What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-02-29 compared with 2023-03-31 · 210 added, 298 removed, 152 unchanged (77% of the section changed)

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock began trading on the Nasdaq Global Select Market (the “

Nasdaq ”) under the symbol “AVPT,”

and our public warrants began trading on the Nasdaq under the symbol “AVPTW”

on July 2, 2021.

Prior to the consummation of the Apex Business Combination on July 1, 2021, Apex Units, Apex Public Shares, and Apex Public Warrants were each traded on the Nasdaq Capital Market under the symbols “APXTU,”

“APXT,”

and “APXTW,”

respectively.

Apex Units commenced public trading on September 17, 2019, and Apex’s Public Shares and Public Warrants commenced separate public trading on November 5, 2019.

In connection with the closing of the Apex Business Combination, each Apex Unit was separated into its components, which consisted of one share of Class A common stock and one-half of one warrant, and such Units no longer exist.

As of December 31, 2022, there were 189,467,338 shares of our common stock, including treasury shares, issued and outstanding held of record by 27 holders, and 17,905,000 warrants outstanding held of record by two holders.

Our common stock is traded on the Nasdaq Global Select Market (the “ Nasdaq ”) under the symbol “AVPT,” and our public warrants are traded on the Nasdaq under the symbol “AVPTW”.

Current Stockholder and Common Stock Information

On March 31, 2023, just prior to the date of this Annual Report, there were 191,399,177 shares of common stock issued and outstanding held of record by twenty-seven holders, and 17,905,000 warrants outstanding held of record by two holders.

On February 29, 2024, there were 184,010,832 shares of common stock issued and outstanding held of record by thirteen holders, and 17,905,000 warrants outstanding held of record by two holders.

This figure does not include a substantially greater number of beneficial holders of our common stock and public warrants whose shares (or warrants to purchase shares) are held by banks, brokers, and other financial institutions.

Dividend Policy

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and, therefore, we do not anticipate paying any cash dividends in the foreseeable future.

Any future determination to pay dividends is at the discretion of our Board, subject to compliance with covenants in current and future agreements governing our and our subsidiaries’

indebtedness, and will depend on our results of operations, financial condition, capital requirements, and other factors that our Board may deem relevant.

Except as noted in “

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations ”

below, there are currently no contractual restrictions on our ability to pay dividends in cash or shares.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and, therefore, we do not anticipate paying any dividends in the foreseeable future.

Any future determination to pay dividends is at the discretion of our Board, subject to compliance with covenants in current and future agreements governing our and our subsidiaries’ indebtedness, and will depend on our results of operations, financial condition, capital requirements, and other factors that our Board may deem relevant.

Except as noted in “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” (Part II, Item 7 of this Annual Report) below, there are currently no contractual restrictions on our ability to pay dividends in cash or shares.

Securities Authorized for Issuance Under Equity Compensation Plans

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ”

(Part III, Item 12 of this Annual Report) and “

16  —

Stock-Based Compensation ”

(Part II, Item 8 of this Annual Report) for more information.

See “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” (Part III, Item 12 of this Annual Report) and “ Note 15 — Stock-Based Compensation ” (Part II, Item 8 of this Annual Report) for more information.

Items 5 and 6

Issuer Purchaser of Equity Securities

On March 17, 2022, we announced that our Board of Directors authorized a new share repurchase program (the “

Share Repurchase Program ”) for us to buy back shares of our common stock.

Under the Share Repurchase Program, we have the authority to buy up to a maximum of $150 million of our common stock shares via acquisitions in the open market or privately negotiated transactions.

On March 17, 2022, we announced that our Board authorized a new share repurchase program (the “ Share Repurchase Program ”) for us to buy back shares of our common stock.

Under the Share Repurchase Program, we have the authority to buy up to $150 million of our common stock via acquisitions in the open market or privately negotiated transactions.

The Share Repurchase Program will remain open for a period of three years from the date of authorization.

Purchases made pursuant to the Share Repurchase Program will be conducted in compliance with Exchange Act Rule 10b-18 (or pursuant to a plan implemented in response to Exchange Act Rule 10b5-1(c) for parties that frequently have access to material nonpublic information, such as our executive officers and directors) and all other applicable legal, regulatory, and internal policy requirements, including our Insider Trading Policy. We are not obligated to make purchases of, nor are we obligated to acquire any particular amount of, common stock under the Share Purchase Program.

