you know, you could point to and tie to AI.
But in general, I think it's this larger theme of the need to get your data estate in good order, which would more be like overall demand for our platform is growing. And I guess we have seen that certainly because of the outperformance on the top line and the raising of the guidance beyond that. And so, you know, that's kind of how we're thinking about it. It's not the easiest thing to quantify, but I think as we keep you know, delivering on both the top line growth and the margin expansion and we're able to show customers consuming more of the platform and sort of our ties to Microsoft, I think that should only become you know, more aware of kind of the value that we can provide.
So maybe just go a little deeper. I think you have three different suites of products. Can you describe, you know, what they do?
Yeah, absolutely. So we have the AvePoint Confidence Platform, and as you mentioned, there's three suites in there. So the Control Suite is really about data management and data governance. You know, there's a few different products in there that we can certainly talk about. You know, we have a product called Policies and Insights, which can really help identify risk within the organization. So anytime someone shares a file, you know, how do you know that that person hasn't broken the permissions that should be in place? So we can kind of quickly identify those risks and also take corrective actions very, very quickly. You know, we have another product called EnPower, which helps companies optimize their use of Microsoft 365 and other digital systems, so it can put automated governance controls in place across the organization.
There's also, like, a cost reduction play there about appropriate versus inappropriate license use, which I think is particularly important today. So that's one. That's about 25%-30% of our business today, or our ARR. We have our Resilience Suite, where the focus is on enhanced data protection. That is where our backup offering sits. Obviously, that's a very popular offering. A lot of organizations, you know, really need tailored offerings for backup. And so, you know, we can really go above and beyond what some of the native capabilities are of potentially Microsoft or maybe other backup providers, you know, and sort of add a lot of value there.
A lot of our customers are in very highly regulated industries, where they need these kind of tailored retention and backup life cycles, and so we can really offer them that, and sort of determine where best to sort of store their data. We also have an archiving product within that suite, that can help reduce kind of data storage costs and improve the data quality in Microsoft 365, which again, gets back to, I think, the AI play. And then the third suite... Oh, sorry, and then so Resilience is about 60% of our, of our business today, and then the third suite is Modernization, which is really about, you know, the employee productivity and experience.
You know, there's a few different products in there, including, you know, our, the tyGraph product that I mentioned, which offers, you know, assessing kind of usage and sort of how Copilot for Microsoft 365 is being utilized within the organization to help companies really gauge, you know, where they should be allocating those resources. There's other products. There's a product called Confide, which is used for M&A transactions for customers and, you know, helping with the diligence process for a number of internal and external parties. There's a lot of vertical solutions that we have in there.
And we also have our migration offering in there, which is, you know, not a huge piece of our ARR, but it's obviously important in terms of customers if they're early on in their digital transformation and need to migrate data from on-prem to the cloud typically, or from cloud to cloud. That's where that would be. And so that's the balance of around, you know, 15% of our business today. So the suites are also interconnected, and obviously, the goal is to cross-sell them. You know, and, you know, what we've seen is that we typically start with one problem and then go on this journey with customers. We really walk into a customer environment, and we're looking to help them. There's a number of challenges that we can help them solve, protecting information or sort of building products for specific business challenges.
We also see companies using a lot of vendors, and they're looking to consolidate, and so we are not just about offering things for Microsoft, but Salesforce, Box, Dropbox. We're really cloud agnostic, and we can help them modernize, however they need to. And we can really sort of, you know, it's a very powerful offering, and so that's kind of a quick overview of what makes up the platform.
Which one's growing the fastest?
So, I mean, it does vary from quarter to quarter. We give kind of the contributions to total ARR on an annual basis. Most recently, though, probably, not surprisingly, we've seen the most demand for control, which again, is around the data governance play and Resilience, which is on, you know, enhanced data protection and backup. So those are the ones that have been, you know, seeing the most demand so far this year. I think we probably expect that to continue, certainly for the foreseeable future.
... Have you said what that one, that suite is growing at, or any, yeah, the Control Suite?
