Where you guys came from, maybe talk about when you went public, how you came public, and what has happened maybe over the last couple of years.
Sure. Great to be here, and thanks for having us. Maybe just thinking about AvePoint, who are we, where we've come from. We're a 20-plus-year-old company, not something that just started yesterday. We're in the data management, data governance space. I'll talk about that in a minute. To your point, Brett, we went public in 2021. At that time, going public via SPAC was in fashion and was the right thing to do. We evaluated, we were going down the path of a traditional IPO. Obviously, this was during COVID. This was no vaccine, no election. Lots of uncertainty. At the time, obviously the SPAC sponsors, very well-known, respected people behind the SPAC sponsor, was a great opportunity, created certainty. The outcome was pretty quick. We went via SPAC.
Now, obviously, fast forward, we go public in July of 2021. SPACs fall out of favor. The whole kind of market collapses from that. I think we got kind of buried with some of that because we actually were performing, and we delivered. I think in the wake of all of that stuff, we kind of got crushed a little bit. It has taken us a while. One of the things that we are really proud of is that for the past eight quarters, we've really communicated what we were going to do. We've set out our expectations, communicated them, and then really focused on profitable growth and executing and delivering against the expectations we set. We feel really good that over the past eight quarters, we've been able to do that. We feel good about the future and the prospects.
We play in an interesting space, right? Data governance, data management has now become very popular. Obviously, with all the AI initiatives that are rampant and very popular, I think the data management governance side is more of the blocking and tackling. For the past 20 years, it wasn't sexy. Only maybe to banks and some other regulated industries was it a must-have or a very sexy kind of thing. Now everyone's talking about it. Every board meeting, every board conversation is talking about security, governance. How can we enable our teams with AI and still protect the underlying data and make sure we're not surfacing data to people who shouldn't see it? That's kind of the governance aspect of it. Ensuring that it's actually managed properly, that we're terminating data that's obsolete, where mission-critical data is relevant.
Again, it's a great time to be in the space. We're excited. We play in kind of all aspects of the market in terms of enterprise customers, mid-market, SMB, which is kind of unique for a company our size. We are also geographically dispersed, with about 45% of our ARR in North America, 30% in EMEA, and roughly 20%-25% sitting in APAC. We are really diverse, dispersed, and well-balanced. I think that positions us really well for the future.
When you maybe take a step back and look at your, I would say, broad product overview, what is your secret sauce? Has that changed over the years? Have you guys been particularly good in backup or migration, and how has that allowed you to expand into adjacencies from a product perspective?
Yeah, it's a great question. I think one of the benefits of AvePoint is that we truly have a platform approach. When you talk about a specific product, a lot of our competitors have a specific product or one product. I think the competitive advantage we do have is that although we are very good on a point solution competition point of view, whether it's backup, whether it's a governance product, whether it's a storage- optimization product, we compete very well on the individual product. I think our competitive advantage is that on a platform basis, in other words, you can engage one company, one platform, and address multiple challenges that you face. That definitely gives us a competitive advantage, particularly in times that we're in now where people are looking to consolidate vendors. They're looking to maximize their efficiencies.
If you can deal with one vendor that's addressing multiple challenges that you face, that's a much more compelling argument than having to employ four or five different vendors to accomplish the same goal. I think that's our competitive advantage.
I think you guys have been, throughout your history, closely intertwined with Microsoft, which kind of makes sense given how widely adopted they are. I would say more recently announced some enhanced product updates for whether it be Google or Salesforce, kind of expanding into maybe a multi-cloud provider. What does that do to your guys' business? Obviously, Microsoft is still a massive TAM if you look at the number of users they have in their ecosystem. What do some of the recent updates to Google allow for you guys, maybe from a TAM perspective, longer term? How should we think about it?
Yeah, great question. I think maybe first and foremost is we recognize that companies today, whether it's Cantor or others, are all multi-cloud. No one is just working in one ecosystem today, whether that's you may use Microsoft for your office productivity suites, maybe email, but maybe you're using Salesforce for your CRM. Maybe you're using even GCP for maybe some of your storage. Maybe you're using AWS. Everyone is multi-cloud today. There's no such thing as just a single use of one hyperscaler or one cloud. I think that's just reality. I think in our world, you're right, Microsoft has been a great partner in terms of the ecosystem we play in. It's 90%+ of our ARR today. We expect that going forward, they're still going to be our dominant partner. That ecosystem, as you said, is massive. We benefit from that ecosystem.