Purchases made pursuant to the Share Repurchase Program may be conducted in compliance with Exchange Act Rule 10b-18 and/or Exchange Act Rule 10b5-1.

Purchases made pursuant to the Share Repurchase Program will be conducted in compliance with all other applicable legal, regulatory, and internal policy requirements, including our Insider Trading Policy.

We are not obligated to make purchases of, nor are we obligated to acquire any particular amount of, common stock under the Share Purchase Program.

The Share Repurchase Program may be suspended or discontinued at any time.

The following table presents information with respect to common stock shares repurchased under the Share Repurchase Program during the period from October 1, 2022, to December 31, 2022:

The following table presents information with respect to common stock shares repurchased under the Share Repurchase Program during the period from October 1, 2023 to December 31, 2023:

Total number of shares purchased (1)

Average price paid per share (2)

Cumulative number of shares purchased

Maximum remaining dollar value of shares that may yet be purchased under the Share Repurchase Program (3)

October 1, 2022 - October 31, 2022

November 1, 2022 - November 30, 2022

December 1, 2022 - December 31, 2022

(1) All shares reported herein were purchased pursuant to the publicly announced Share Repurchase Program.

(2) Average price paid per share includes costs associated with the repurchases.

Total number of shares purchased as part of the Share Repurchase Program

Approximate dollar value of shares that may yet be purchased under the Share Repurchase Program (3)

October 1, 2023 -

October 31, 2023

November 1, 2023 -

November 30, 2023

December 1, 2023 -

December 31, 2023

(1) All shares reported herein, including shares repurchased to satisfy employee taxes on vesting RSUs, were purchased pursuant to the publicly announced Share Repurchase Program.

(2) Average price paid per share includes costs associated with the repurchases, but excludes the 1% excise tax on stock repurchases enacted by the Inflation Reduction Act of 2022.

(3) The maximum remaining dollar value of shares that may yet be purchased under the Share Repurchase Program is reduced by the aggregate price paid for share purchases in addition to any fees, commissions, or other costs that may arise as a result of the purchases.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ( “

MD&A ”

) summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. 

The MD&A should be read in conjunction  

with the other sections of this Form 10-K, including our audited, consolidated financial statements and related notes contained in Item 8.

Financial Statements and Supplementary Data, and the discussion of risk factors that may affect future results in Item 1.A.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management ’s Discussion and Analysis of Financial Condition and Results of Operations ( “ MD&A ” ) summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below.

The MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K, including our audited, consolidated financial statements and related notes contained in Part II, Item 8.

Financial Statements and Supplementary Data, and the discussion of risk factors that may affect future results in Part I, Item 1.A.

Risk Factors.

This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

For a discussion of the year ended December 21, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “ Management ’s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2022.

2023 Business Highlights

Total ARR increased 27% year-over-year to $201.7 million as of December 31, 2022.

On an FX adjusted basis, total ARR increased 32% year-over-year;

Total revenue increased 21% year-over-year to $232.3 million for the year ended December 31, 2022.

On a constant currency basis, total revenue increased 29% year-over-year;

SaaS revenue increased 37% year-over-year to $117.2 million for the year ended December 31, 2022.

On a constant currency basis, SaaS revenue increased 46% year-over-year;

Completed the acquisition of four companies during 2022, further enhancing the Company's talent, product offerings, and distribution capabilities with a strong focus in the digital workplace and EdTech markets;

Announced a 100 million SGD international research and development hub in Singapore to support the growing demand for our SaaS solutions.

AvePoint provides a cloud-native platform that organizations rely on to optimize IT operations, manage critical data and secure the digital workplace.

As companies around the world embrace the new normal of hybrid work, they must build and deliver a new, seamless workplace experience for knowledge workers, centered around an extensive portfolio of SaaS solutions and productivity applications aimed at improving collaboration across the organization.

The adoption of this portfolio of solutions –

what has been generally described as the “digital transformation”

is a substantial and ongoing challenge for most organizations, which for decades had previously relied upon only a small number of multi-purpose on-premises applications to drive business outcomes.

However, to build and deliver an efficient digital workplace today, companies must address this abundance of applications and the associated explosive growth and sprawl of data with a platform offering that is well governed, fit for purpose, easy to use and built on automation.