Yeah, I mean, I think we haven't sort of explicitly given it on a quarterly basis, but you know, I think both of those are growing really right around the ARR growth that we reported for Q2-
Okay
- of sort of like 23%. You know, I think Control, I think Resilience was a little bit higher in Q2, and, and Control was right behind it. But they're all, they're all growing very healthily.
Do most customers take all three products?
No, and I think that's why we view, that's what we view as a pretty big opportunity. You know, we have some attach rate statistics in our investor presentation, which we update annually, but... and we look at, you know, the attach rates of, you know, for our mid-market and enterprise customers. You know, SMB customers typically take a lower number of products, but, really, if you look at our pool of mid-market and enterprise customers, which is really companies above 500 seats, it's, I think only about half of those customers are taking more than 2 products, and only about, you know, 25%-ish are taking products from multiple suites. So there is a big opportunity for us to, I think, sell more to existing customers.
We've done a really good job, I think, of signing new logos every single quarter. Today we have, you know, the last count we gave was more than 21,000 customers, and a lot of those are SMBs. But I think we view the opportunity within the installed base as pretty substantial, just in terms of being under-penetrated, and we're getting better, I think, at selling more to them. You know, I think a lot of the examples we gave in the prepared remarks at this past earnings and also in prior earnings talks about the way in which, you know, we've been successful, I think, in upselling.
Because I think customers now are realizing again that the problems that we've been talking about for quite some time are much more of a priority, and I think we are having discussions that are more strategic in nature and less kind of tactical around solving these one-off problems. I think that, again, speaks to the results that we've seen and the raising of the guidance for the year.
Only 25% take all three, is that right?
I think it's even less than that.
Okay.
I think 25% take 2 or more, and there are 3... Again, there's suites, and then within the suites, there are multiple products.
Okay. Got it.
So, you know, the first set of 50% is really two or more products, that's regardless of suite, and then the 25% is two or more suites. So either way you look at it, there's an opportunity for customers to be existing customers-
So-
- to be doing more with us.
Who do you consider your primary competitors?
It's a great question. It's probably not the easiest to answer just because we certainly don't have a singular competitor for the platform, but I think as you look at the suites, we do see kind of point solutions across the suites. And it's actually, if you go a level deeper than that, it can vary by customer segment within the suite level. So if you think about the Resilience Suite, for example, where we talk about backup being the major contributor to that, you know, at the enterprise level, we could compete with Commvault or Veritas. At the SMB level, we could compete with Veeam or Acronis. You know, I think Veeam has got 80% of their business coming from companies with less than 100 employees.
We define SMB as less than 500, but, you know, there's a lot of different, players in that space. You know, if we look at the Control Suite, which again, is around kind of governance, we could see, you know, Varonis at the enterprise level. You know, Modernization, which is migration and others, we could see some traditional players like Quest or Informatica. You know, I think as we keep growing, we would expect that we'll only run into more point competitors, but again, our, our strength is really the platform play, the value provided by all three suites, and offering multiple solutions that customers can take advantage of, over time.
Very helpful. You know, a lot of software companies lately have been kind of blaming macro environment for slowing growth, but I mean, there's other issues. It seems like enterprises have been pretty stringent on their budgets and taking longer to buy things. Are you seeing any of those?
We haven't seen a change. I think what I would say is, starting at the end of 2022 and early 2023, we called out, at the enterprise level, definitely longer sales cycles, that we have been seeing greater levels of budget scrutiny. But since then, and I guess we've really reported, I guess, 6 quarters, we haven't seen things get worse. They've kind of stayed at that level. You know, for the enterprise, we have sales cycles that are, you know, right now around 6-9 months. But I think what we're also seeing is, you know, not surprisingly, organizations are prioritizing budgets for data governance and data security, and again, I think they're, they're really, I think, starting to focus a lot on the things that we have been talking about for quite some time.
So I think we're really pretty happy with the momentum we're seeing in the pipeline build. We're obviously very happy with the team's performance in Q2. I know some companies have called out specific weakness at the SMB level, and again, that's 20% of our business. We really haven't seen too much weakness there, frankly. I think it's, it's really our, still our fastest growing segment. Obviously, smaller dollars than at the enterprise or mid-market level, but we really started, you know, designing the software that was enterprise-grade because we were really going after enterprises. But, you know, we've now made that available to companies of all sizes, and I think, you know, we have a, a pretty unique ability to be attractive to all customer segments....