I think we help the ecosystem as well. You're right, things like or other ecosystems like Google, we think has a massive opportunity for improvement. The same challenges that we solve for our Microsoft customers, our Google customers are experiencing the same challenges, whether that's things like you mentioned, whether it's backing up, whether it's governance, whether it's storage optimization, security, all of those same challenges that our Microsoft customers have, the Google customers have. There is a massive opportunity for us to play in that space. We recently announced right before earnings a partnership with Google in terms of making our technologies available to that customer base. We're excited about that opportunity.
It's obviously early innings for us there, but we think there's a great opportunity for us to accelerate and capture market share in that space as well. I think you're right. It just helps us achieve kind of the longer-term goals that we've set. As you know, at our Investor Day, we announced kind of this five-year target of getting to $1 billion of ARR. I think the Google initiative that we've been talking about and that partnership will contribute to us getting to that number.
Is there a different competitive environment if you're talking about from one cloud environment to the others with respect to the customers you service?
Yeah, I think so. I mean, if you think about just the environment itself, whether it's in Microsoft's case, obviously, they've been around a lot longer. There's just more competitors. It's a more mature space. If you think of the Google Workspace environment, it's funny. I was talking to somebody just a few minutes ago. If you think of the companies that initially were using Google Workspace, it was startups because it was initially free. It was kind of considered almost like a, "Okay, you can't afford Microsoft, so you're using Google." Now, that's no longer the case.
I think there's real companies using Google Workspace as their primary solution. It has kind of matured. Obviously, now it's a very mature product. I think there's real opportunities. The competitive landscape in that ecosystem is less than the more mature Microsoft ecosystem. We do think there's an opportunity for us to capitalize. This is why the partnership and why Google was excited, because we're bringing technologies that their customer base doesn't have today. There are either a lot of homegrown solutions that their customers are utilizing. I think they look at what we've done with Microsoft, and they view it as, "Hey, this is a real opportunity for you to help our customers," which is only good for and better for them as they mature their own marketplace, their own ecosystem. This really propels them as well.
I think we've ran about it a bit that you guys are kind of a pick-and-shovel play for AI. Maybe elaborate on that. For AI to become as ubiquitous and proliferated as many think it could be, you need a lot of governance and somebody to take that unstructured data and get meaning out of it. How are you guys a pick-and-shovel play? Maybe elaborate just on your view of how AI ultimately helps your business over the short, medium, long term.
Yeah, I mean, picks and shovels, you could pick another acronym or analogy like blocking and tackling. Pick one that you like that meets. I think the premise there is that I think we're doing the things that are not sexy, right? It's the behind the scenes. Somebody was asking me the other day, Jamie and I were talking to this person, and they're like, "I've never heard of AvePoint." It's like, "Yeah, you know what? Because we're behind the scenes, right? We're not customer-facing. We're not, obviously, it's B2B, and we're also kind of behind the scenes. We're not even an end user would have no idea that our technology was supporting them." That's kind of the behind- the- scenes piece or the blocking and tackling and the picks and shovels. Bless you.
I think that really goes to what we've been doing for 20 years. It is really that fundamental foundational things that we're managing, that data that now has become really important when you then put AI models or agents sitting on top of that reasoning over that data. It's the old story, right? If you have garbage in, garbage out. If the data has a bunch of junk in it, then the results you're going to get from the AI modeling are also going to be junk. Whether that's old obsolete data that should have been archived or destroyed or duplicate copies that should have been cleaned out and has not been, that's a problem. When we talk about governance, who has access to what? As the CFO of the company, I may have access to certain information.
The accounts payable staff person who's been with the company for a month should not have the same access to data that, say, the CFO or the CEO does. Yet what we were finding with some of our customers when they were implementing some AI tools, whether it was Copilot or other, even ChatGPT in their own environment, they were surfacing data that should not have been surfaced. That goes to, again, the governance of who has access to what, the permissioning, the tagging of information. Our software allows companies to do that in a very automated fashion so that it's not manual, but automated, flagging those items that are improperly classified or that may create exposure. Therefore, they can be remediated before implementing, say, an AI solution.
You are not surfacing the payroll of everyone in the department or things that we've read about in the papers of the incidents that have happened. I do think it's important. I do think it's a nice tailwind for us because I think it's something that we've thought has been very important for the past 20-plus years. I think now there's a lot more people who agree with us that it is important. Again, we think it's kind of the new normal now that people will just assume that their data is their most important asset and needs to be treated as such.
