Morning. Thanks for being here. I'm Jason Ader with William Blair, and I'm very pleased to introduce TJ and Jim from AvePoint. 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 williamblair.com. Jim and TJ are going to go through some slides, and then we'll have some time for Q&A, and then we'll have a breakout upstairs right afterwards. Take it away, TJ.
Thank you, Jason. All right. I think we'll just do a quick overview of the thing. I see many familiar faces in this room, so many of you heard the story already, but I'll just have a shortened slide here. Perfect. All right. OK, so AvePoint today, we're the largest SaaS data governance and security player in the Microsoft Office Cloud ecosystem. The data that we really focus around security and governance and management is unstructured data. This is actually 80% of all data out there. A lot of people ask us about how we differentiate with other data aggregators and managers like Databricks and others. We actually work with them. We're another layer, think of us, on top in terms of data orchestration, data governance, and data security.
The unstructured data is really around your emails, your files, your chats, anything that actually is part of our business. Also, we actually deal with business processes, governance on top of that as well. It is a large, addressable market. The immediate market today is, we estimate, about $19 billion. That's in the governance, risk, and compliance space, as well as data replication and protection space. Those are the major things that we do. I'll go quickly over our overall confidence platform and the major components. The medium-term adjacency, it's, of course, in the data intelligence and data integration space, which we also do in terms of data analytics, data integration, data migration. Of course, we already are classified by Gartner in the DSPM ecosystem, so data security, posture management. That's our approach to security. We'll talk a bit more about that.
Security is a massive, massive area. There is opportunity there for us to do both organic investment as well as organic expansion to extend our offering. The customers today are really needing one is, of course, less throat to choke, so to speak. They need enterprise-grade partners, vendors that can actually help them solve their burning data management and governance issues. That is why we offer a platform-first strategy. Also, to make sure that whatever vendors they deploy has to be robust enough to handle some of the most rigorous requirements, whether it is data sovereignty or even government data centers. Also, of course, all the nuances associated with massive data volume. Of course, in the age of AI, this is even more important because your AI is only as good as your data.
Now the commoditization of large commercial LLMs, enterprises are investing into agentic, so reasoning capabilities. But all of that grounds on their corporate proprietary data set. So whatever AI they deploy can speak intelligently about their domain and their industry. This is a quick way to visualize our Confidence Platform. It is a singular SaaS platform. We now have about 50 instances of it running, mostly in Microsoft Azure data centers around the world, including in FedRAMP-certified data center in Arlington, Virginia, which itself is a three-year certification process. We now also have instances running in GCP, so Google Compute Cloud, as well as AWS. Because the world is becoming multi-cloud or is multi-cloud, for us to continue to do the land and expand and continue to improve our NRR, that's the direction that we take.
Jim will talk a bit more about our GR and our retention stats. Overall, the Confidence Platform has three major areas, multiple SKUs around this. The way to think about it is, we do resiliency. That's backup as a service, archiving as a service, storage optimization as a service. Every day, we actually back up well over 600 PB of data globally. We're one of the largest backup as a service providers in the Microsoft Office ecosystem. Overall, resiliency is well over 50% of our full recurring revenue. Then we have the control side, which is data governance, so controlling who has access to what, from where, when, how, and how long does the data live. That's critically important when enterprises are deploying Copilot. Because Copilot, Microsoft Copilot, especially for Office, rely on Office Graph.
No enterprise has their Office Graph permission done properly. This is where we do our software automatically go to do provision management, recertification, and time leasing management of all contents, all channels, all chats. This essentially has the ability to then influence how AI grounds on this content to make sure that it's not based on redundant, out-of-date, trivial content and also help customers to really manage the time sensitivity of data sets. Lastly is modernization. Control, by the way, is our fastest growing suite since last year. We see that one of the major drivers is actually AI deployments across enterprises. Lastly is the modernization. It's really data analytics, data integration, data migration. We've been around for 20 + years.
We understand all the enterprise content systems under the sun, whether it's legacy stuff like Documentum, HP Trim, OpenText, even IBM Lotus Notes, or cloud- to- cloud. Companies will never finish moving data. Think about this as data set moves, whether it's from Box, Dropbox, Google, Salesforce to Microsoft, vice versa. For example, Shell's been a customer of ours for 15 years. They never stopped moving data. There's divestitures, there's acquisitions. Anytime you move, it's actually not just a simple lift and shift. It's actually reorganizing content, making sure that you can preserve metadata tags, preserve business processes, but completely rejiggle the way schema and data are structured. That's also another major business of ours. It's a smaller portion of our recurring because a lot of this has to be services orientated.