AvePoint’s Confidence Platform empowers organizations –

of all sizes, in all regions, and across all industries –

to optimize and secure the solutions that most commonly establish and underpin the digital workplace.

Total annual recurring revenue (“ ARR ”) increased 23% year-over-year to $264.5 million as of December 31, 2023.

On a foreign exchange (“ FX ”) adjusted basis, total ARR increased 24% year-over-year;

Total revenue increased 17% year-over-year to $271.8 million;

SaaS revenue increased 37% year-over-year to $161.0 million;

GAAP operating loss was $15.4 million dollars, or a GAAP operating margin of (5.6)%, representing year-over-year margin improvement of more than 1,200 basis points.

Non-GAAP operating income was $22.2 million dollars, or a non-GAAP operating margin of 8.1%, representing year-over-year margin expansion of over 930 basis points;

Cash flow from operations was $34.7 million, compared to $(0.8) million for the year ended December 31, 2022.

AvePoint provides a cloud-native data management software platform that organizations rely on to manage and protect critical data, optimize IT operations, achieve meaningful cost savings, and efficiently secure the digital workplace.

Companies around the world have now fully adopted a hybrid work model, and they are now tasked with delivering a seamless and secure workplace experience for knowledge workers, centered around an extensive portfolio of Software-as-a-Service (“ SaaS ”) solutions and productivity applications.

The adoption of this portfolio of solutions is a substantial and ongoing challenge for most organizations, which for decades had used only a small number of multi-purpose on-premises applications to drive business outcomes.

However, to deliver an efficient digital workplace today, companies must manage this range of applications – and the associated explosive growth and sprawl of critical data – with a platform offering that is well governed, fit for purpose, easy to use and built on automation.

In addition, many organizations are beginning to realize the potential of generative artificial intelligence (“ AI ”) to drive competitive advantage and value creation, including (1) extracting greater value from complex datasets, (2) making more informed business decisions, (3) reducing employee workloads, and (4) improving the overall customer experience.

While these data-driven improvements are expected to lead to stronger revenue growth and operational efficiency, successfully leveraging this new technology is in turn dependent on first addressing data management challenges that all organizations face.

Specifically, for AI-driven projects to succeed, companies must apply robust strategies across the data estate to manage the information lifecycle, properly govern and secure their data, and ensure its compliance.

These are the core business problems that AvePoint has been solving for more than two decades, and why we believe AvePoint is well positioned to be a key enabler of generative AI adoption within enterprises in the coming years.

AvePoint’s Confidence Platform empowers organizations – of all sizes, in all regions, and across all industries – to optimize and secure the solutions that most commonly establish and underpin the digital workplace.

As our customers seek to rapidly reduce costs, improve productivity and make more informed business decisions, they depend on our platform for data-driven insights, critical business intelligence and ongoing operational value through automation.

The 2021 Business Combination

On November 23, 2020, Legacy AvePoint and the members of the Apex Group entered into the Business Combination Agreement, and following a series of subsequent mergers, on July 26, 2021, we became the successor to an SEC-registered and Nasdaq-listed company.

Key Business Metrics

Our management reviews the following key business metrics to measure our performance, identify trends affecting our business, formulate business plans, make strategic decisions, and effectively allocate resources.

We disclose key business metrics within the MD&A and elsewhere in this Annual Report to enable investors to evaluate progress against our growth strategies, provide transparency into performance trends, and reflect the continued evolution of our products and services.

Our key business metrics are fundamentally interconnected and indicative of how customers use our products and services.

However, increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue.

The chart below illustrates certain of our key business metrics, each described in more detail below, as of the end of or for the periods presented.

Our key business metrics are further discussed in the section titled “

Notes to Consolidated Financial Statements ”

(Part II, Item 8 of this Annual Report).

Total ARR ($ in mil)

Core TTM dollar-based net retention rate (1)

(1) On an FX adjusted basis, Core TTM dollar-based net retention rate was 108% and 109% for 2022 and 2021, respectively.

Key Business Metric

Our management reviews the following key business metric to measure our performance, identify trends affecting our business, formulate business plans, make strategic decisions, and effectively allocate resources.

We believe that both management and investors benefit from referring to this metric to evaluate progress against our growth strategies and gain additional transparency into performance trends.