I don't know if you guys coined the term data estate, but I know you guys said it, and I like it.
I think that might have been Jamie. I think he created that one. It is a very good term.
If you look across your customer base, to what extent do you feel like what percentage of your customers do you think have good control over their data estate? Or maybe just in your TAM, what trends are you seeing of people coming to just reason that we actually need to step on the gas here?
I think I'm not going to get the quote right, but there is a stat we have. I don't think it's in our investor deck, but that there was a CIO survey that talked about your confidence in your data, essentially the question you're asking. The percentage was abysmally low. I want to say in the 20% of the confidence that we have control of our data. That's coming from the people in charge of the responsibility, right? That's a pretty bad statistic in terms of if we think about just where we live as a society in terms of businesses that our IT groups would not be thinking they have control over their data. I think that's bad in terms of how we think about it as companies.
I think that's good for companies like us because I do think that, again, puts a spotlight on the need for better management of the data and better security of that data. That doesn't even talk about all the hacks and ransomware attacks and all of that stuff where you really need to be protected. We're talking about just your own people surfacing data that they shouldn't be surfacing. The protection and the governance over that is really important. Obviously, you have all the security concerns from external threats and even just your own employees not taking the proper care and then exposing the company to all kinds of bad things.
Yeah, I mean, I think overall, even within our customer base, there's still huge opportunities, which has led to really some nice NRR growth for us over the past two years, all-time record highs in NRR growth this past year. I think that's all coming from, number one, we have a platform that people can consume more and more products as they face their additional challenges. I think that's been really good for us. Like you said, I think it's just a heightened awareness that people are seeing the challenges. Fortunately, we're in a position to be able to help them.
I was just going to say, I think more recently with some of our new customer ads and expansions, we've probably done a better job with what you're talking about, Brett, in terms of selling more of the platform. I think if you look back even just a few years ago, it would be very common to just start with a migration offering or just backup and sort of these tactical use cases that we could address. With all the themes that I think Jim has been talking about, you've seen a lot more of the strategic discussions taking place where we're selling more of the platform. In 2024, our Control Suite, which is where our governance products sit, was our fastest growing suite and actually grew kind of high 20s percentages, so outpacing the overall ARR growth.
Resilience is sort of right behind it, which is our backup and storage optimization play. We are seeing a lot more of those new customers starting with those. The other thing that we talked about at our investor day last week were some new packages that we are rolling out to sort of simplify the selling process specific for those two suites as well, which we think is really going to be helpful, I think, with a starting point for customers.
There are three tiers within each suite. Our reps, I think, can very nicely sell and address the use cases that customers are telling us they really care the most about. It also kind of provides a natural map to upsell them to the higher tiers of offerings over time. I think we are seeing better adoption from new customers and better expansion trends. That is really, I think, driven by the overall demand for our platform and some of these dynamics that we have been talking about.
Could you just compare the new selling motion with the tiers to what you had previously?
Yeah, I mean, I think, first of all, the packages are brand new. We're just rolling them out. I think it's really just a simpler way of bundling or packaging them and sort of, again, having the discussion be much more around these use cases and the capabilities that we can offer as opposed to just saying, "We can migrate your data from on-prem to the cloud or from one cloud to another," because I think that kind of dilutes the power of our platform offering. When we sort of, I think, phrase the conversation this way, it's resonating a lot more with these buyers because these are really kind of top-of-mind problems that they can't really, I think, ignore anymore.
I would say across the tech space, software space, SaaS space, there's not a lot of companies, I think, end of the year with record high NRR and gross retention as well. Could you just give more color to that? Is that coming off a lower base? Is that because you're just seeing a shift in patterns from your customers? Is demand really just inflecting materially higher?
Yeah. I mean, it's a great question. Maybe starting with gross retention rate, because when we think about NRR, obviously, first and foremost is GRR. If your GRR is strong and improving, it should have a positive impact on your NRR. It's a good base to start. One of the key things we really have been focusing on over the past couple of years is how do we improve our GRR? You have seen over the past, really, three or four years a steady improvement in that GRR.