We actually start to give away a lot of that service capability to our partners. This is how we were able to reduce the total amount of service as part of revenue from 20% when we have gone public in 2021 to now just under 12%. Our goal is to get that under 10%. We will always have the service component because that also allows us to do a certain amount of premium services with our large enterprise customers as well as our MSP customers. I will mention about MSP a bit. That is how we stay close to customers. These days, with rapid disruption and change, especially with agentic AI, it is critical for vendors to stay very close to the customers to see where the puck is going. Overall, in terms of compete landscape, it has always been competitive.
Since I've been doing this business for 20 + years, that hasn't really changed. We have point competitors. We don't have a holistic competitor given our background from this enterprise content management space where we focus on the end-to-end lifecycle management of unstructured data. We also have different point competitors in different segments. We're unique in that while we're not yet that large, we're very global, and we're also cross-sectional. 53% of our recurring revenue come from companies with 5,000 employees and up. The other 47% come from small to medium-sized businesses. Especially small businesses with less than 500 employees, that's now just under 20% of our business. That's growing very, very fast. For context, that's actually 40% of Microsoft revenue pie. There's a lot of uplifting to grow from all the segments. We're very excited about that.
That is how we actually look at the go-to-market motion. We license by number of employees majority of the time, just like Microsoft license Office. There are increasingly areas where we are actually licensed by consumption. Obviously, migration is a consumption play. Also, even with the data governance and security side, as increasingly enterprises are taking a very ROI-driven approach to AI rollouts, not an enterprise-wide approach, there are more opportunities for us to do the consumption-based model. I spoke a bit about the multi-cloud. We are investing aggressively into the multi-cloud. You probably saw some announcements from us on the Google relationship. All the pains that we solve in the Microsoft Cloud ecosystem exist in the Google ecosystem, very analogous. You talk about the things that we do for Copilot also exist for Gemini.
It is really a concept of making sure that your enterprise AI is grounded on really high-quality, relevant, up-to-date data. That is fundamentally what that is. Also, of course, access control. Who has access to it, from where, when, for how long? That is an increasing offering set we start to deploy into the Google ecosystem. Our path, we declared at our most recent investor day to get to $1 billion ARR. We are pretty confident on that. That is a 25% CAGR going forward. Jim will talk a bit more about our financial performance.
Thanks, TJ. I am going to come back to this slide, but just suffice to say that we believe we have a very compelling equity story. TJ has touched on a bunch of these issues. I am going to come back to this at the end. We believe that there is tremendous growth potential.
TJ talked about the TAM, the expanding TAM. We think that we're in the right space at the right time. We have a tremendous diverse customer base. TJ talked about the three different segments that we play in. You'll see some of the names on our website. It's really a who's-who's list of the companies we play with and actually help in their opportunity and their growth. They're dealing with, obviously, the challenges that they face. Obviously, the strong financial performance. We've had nine straight quarters where we've exceeded the performance that we set for ourselves. We're proud of that. Obviously, there's still a lot more work to do. Some of the highlights from the first quarter of 2025, you can see here total ARR growth of 26% year- over- year, solid performance.
Maybe the biggest highlight in terms of our ARR growth is the second line here, where we had net new ARR in the quarter of really $18.5 million or 85% year-over-year growth. Really stellar performance from all three of our regions across the globe. Really proud of the teams in terms of their execution. It is obviously reflected in our growth. SaaS revenue is up 34%. On a constant currency basis, 37%. Total revenue up 25%. This kind of aligns with, obviously, what TJ was talking about, our long-term CAGR of 25% to get to that $1 billion of ARR. Q1 is reflective of our kind of plan to get there. Obviously, the numbers reflect our ability to do that. We talked about retention, a couple of different points. For us, it is gross retention and net retention. Gross retention stands at 89%.
Net retention is at 111. Again, good progress toward our longer-term targets here. On the long term, we're expecting that 89% to be 90+ %. On our net retention rate, that 111, we see that getting to 115. Again, good progress to date. We still think there's tons of room for improvement. We have a number of initiatives that we're working toward improving these numbers. Again, we feel good about where we're at right now, but lots of room for improvement. Obviously, the last thing on the page is just our operating margin. We are just under 14.5%. Really good start to the year. Traditionally, Q1 is our weakest quarter, coming off of the big Q4 generally in software, particularly in the U.S. Again, really pleased with the performance of Q1.