So we also feel like with the SMB level, there's a lot of runway there, especially as we think about our strategy with MSPs or managed service providers, where we can go through them to really reach a lot more end market customers. And that's where I think we've been very successful in sort of signing a lot of new logos at the SMB level. And we're also investing quite a bit there to make sure that our offering is more attractive to the MSPs. You know, and so we'll continue to do that, and I think the economics there are pretty healthy as well, where the streamlined offerings make it as easy as possible for them to sell to the end customers. So we haven't sort of seen a meaningful change in things.
It doesn't necessarily mean that it's easy out there, but, you know, we like to think that, you know, the problems that we're solving are really top of mind for customers.
So I wanted to focus a little bit more on AI, and I guess specifically, I'd be remiss if I didn't ask you, what do you see for Microsoft 365 Copilot? You know, there's a lot of thinking out there that maybe it's a little immature and people aren't getting the kind of productivity improvements out of it that they should be, but you actually have the data on it, yeah. So any thoughts there would be great.
Yeah. I mean, so in terms of what we're hearing from customers, look, the demand for AI readiness is definitely there, but it really still feels like it's customers are experimenting and kind of testing it out. Everyone has these long-term goals of lower costs, improved productivity, and sort of a better and more efficient workforce and end customer experience. So there's been a ton of conversations. There's been a lot of assessments. You know, we really haven't seen too many enterprise-wide deployments of Copilot. There are more, I would say, pilots, where they're testing it with a smaller percentage of their employee population. I think it's really...
There's a couple steps like, you know, it's first about data cleaning, like we talked about, you know, addressing risks around potential data loss, over-sharing, and then once that's done, you know, data governance and data security, which again, are kind of our core businesses. So ultimately, I think every organization cares about all this, which bodes well for us. You know, and I think Microsoft has certainly talked up, you know, they, they obviously, they've talked up, I think, the, the greater adoption of Copilot and how that's trending in the right direction, but I think they are also trying to preach patience.
I don't know that it's because it's immature, but obviously, I think the expectations were quite high, both for the adoption and for like the immediate result of what their customers would realize in terms of, you know, value creation. Maybe if that hasn't gotten here yet, it doesn't mean that it will, but I think it's just gonna take time. We feel like we're obviously in a good position because there's a lot that we can do to help customers get ready to deploy Copilot and other AI strategies. It is, I think, gonna take time, and yeah, so that's kind of what we're hearing from customers.
But do customers ultimately, you know, the ones that had time and got trained on it and are using Copilot, is it improving their productivity, do you think?
I think it is. I mean, certainly, I know Microsoft has cited some statistics around improved productivity for those who have fully adopted it. You know, for us, you know, we have the tyGraph offering I mentioned about measuring, you know, Copilot usage, and the value that we can help offer there in terms of best allocating, you know, who are the high probability adopters of Copilot? You know, what employees are using, you know, how, when, and where they're using it. All of these things, I think, provide, like, that can offer a lot of value to customers, but it's still a very new offering for us. So, like, I don't think there's anything to suggest that, you know, the benefits of Copilot and of AI aren't there.
But it's just, I don't think it's as widespread yet as everyone would hope, and, you know, it's just going to take time. But in the meantime, I think there's a lot that needs to be done before, you know, Copilot can be kind of effectively rolled out, and I think there's still a lot of companies that are in the early stages of that, and that's where I feel like the opportunity is for us. You know, one of the things that we mentioned at earnings last week was, you know, there's a model that Gartner has established around a workplace's digital maturity, and it's sort of a five-stage model. And it's only at the fourth stage where companies can sort of successfully deploy AI strategies.
And of the organizations that they survey, I think only about 2% were kind of at that fourth stage, and, you know, over 80% were only at kind of the second stage of making sure their data and infrastructure was properly, you know, kind of en route to being transformed and secured the way it needed to be. So there's a big opportunity there that we are, you know, kind of focused on capitalizing on, and again, not just that's with new customers, but also existing customers, helping them get there, too.