Obviously, we ended this year at 89%, which was a record high for us. Again, we are really focused on improving that. We think that gets into the low 90s here in the next couple of years. We feel really good about the progress we have made in GRR. That is really a combination of focus, number one, but also resourcing, making sure we are properly resourced to support our customer base. Secondly is technologies, investing in technologies both within the platform in terms of really the telemetry of the product to understand how our customers are using the product or, more importantly, how they are not using the product, that we can come in and really give them advice in terms of how do they maximize the value of the platform.
External tools as well to really understand our customer usage and where they're at in the platform. What we did this year, really starting in 2024, was really looked at a concept that we've called pooled CS, which would be, if you think about customer success, for us, there is a dedicated CS person for every customer above a certain dollar amount. Below that, there's no dedicated CS. In the past, that group had a very low retention rate, as you would imagine. What we focused on was individually, they're not material customers, right, from a financial point of view. In the aggregate, that cohort is still a significant population. We really focused on a pooled CS concept, which was not dedicated, but still support, and then looking at our digital assets to support that group.
What we've seen really starting in Q3 of 2024 was an improvement in that cohort base in terms of their retention rate and then a further improvement in Q4, both of which helped us kind of accelerate the GRR to record high levels. We are continuing to invest in that part of the business. That is our GRR story. On the NRR, obviously, it starts with GRR. But then as Jamie referred to, this platform play that we do have is really a key because if you think of most of our products, they are licensed on a seat count basis. We are not really getting expansion by selling more seats. There are cases where customers are adding employees, and we are obviously adding more seats. That happens for sure.
The bulk of our upsell is coming from them buying additional products within the platform. As Jamie said, maybe they're buying something from our Control Suite, which maybe is governance. Then maybe they expand to the Resilience Suite, which might include one of our backup products or a storage optimization product. By consuming more of the platform, they're expanding their spend with us. Obviously, that's improving the NRR.
Awesome. I want to touch on M&A and kind of capital allocation. You guys have been somewhat acquisitive, most recently the Ydentic acquisition. Can you just maybe talk about how you guys view capital allocation? You have a ton of cash on the balance, well, not a ton, a lot of cash on the balance sheet. You're buying back shares. You're making acquisitions. What is priority number one for you guys?
Great question. We think about capital allocations really in three components or three pillars, as we refer to them. The first is obviously investing in the business. First and foremost, we want to ensure that we're investing in our development teams. We're investing in the rest of the organization to make sure that they have the resourcing, they have the tools, they have the technologies that they need to be successful and help us continue to grow and support our customers. That's first and foremost. We want to make sure we do that. Second is we believe that M&A is a vital strategy for us to continue to grow and take advantage of the market we're in.
As you mentioned, we've done six, what I would call tuck-in acquisitions to date, so very small. I would consider them more like technology acquisitions. Not really driving revenue or ARR per se, but nice tuck-in technology acquisitions that we believe then plugged into our platform provide more value to our customer base and maybe even expand that customer base. They have been relatively small.
I think when we look at now 2025, I think we are in a position where we believe we can actually do more transformative M&A or at least larger M&A. We have kind of cut our teeth on these six. We think we have integrated them really well. We have executed, and we feel comfortable now and more confident that we can execute on larger opportunities. If you think about it, we went public. We had never done an acquisition before. It was only a couple of years ago. You want to ensure that the integration of whatever you are acquiring is as smooth as possible. Most acquisitions fail, right, after it's the implementation. It's not in the deal structure or that the deal was structured improperly. It's the integration of the organization.
I think we've done a great job on the six that we've done so far. I think we've got a muscle and an experience now to be able to take on bigger opportunities. That's the second kind of capital allocation. The third allocation for us has been just thinking about share repurchases, where it's an opportunity for us to continue to keep the share count as not dilutive as possible in terms of, obviously, we're mindful of that. If there's an opportunity for us to put some capital to work in terms of repurchasing shares, we'll do that. We've done that in the past. We have a program in place, a share repurchase program in place.
As the opportunity arises, we'll be in a position to repurchase shares. For us, that's really the third leg of that stool in terms of capital allocation. Again, we feel that all three are very important. I would say probably leaning more on the first two than the third. Again, we'll utilize all three as necessary.
If previous acquisitions have been kind of tech-focused, not saying that the next acquisitions would be to buy revenues, but what would you look for in a bigger acquisition? Could you be more specific as to what product exposure you might not have now that you would want or what you would see that acquisition looking like? How big are we talking about?