I think sets us up really well for the rest of the year. Some of you who have heard me talk about this slide, you know this is my favorite slide. I do think it encapsulates AvePoint in really one picture, talks about the balance and diversity of our company. On the left-hand side, we talk about industries. You can see here that there is really no concentration in any one industry. We service really every industry. Every industry has the same data management, governance, security challenges that we address. That is why you see this great diversification in terms of industries. On the right-hand side of the page, you see a variety of pie charts covering all these different aspects of our business, whether it is geography. Talked about the three different regions we play in.
North America represents about 44% of the business, EMEA 35%, and APAC the balance. For a company of our size, this is a really unique, I think, distribution of our ARR. Normally, a company sub-$400 million would be concentrated maybe just in North America. Maybe they've dabbled a little bit in the U.K., maybe a little bit in Australia. To have this diversification, I think, demonstrates that we've done some of the hard things first, which is build the foundation of the organization on a global scale that now allows us to scale up and really grow without some of those impediments of having to build out an infrastructure. This gives us some of the confidence to get to that billion dollars over the next several years.
The rest of these kind of direct versus channel, again, just shows our balance all the way down to customer segments, as TJ alluded to earlier. Really good diversification. That customer segment is another unique aspect, I think, of AvePoint in that, again, most companies our size would concentrate in one area. Maybe they're an SMB player. Maybe they're an enterprise player. You can see here that we're actually providing solutions that cut across all customer segments and address the needs of our customers. I guess it was our first investor day, and really almost two and a half years ago now. We started talking about this phrase, and you've heard us say it a thousand times, profitable growth.
I think this slide encapsulates what we were talking about back in 2022, where you guys remember back in 2022, obviously, there were companies laying off people. There were tons of rifts. We were coming kind of out of the COVID pandemic. There was kind of this rebound of people trying to right-size their businesses. There was a lot of turmoil and concern. The idea of software companies just growing at any costs fell out of favor. All of a sudden, it was, hey, what's the pathway to profitability? We made a commitment at that point that said, we are focused on profitable growth. We're going to demonstrate that we have a pathway to profitability. Obviously, this was at the end of 2022.
I think what you see here, both in 2023, 2024, and now in Q1 of 2025, is the execution against what we committed to do back at the end of 2022. You can see on the left-hand side, revenues, you see this nice continued growth, ending with the 25% year-over-year in Q1 that we talked about. You can see nice gross margin improvement in the middle of those bar charts from 72+ % up to now almost 76% in gross margins. It obviously starts there. When you think about profitable growth, if you can improve your gross margins, it starts there and trickles down. If we move over to the operating expenses, you can see here that we made significant improvement in terms of leveraging our expenses. On the bottom chart, or the bottom part of the bar chart, is our sales and marketing expenses.
You can see that they were about 41% of revenues back in 2023. These are on a trailing 12-month basis. Now that has dropped to under 34% of revenue. Again, good leverage coming out of our sales and marketing. The top of the chart is our G&A. You can see also almost 19%, down to under 15%. The middle is our R&D, which we believe is the lifeblood of the company and something we want to keep in that 12% range. Again, we have done a good job of reinvesting in initiatives and obviously technology. That translates to the right-hand side, which is ultimately the profitability. You can see that we were effectively break-even on a trailing 12 months back in Q1 of 2023. That has improved now to almost 16% in Q1 of 2025. Good progress.
I think hopefully demonstrating that what we said we were going to do back in 2022, we've obviously been executing. We believe we can continue this moving forward. That operating income obviously translates to really nice free cash flow. You can see the improvement here again. Minimal free cash flow back in 2023. That improved significantly, where the trailing 12 months is now $77 million. At the end of 2024, we had about 26% free cash flow margins. Again, really strong dynamics in the business, healthy cash flow generation. People ask about capital allocation all the time. We're sitting with $350 million of cash on the balance sheet. You just saw the free cash flow generation. What are you guys doing with the cash? This is how we think about the allocation of capital in these three major buckets.