Annual Recurring Revenue

We calculate annual recurring revenue (“

ARR ”) at the end of a particular period as the annualized sum of contractually obligated Annual Contract Value (“

ACV ”) from SaaS, term license and support, and maintenance revenue sources, with the exception of migration products, from all active customers.

As of December 31, 2022, and December 31, 2021, total ARR was $201.7 million and $159.2 million, respectively, representing growth of 27%. Growth in ARR is driven by both new business and the expansion of existing business.

ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with, or to replace, either of those items.

ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

Beginning in 2023, the Company will include migration products in the calculation of ARR.

For 2022 and 2021, ARR from these products totaled $13.0 million and $8.0 million, respectively.

Core TTM Dollar-Based Net Retention Rate

We use a TTM dollar-based net retention rate to evaluate our ability to expand our revenue with our Core customer base, which are those with a contract duration exceeding three months.

Core TTM Dollar-Based Net Retention Rate ”

as of a period end is calculated by starting with the ARR from the cohort of all Core customers as of 12 months prior to such period end (the “

Prior Period ARR ”).

We then calculate the ARR from these same Core customers as of the current period end (the “

Current Period ARR ”).

Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period.

We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the Core TTM Dollar-Based Net Retention Rate.

Beginning in 2023, the Company plans to report this metric for its entire base of customers.

For 2022 and 2021, this metric was 103% and 110%, respectively.

Total ARR ($ in mil)

We calculate ARR at the end of a particular period as the annualized sum of contractually obligated Annual Contract Value (“ ACV ”) from SaaS, term license and support, and maintenance revenues from all active customers.

As of December 31, 2023, and December 31, 2022, total ARR was $264.5 million and $214.7 million, respectively, representing growth of 23.2%.

Adjusted for FX, total ARR increased 24.0% year-over-year.

Growth in ARR is driven by both new business and the expansion of existing business.

ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or replace these items.

ARR is not a forecast of future revenue, and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

Components of Results of Operations

We generate revenue from four primary sources: SaaS, term license and support, services, and maintenance.

SaaS revenue sources are generated from our cloud-based solutions.

Term license and support revenue sources are generated from the sales of on-premises or hybrid licenses which include a distinct support component.

Both SaaS and term license and support revenue sources are primarily billed annually.

We generate revenue from four primary sources:

SaaS, term license and support, services, and maintenance.

SaaS revenues are generated from our cloud-based solutions.

Term license and support revenues are generated from the sales of on-premise or hybrid licenses which include a distinct support component.

Both SaaS and term license and support revenues are primarily billed annually.

SaaS and term license and support are generally sold per user license or based upon the amount of data protected.

Services revenue includes revenue generated from implementation, training, consulting, migration, license customization and managed services.

SaaS revenue is recognized ratably over the term of the contract.

For term license and support revenue, the license component is generally recognized upfront at the point in time when the software is made available to the customer to download and use, and the support component is recognized ratably over the term of the contract.

Services revenue includes revenue generated from implementation, training, consulting, license customization and managed services.

These revenues are recognized by applying a measure of progress, such as labor hours, to determine the percentage of completion of each contract.

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Services revenue from managed services are recognized ratably or on a straight-line basis over the contract term.

Maintenance revenue is a result of selling ongoing support for perpetual licenses.

Maintenance revenue is a result of selling on-going support for legacy perpetual licenses.

It also includes recurring professional services such as technical account management.

Maintenance revenue is recognized ratably over the term of the maintenance agreement, which is typically one year.

We expect SaaS revenue will continue to increase as a percentage of total revenue, as our focus on increasing revenues from this offering remains a strategic priority.

Cost of Revenue

Cost of SaaS and cost of term license and support consists of all direct costs to deliver and support our SaaS and term license and support products, including salaries, benefits and related expenses, allocated overhead, and third-party hosting fees related to our cloud services.

Cost of SaaS and cost of term license and support consists of all direct costs to deliver and support our SaaS and term license and support products, including salaries, benefits, stock-based compensation and related expenses, overhead, third-party hosting fees related to our cloud services, depreciation and amortization.

We recognize these expenses as they are incurred.

We expect that these costs will increase in absolute dollars but may fluctuate as a percentage of SaaS and term license and support revenue from period to period.