You know, to your point, I mean, enterprises realize they are gonna use AI at some point, and, you know, they, they gotta get their house in order, then get prepared for it. It might be six months from now, it might be three years from now, but they, they gotta go down this process now. What percentage of your revenue-
Yeah, yeah
... do you think is tied to-
Sorry, go ahead.
I mean, is almost everything you do tied to Microsoft?
Today it's about 90% or a little above 90%.
Okay.
So, you know, a lot of that is just a by-product of starting there and growing alongside them. But obviously, you know, and, and this is another point that I think we made at earnings last week, was a lot of our customers are multi-cloud, you know, and we wanna make sure that we can meet them and provide value wherever they are. So for us, we see a lot of customers who have, you know, who also use Google Workspace, who use Salesforce, who can benefit from, like, the single pane of glass that our platform offers to protect and secure data, you know, in those ecosystems, just like they can in Microsoft.
So we talked about a new partnership we have with SADA, which is one of the top global resellers of Google Workspace, and how they'll now be able to sell our backup solution there to those customers. You know, more than 10 million organizations globally are using Google Workspace, and so we're pretty excited about that new partnership and the potential that that offers. So I think, you know, for certainly for the foreseeable future, everyone should expect that Microsoft will be a meaningful part of our results. But obviously, we see value in kind of diversifying outside of that, 'cause that's where our customers are, especially those, you know, about 70% of our customers are in highly regulated industries.
And, you know, security and compliance is absolutely paramount, and if they're using multiple sites, or multiple, I guess, cloud ecosystems, which many of them are, they need to make sure that they're getting the same level of protection across that. So, you know, that's what we offer, and so we think there's a lot of potential there.
Why does Microsoft do some of this? And if not, you know, why aren't they?
Yeah, that's a great question. So I think, you know, there's a couple things that investors should think about. We've been a partner in the Microsoft ecosystem, like I said, for more than 20 years. We like to say we don't compete with Microsoft, we compete within that ecosystem, which is really multi-trillion dollars. We're a top global partner for them today, we're a big consumer of Azure Cognitive Services. One of their EVPs of collaboration, a gentleman named Jeff Teper, sits on our board. And so, you know, that gives us kind of good insight into, you know, kind of what they're working on. Microsoft really relies on partners like us to complete that ecosystem, which really, I think, increases the competitive moat for their platform. So fundamentally, I think we just have different motivations, right?
They have this massive platform for hundreds of millions of users, that they wanna attract as many, you know, to keep growing as much as possible. Their customers are really relying on us and other partners to try and optimize their deployments and maximize the investments that they have in place. So, you know, the analogy we typically use is Microsoft is like the utility company that's building really and improving a city's infrastructure, but if you live in that city, you know, you need contractors to come to your house and kinda do interior design and improvements, if you will. So we're really a value add to their customers. We make their products more sticky, and it's really this mutually beneficial relationship that's only strengthened over time.
So it's a question we typically get of like, "Hey, why can't Microsoft do this?" Or, you know, "Why couldn't they eventually do this?" We've been fielding that question, certainly since we went public, but probably much longer than that, and it's something that we're not really worried about, because again, there's just different motivations at play here. So they really rely on us to build on what they already have.
Are they a channel partner for you? I mean, do they send you customers as yet?
Yeah. So like, I mean, well, their sales reps can retire quota, you know, for example, by selling our solutions.
Okay.
But when we talk about, like, when we talk about channel, for us, that's typically at the SMB level, like I mentioned, with MSPs and also at the mid-market level with potentially MSPs or other resellers. At the enterprise level, we try and do everything direct. So yeah, I wouldn't necessarily think about Microsoft that way.
Got it. So you're not that far away from the Rule of 40. You're, I guess, around 35% as we speak. I think you have a goal to get there.
Yep.
I mean, do you think it's a, a combination of expanding margins and, like, growth accelerating, or is it more margin expansion, do you think?