First, obviously continuing to invest in the business for profitable growth. It's important that we invest in our teams, ensuring that they have all the right resources. That's both people resources. It's also technology, particularly now in the age of AI, ensuring that they have the right technology to execute and deliver that profitable growth. That's first and foremost. That won't change. Second is obviously M&A. It's a vital part of any company's thought process in terms of supplementing what we can do organically. How can we supplement that inorganically? It's something we've done in the past. We've done six acquisitions to date, all tiny little tuck-in acquisitions. I do think we've demonstrated our ability to not only acquire those companies, but assimilate those into the broader organization. I think we're poised to do even larger acquisitions at this point.
The last is share repurchases, where we've done some of this in the past. We have a program, an authorized program to purchase up to $150 million of our own stock. That is broadly how we think about capital allocation. I've kind of touched on some of these long-term targets. I know we only have a little over eight minutes left, Jason, so I'm going to almost end here in a second. Long-term targets, we think 80% gross margins. Sales and marketing goes from that 33% down to 30%. R&D stays in that 12%-12.5% range. G&A goes from right now the 14% range down to 10%. Again, really good progress toward those goals. That leaves us with operating margins of the high 20s, 27.5%.
Our stock-based compensation, which is around 12% at the end of last year, we believe gets to 10% this year and below 10% moving forward. Since the presentation is frozen, I think we're going to end here. This is maybe a good way to end it.
All right. Leave that up there. One of the main questions, I guess, on AvePoint I get a lot is just, who are you competing against? Maybe you can talk a little bit about the competitive landscape. In particular, I'm obsessed with this question, which is that actually today, later today, we have Commvault and Varonis, which are both sort of quasi-competitors to you.
They take kind of a horizontal approach to a specific function within data management, like Commvault and backup, Veritas in data governance, where you guys have more of like a vertical stack around an individual ecosystem like Microsoft or Google. Can you just talk about how that works inside a company? How do they buy this technology? Is it just sort of dependent on the company, where some companies want more of a vertical approach and some companies want more of a horizontal approach?
Yeah, I think a few years ago you would have company IT that organized with a backup group and a risk group that they would have their own purchase decisions. Increasingly, with the way that everyone's centralizing on cloud, on the new technology, because that's where things are revving the fastest, increasingly you see that group become merged into one.
That worry about fundamentally AI and security. Underneath of that, that substrate is data. They have to worry about how secure is their data, the quality of the data, and the curation of that to accelerate, obviously, the collaboration, velocity of innovation, etc. That is how we see the conversation changing. When we have conversation with our customers, it is not just a backup conversation, not a governance conversation, or a data analytics migration conversation. It is actually one of data governance and data quality conversation. You see this is why Salesforce actually went out and bought Informatica, because they are missing that kind of data analytics story. That is how we think about it. We think it is really one collective problem set. Yes, you do see the backup vendors, even a Rubrik and others, that are horizontal, just to back up. We see them from time to time.
More importantly, we think that the conversation that we're having, it's just different. We do see multiple occasions where we are actually co-deployed in accounts, where they could have some Veritas or some Commvault, and then even some Varonis. Different aspect, because you have to understand the tech space is pretty complex and nuanced. Varonis' strength is in file share, security audits, and remediation. They're very, very new to cloud. Especially the nuance of entirety of Microsoft Office Cloud is actually quite complex. We have been doing that for 12 + years, and we continue to do that. Of course, I think even backup players, you see that they're trying to pivot toward the security story, because they also know backup alone is no longer sufficient. It's a bit of a race to the bottom, commoditization.
Everyone's trying to pivot towards different type of value propositions so they can be more strategic to the customer. That's how we see things. We don't really see it as a backup story or a separate governance story. This is why when we actually deploy into accounts, when we have two or more of these products, our retention rate goes through the roof. We are able to really have the high NR as well so we can get the recurring revenue from those customers.
Great. The next obvious question that people ask, I think, is you're very tight with Microsoft. You've been a partner for 25 years or something, right? Yeah. Pretty long time. What's to stop them from kind of doing more of this stuff in-house themselves? I mean, you see in security, they've really pushed hard into the security space.
I do not know that that has massively disrupted some of the players, but I would say it has had an impact on some of those pure play security names. Why should we not be worried about that?
That is a great question. I like to say we do not compete against Microsoft. We compete within this trillion-dollar Microsoft ecosystem. There is plenty of room to grow. I was at the Microsoft CEO Summit two weeks ago, where we spent two and a half days with Satya, with Bill Gates, one of the most commonly, the highest attendance session in cybersecurity that you talk about. They actually say, yes, their biggest competitor in this space is CrowdStrike and SentinelOne. They also know that customers do want to have third party as well. They do not want to trust everything with one vendor. There is always that dynamic happening.