Cost of maintenance consists of all direct costs to support our perpetual license products, including salaries, benefits, stock-based compensation and related expenses and allocated overhead.

Cost of maintenance consists of all direct costs to support our legacy perpetual license products, including salaries, benefits, stock-based compensation and related expenses, overhead, depreciation and amortization.

We recognize these expenses as they are incurred.

We expect that cost of maintenance will decrease in absolute dollars as maintenance revenue declines but may fluctuate as a percentage of maintenance revenue.

Cost of services consists of salaries, benefits, stock-based compensation and related expenses for our services organization, allocated overhead and IT necessary to provide services for our customers.

We expect that cost of maintenance revenue will decrease in absolute dollars as maintenance revenue declines but may fluctuate as a percentage of maintenance revenue.

Cost of services consists of salaries, benefits, stock-based compensation and related expenses for our services organization, overhead, IT necessary to provide services for our customers, depreciation and amortization.

We recognize these expenses as they are incurred.

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Gross profit has been and will continue to be affected by various factors, including the mix of our revenue, the costs associated with third-party cloud-based hosting services for our cloud-based subscriptions, and the extent to which we expand our customer support and services organizations.

We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors but should increase in the long term as SaaS revenue continues to increase as a percentage of total revenue.

We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses for sales, marketing and customer success personnel, stock-based compensation expense, sales commissions, marketing programs, travel-related expenses, and allocated overhead costs.

Sales and marketing expenses consist primarily of personnel-related expenses for sales, marketing and customer success personnel, stock-based compensation expense, sales commissions, marketing programs, travel-related expenses, overhead costs, depreciation and amortization.

We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand.

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General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for finance, legal and compliance, human resources, and IT personnel, as well as, stock-based compensation expense, external professional services, allocated overhead costs and other administrative functions.

Our general and administrative expenses have increased as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services.

General and administrative expenses consist primarily of personnel-related expenses for finance, legal and compliance, human resources, and IT personnel, as well as stock-based compensation expense, external professional services, overhead costs, other administrative functions, depreciation and amortization.

Our general and administrative expenses have increased as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services.

Research and Development

Research and development expenses consist primarily of personnel-related expenses incurred for our engineering and product and design teams, as well as stock-based compensation expense and allocated overhead costs.

We have a research and development presence in the United States, China, Singapore and Vietnam.

This provides a strategic advantage, allowing us to invest efficiently in both new product development and increasing our existing product capabilities.

Research and development expenses consist primarily of personnel-related expenses incurred for our engineering and product and design teams, as well as stock-based compensation expense, overhead costs, depreciation and amortization.

We have a geographically dispersed research and development presence in the United States, China, Singapore and Vietnam.

We believe this provides a strategic advantage, allowing us to invest efficiently in both new product development and increasing our existing product capabilities.

We believe delivering expanding product functionality is critical to enhancing the success of existing customers while new product development further reinforces our breadth of software solutions.

Other Income (Expense), net

Other income (expense), net consists primarily of fair value adjustments on earn-out and warrant liabilities and realized gain/loss for securities. Other income (expense), net also consists of foreign currency remeasurement gains/losses and interest income on corporate funds invested in money market instruments and highly liquid short-term investments.

Other (Expense) Income, net

Other (expense) income, net consists primarily of fair value adjustments on earn-out and warrant liabilities, realized gain/loss for securities, and of foreign currency remeasurement gains/losses.

We are subject to income taxes in the U.S.

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Results of Operations

The following table summarizes our historical consolidated statement of operations data for the periods indicated.

The period-to-period comparison of operating results is not necessarily indicative of results for future periods.

Year Ended December 31,

(in thousands)

Total revenue

Total cost of revenue (1)

Operating expenses:

Sales and marketing (1)

General and administrative (1)

Research and development (1)

Depreciation and amortization

Total operating expenses

Loss from operations

Other income (expense), net

Loss before income taxes

Income tax expense

Stock-based compensation for the periods was included in the following line items:

Year Ended December 31,

(in thousands)

Cost of revenue

Sales and marketing

General and administrative

Research and development

Total stock-based compensation

Comparison of the Years Ended December 31, 2022, and December 31, 2021 

The components of AvePoint's revenue during the years ended December 31, 2022 and 2021 were as follows:

The below period-to-period comparison of operating results are not necessarily indicative of results for future periods.