So yeah, I mean, it's a great question. I think, you know, right now, our guidance for 2024 is that, you know, on a Rule of 40 basis, and again, we are defining that as ARR growth and non-GAAP operating margin, we're guiding this year to be a 33. So that's 21% ARR growth and a 12% operating margin. So our target that we've stated publicly, that we put out in our Investor Day last year, was that we would be Rule of 40 for 2025. So obviously, you know, for next year, that requires, you know, like you said, either a step up in both or maybe a big step up in one or the other. We really do think, you know, it's both. I think the question ties to a number of our strategic priorities.
And while we haven't guided to the specific mix that would get us to that 40, I think we expect to see improvements in both components. I think as we think about next year, you would see a little bit more of the contribution coming from the top line than from the bottom line, but it doesn't mean that, you know, we wouldn't expect both to tick up. And even so far this year, you know, the 33 that we're at right now, that compares to a 29 that we started the year at, and then a 31 that we increased to after the first quarter. So now we're at 33, and again, I think we're making a lot of good progress in that direction.
You know, if we think about the two components, right, ARR growth, there's a few things that give us some comfort in the ability to keep growing that. I mean, one is just the demand environment, like, as we've been talking about, healthy pipeline build and overall demand for the platform, you know. And then we've also called out, I think, improved productivity with our sales reps. You know, we had to go through a RIF at the end of 2022, and, you know, invested some of those resources back into our higher-performing reps.
You know, and some of the stats that we track pretty closely in terms of, you know, time to a first sale for a rep has shortened and has become more predictable, which is great, and I think, you know, those contributions are really starting to be felt from the reps that we hired last year. This year, we've also been steadily hiring again to make sure that we're positioning ourselves for even better acceleration next year. And then, you know, we, we've alluded to it a little bit, but our focus of going through the channel is a big strategic priority for us, and really investments there allow us, we think, to extend our reach even further, especially in the ability to land new SMB and mid-market customers and to sell more to existing customers.
So that should also benefit the top line. As we think about margin expansion, we can come right back to the channel because I think there's benefits to the bottom line there as well in terms of more efficient growth. Again, we've been talking about profitable growth for quite some time. This is a big part of that. Then there's just a lot of embedded leverage in the business, especially. You know, there's two areas where I think the most can be had is sales and marketing, where we've shown a lot of progress towards our long-term target, which is 30% of revenues. You know, we're around 36%-37% for the first half of this year, but we're obviously much, much higher over the past few years.
And then G&A is the other one as well, where the long-term target's 10% of revenues. You know, I think the expense growth there does not have to continue at the same pace going forward. I think when we went public in 2021 and sort of into 2022 and beyond, we had to invest quite a bit just to get the right infrastructure in place. But there's obviously some economies of scale that we expect to be realizing, you know, going forward, where again that expense base doesn't have to keep growing. And so that is, you know, those should be all the things we're thinking about for the opportunity for next year.
So, you know, prior to the last two years, I mean, what were you, what were you growing at historically? Was it more like in the 10%-15% range? I mean, I guess-
Um-
A real inflection since AI has kind of come out.
So are you talking about sort of top-line growth, if you will?
Yeah, yeah, yeah.
Yeah, so, you know, 17% revenue growth last year, 21% revenue growth in 2022, and 27% revenue growth in 2021. ARR grew 23% last year, 28% in 2022, and 37% in 2021. But obviously, you know, the dollars have grown pretty meaningfully since then. We're almost at $300 million of ARR versus, and we were kind of, you know, $130-ish million at the beginning of 2021. And so, you know, I think we feel really good about the fact that we've been continuing to raise the top-line guidance, especially over the last six quarters, as we keep outperforming. And so, like, that, I think, is, you know...
The fact that we are continuing that growth trajectory is something that we're really pleased with, and we think that there's just a ton of opportunity with all of our customers in mid-market, enterprise, and SMB.
Very helpful. Have you ever given a breakdown what percentage of revenue comes through channel versus sales, your own sales force?