For us, really, we see massive opportunity in the ecosystem. We stay very close to our customers, fundamentally. Customers today are intentionally multi-cloud because they do not want to trust their entire stack with one hyperscaler. Also, the problems that we address are fundamentally different than Microsoft's motivation. For example, Microsoft will want everyone to buy the Cadillac version of every license type, whereas we actually help customers consolidate and coalesce data management and governance consistency across different license types and also across multi-cloud. Those are things that the hyperscaler would never help their customer to do. We really, in this case, behave like an advocate for the customer. Because we are very close on the product side, we are one of the top global partners, we actually also forecast where Microsoft is going in the next year, two years.
Then we can actually anticipate the new monetization areas. Again, dancing with the elephant for 20 + years, we know how to work with that. Of course, there are always baseline improvements from the hyperscalers that from time to time will remove different aspects of our offering. We like to think about it as a very good coexistence where we actually complement. For example, we do work with Purview. It is not a pure all or nothing type of story. We also work with customers who do not have Purview coverage for the entire enterprise, who do not have Purview coverage for multi-cloud. These are things that fundamentally are just not in the interests of Microsoft to do. That is how we come across to the customer as a value-added provider.
Lastly, I would say it's because this MSP segment that we are really growing very well, we actually now roll out license control management for them because everyone is also conscious about cost. Again, recently we had a meeting with a, and we sell this to the SMB customer because they're so conscious about that. MSPs managing hundreds of tenants, right? License management is a big, big topic. Recently we showed this capability to a large enterprise customer, a 130,000 seats customer in Europe, where I actually showed them on a dashboard, say, hey, you're actually over-licensed on the Microsoft side by $2 million a year. The Chief Procurement Officer nearly fell off his chair. He checked all our numbers, it's correct. Yeah, there's another thing. Most cloud consumption today, at least 40% is considered wastage.
There is a ton of room for ecosystem partner like us who think really for the benefit of the customer to grow.
Okay, great.
Maybe last question because we are at 30 seconds left.
In your experience at these conferences, talking to investors, you guys have been public now for, what, four years or something. What do you think investors most underappreciate about the AvePoint story? I know you want to take that one, Jim.
Yeah, I mean, I'll start and then TJ can add. I think that one slide, my favorite slide, that balance slide, I do think is something that's underappreciated. How hard it actually is to build a global organization and be as diversified as we are playing in really three different geographies, three different customer segments, and really establishing a platform that isn't just a point solution, but solves multiple problems for our customers.
I think sometimes that's underappreciated because I think you just assume, you see companies like the hyperscalers and you just assume, oh, well, everybody can do that. It is not easy. I think it's taken us a ton of work to get there. However, I do think now we're positioned, and I think this is the underappreciated part, that since we are this global organization, the scaling from here is actually easier than the scaling to get here. All of that infrastructure that's in place, all of the layers of management in terms of being able to manage those teams across the globe, I think we've done those hard things first. Now, not that it's ever easy, but I do think our ability to scale from here is much easier than getting to here.
Yeah, I concur.
We built this business, we would not take this business public in 2021 with just $60 million primary capital, no debt. We are super disciplined and efficient. We built this infrastructure that is highly scalable now. We are more excited than ever before in that we started in the direct sales, large enterprise, the hard things first. Now we have the flywheel of channel. We have the SMB. We, of course, have enterprise. We have done the full subscription conversion before we went public. Everything now is that flywheel. As we continue to improve the NRRs, retention numbers, you have a lot more predictability on the revenue growth. We will not slow down on the top line new logo acquisitions as we continue to also expand our IP offering with really native product integration. We do not believe in acquisitions where you accumulate tech debt.
I think those are the most dangerous type of acquisitions to do. Especially in the next few years, you will see where our tech capacity is half of our population is in developers. So that's also a major advantage that we have to continue to rev and stay ahead of the curve. Because in the next few years, you will see a lot of the existing vendors will not be able to transition properly these highly disruptive agentic AI times, where even fundamentally the way code are being developed, deployed, and managed in the next few years will change.
Okay, thank you guys very much.
Thanks, everybody. Appreciate it here.
We're going to go upstairs to Jenny A for the breakout. Jenny A.
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