Yeah. Really good question. I think when we think about acquisitions going forward, I think they could fall into maybe three different categories or priorities. One would be we've talked a lot about multi-cloud. I think as we think about acquisitions, if they support our multi-cloud strategy and would help propel that forward, I think that could be a nice opportunity to supplement what we're currently doing organically. The second would be even geographically. We've talked a lot that we have a great presence in North America. It's growing very nicely. EMEA is very strong. Even APAC, probably our fastest growing market, also very strong. We have very little presence in South America, Latin America. I think there's opportunities there as those countries develop and continue to mature. I think there's an opportunity for us to play there.
Even areas like India, which historically has been an exporter of technology, I think they're now starting to become more of a consumer as well of technology. I think there's an opportunity for us to play in that marketplace where in the past we wouldn't have. Again, that's an untapped market for us. We think there's opportunities there. I think geography is like the second opportunity for us. First would be multi-cloud, second would be geography. The third, similar to this identic acquisition we just did in terms of the MSP space that we're playing in, we think there's an opportunity to continue to look at technologies in that space that bolster our Elements platform, which is specifically targeted and focused for the MSP community. We think there's an opportunity to support that and in turn support our MSP customers.
That's a huge growth area for us, has been over the past couple of years. We expect that to continue to be a significant growth area. I think supporting that with potential acquisitions of technology could be a nice support structure. You're right. I think to date, they've all been technology-focused. I do think the size could be larger. Our ticket size to date, I think our largest acquisition was from a purchase price size, a little less than $20 million. I do think we have appetite for significantly larger than that. You're right. If you're spending more, then the actual revenue or ARR associated will be more. I think those next opportunities we look at will probably have a more accretive impact on both revenue and ARR as opposed to just a technology acquisition.
On your path to a billion dollars, to what extent is M&A playing a key role in there?
Great question. When we laid out the plan, and it's funny, we were, I don't know if we talked about this, but we were talking about internally, we've been talking about this billion-dollar target for months. The question came up is, should we at our Investor Day make this internal target a public target? There was some debate back and forth because arguably pretty aspirational. People generally aren't committing a five-year target. We felt like, well, we already have it as a North Star internally. We might as well make it an external target as well and hold ourselves accountable. We put it out there.
Now, when we do that, we look at that almost geographically focused as well in terms of working with our North America team, our EMEA team, and APAC team and talking about their individual goals of how they're going to get us to the billion dollars. Each of those groups has their own component that helps us get there. That has been really rewarding in terms of the accountability that each of those teams has stepped up and taken. That is really good. We feel pretty good that even those groups have a really good chance to get to the billion dollars without any M&A activity.
However, having said that, we do think M&A will play a part in contributing to that target, how much we really haven't specifically laid out. I think it does two things. M&A, I think, does two things depending on the size. Either helps us attain the goal or it helps us attain it faster. I think either one of those is a real positive in terms of achieving the goal.
Maybe just lastly, if you had to say there was one misconception about your stock, what do you think it would be?
Yeah, that's a really good question. It's interesting. I would have said.
I'll offer my opinion. I think we get a lot of people asking if Microsoft is going to co-compete with you guys.
That's a great question. We've been answering that question for 20+ years where people say, well, is Microsoft just going to do what you're doing or why don't they acquire you? We've been answering that question for 20+ years. The short answer is we don't compete against Microsoft. We compete in the ecosystem that is Microsoft. I think Microsoft has demonstrated over the past 30 years that they're a great partner in terms of to participate with.
We are fortunate that we've been a partner for a long period of time. We are at a level that we participate in their development cycles. We get access to their products way early in terms of the roadmap. If and when they were to actually introduce a product that might be competing with our product, we are part of their launch partners. We're part of the dev process. We are intimately familiar with where they are headed. We are tweaking constantly over the past 20 years how we are adjusting and ensuring that we can be co-existing and not only co-existing, but supporting them and their customer to get full value out of the Microsoft product and ensure the customer is getting full value of our products as well, but also making the best use and they're achieving their objectives.
For us, that is a common misconception that somehow we're either competing with them, which is no, we don't resell their products. We are kind of the last mile. Somebody used a good analogy of the city planner where Microsoft has built the city, so all the utilities are in place, everything's in place, but the last connection to your house and the fixtures in the house for the plumbing and everything else, it's like that's where their ecosystem comes into play and that's where we play. We are not building the infrastructure over here, but we are completing the last mile.
Awesome. All right, we'll leave it there. Thank you. Really appreciate it.
Great. Thank you. Thank you very much.