Yeah, so that's something we actually give out on a regular basis. Today, about 52% of our total ARR, which again is about $290 million, comes through, has come through the channel, and then we give incrementally each quarter what came through. That can obviously fluctuate a little bit more, but in Q2, it was about 62% of the new ARR that we added came through the channel. That's been anywhere, since we started giving it out, like from 50%-70%. But, you know, we would expect, even though that number might move around a bit, we would expect the total ARR contribution to keep ticking up. And, you know, a few years ago, it was sort of mid-40s% of total ARR coming through the channel.
And now it's, you know, like I mentioned, we're up to 52%, so that should continually, continuously, steadily creeping up. But again, you know, I think the... especially at the enterprise level, I think the direct selling motion will be there for the foreseeable future. I think it's important for us, especially with a lot of these large customers that we are landing, to make sure that we are controlling that process and owning that. So yeah, there's room for that channel percentage to keep growing, but I don't think it's never gonna get to sort of a 100% channel.
And, so you're still very, very small penetration into Microsoft's customer base, obviously. And I'm assuming that you're, you know, so it sounds like a great product. Are you saving these customers money? Obviously, you're improving the security and quality, but yeah, can you talk a little bit about the overall kind of sales pitch?
Yeah. So, I mean, I think that the thing that we can be valuable on is there's a lot of ways that we can kind of get our foot in the door and help them wherever customers are on their digital journey. So, you know, if the discussion is one where they just need to migrate data from on-prem to the cloud, if they're in the earlier stages of that journey, then that's something that we can obviously help with. But then, once that's done, you know, we wanna make sure that we can—they understand that we can also help them back up that data that is now in the cloud and make sure that the data is properly governed. You know, that would then... If we're successful there, then that would mean they're buying products from all three of our suites, for example.
And like I mentioned at the beginning when I was walking through some of the products, there are some where there's just a very specific cost-savings play. You know, we have tools that can help with archiving and data storage, where it's, you know, we can look at their data and give them a sort of a real-time assessment of where they can, you know, move data to lower cost locations and very clearly help them understand how much money we can save them. That's obviously a very easy conversation, especially now, when cost reduction and efficiency is something that every, you know, no customer can afford to ignore. So, you know, I think historically it's been about helping them, you know, come in, solve one problem, and then move on to others.
But I think what we've seen in the more recent quarters is like, again, it's, it's, it's more of a strategic discussion where there's a lot more of the platform that we're talking about upfront. You know, some of the examples that we gave in the prepared remarks at earnings last week, the customer examples, new wins, you know, I think we gave 5 customer examples. 3 of them were Fortune 50 companies, 1 was Fortune 20, and 1 was Fortune 10, buying products from multiple suites or multiple products. We had 1, like, the Fortune 10 customer was a healthcare company that had been a backup customer, but they had a lot of needs in place that they needed to, you know, address with data oversharing and risk associated with that.
And they actually literally purchased our entire Control Suite, which effectively doubled the ARR that we were seeing with them. So there's like big, I think there's very big things happening here with large customers. You know, either you know, new big lands or expansions taking place. So there's just a lot of ways that we feel like we can add value. And obviously we wanna try and do more and more of that upfront and become a true and, you know, become a true partner with them and go on this journey with them. So I think the reps are also, like I said, getting better at those discussions and sort of selling more of the platform and thinking about it that way. And you know, we would expect that to only continue.
Jamie, unfortunately, we're out of time. I guess, do you just have any final thoughts to leave the audience with?
Yeah, I think... Look, we are, you know, just with earnings being, you know, just a few days in the past, I think we feel really good about our ability to keep delivering strong top line growth, margin expansion, and cash flow generation. I think the last piece is we didn't really touch on that too much, but that has been, we think, pretty powerful. You know, we wanna make sure that we're providing guidance and expectations where we can be reliable. You know, and are just, you know, we will continue to focus on profitable growth.
And so even with an uncertain macro environment, we feel like the problems that we're solving and the momentum that we see, that, like, that's giving us the confidence to raise the guidance for the year again after just, you know, two quarters in a row. So, you know, we feel like we're in the right place, and we're, we're for the moment, and the platform play is resonating, so our focus is keeping that going.
Jamie, thanks a lot. Look forward to getting caught up on a regular basis. Thank you.
Thank you so much.