Comparison of the Years Ended December 31, 2023, and December 31, 2022

The components of AvePoint ’s revenue during the years ended December 31, 2023 and 2022 were as follows:

(in thousands, except percentages)

Term license and support

Perpetual license

Total revenue

Total revenue increased 21.1% to $232.3 million for the year ended December 31, 2022, primarily as a result of an increase in SaaS revenue.

SaaS revenue growth comprised approximately 78% of the net increase year over year.

For the year ended December 31, 2022, SaaS revenue increased 36.9% to $117.2 million, as we continued to see strong customer demand for these and our term license and services offerings.

The increases were partially offset by a decrease in maintenance revenue, which decreased 24.5% to $15.9 million for the year ended December 31, 2022.

Our revenue from perpetual license and maintenance offerings is expected to continue declining as we shift away from the sale of perpetual licenses and towards SaaS licenses.

Without material perpetual license sales, there will be limited opportunities to sell maintenance contracts to new customers.

Existing maintenance customers have transitioned and will continue to transition to SaaS and term licenses, which will continue the decline in maintenance revenue.

For the year ended December 31, 2022, total revenue increased 29% year over year on a constant currency basis.

Within total revenue, SaaS revenue increased 46% year over year on a constant currency basis.

Revenue by geographic area during the years ended December 31, 2022 and 2021 was as follows:

Total revenue

million for the year ended

December 31, 2023

, primarily as a result of an increase in SaaS revenue.

For the year ended

December 31, 2023

, SaaS revenue

million, as we continued to see strong customer demand for this offering.

The increase in SaaS revenue was partially offset by an expected decrease in both term license and support and maintenance revenue.

Term license and support revenue is expected to continue declining as some existing customers are moving from on-prem term license subscriptions to SaaS subscriptions.

Maintenance revenue is expected to continue declining as revenues from the sales of legacy perpetual licenses are immaterial.

As a result, there will be limited opportunities to sell maintenance contracts to new customers.

At the same time, some existing maintenance customers have transitioned and will continue to transition to SaaS and term licenses, which will continue the decline in maintenance revenue.

ervices revenue is expected to fluctuate as the offerings are not inherently recurring in nature.

Revenue by geographic area during the years ended December 31, 2023 and 2022 was as follows:

(in thousands, except percentages)

North America

From the year ended December 31, 2021 to the year ended December 31, 2022, North America revenues increased by $19.0 million, driven by a $21.1 million increase in SaaS, term license and support, and services revenues, partially offset by a $2.1 million decrease in maintenance and perpetual license revenue.

EMEA revenues increased by $13.4 million, driven by an $15.6 million increase in SaaS, term license and support, and services revenue, partially offset by a $2.2 million decrease in maintenance and perpetual license revenue.

APAC revenues increased by $8.1 million, driven by a $10.6 million increase in SaaS, term license and support, and services revenue, partially offset by a $2.5 million decrease in maintenance and perpetual license revenue.

For the year ended December 31, 2022, North America total revenue increased 23% on a constant currency basis, EMEA total revenue increased 38% on a constant currency basis, and APAC total revenue increased 28% on a constant currency basis.

For the year ended December 31, 2022, North America SaaS revenue increased 39% on a constant currency basis, EMEA SaaS revenue increased 48% on a constant currency basis, and APAC SaaS revenue increased 57% on a constant currency basis.

For the year ended December 31, 2023 , North America revenues increased 16.1% to $118.5 million, driven by a 29.2%, or $15.9 million, increase in SaaS revenue and a $2.2 million combined increase in services revenue and term license and support revenue, partially offset by a $1.6 million decrease in maintenance revenue.

EMEA revenues increased by 14.1% to $81.8 million, driven by a 43.7%, or $18.1 million, increase in SaaS revenue, partially offset by a $8.0 million combined decrease in term license and support, services and maintenance revenue.

APAC revenues increased 22.0% to $71.6 million, driven by a 45.9%, or $9.7 million increase in SaaS revenue and a 20.9%, or $4.9 million, increase in services revenue, partially offset by a $1.7 million combined decrease in term license and support and maintenance revenue.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we disclosed non-GAAP cost of revenue, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP research and development expense, non-GAAP operating income and non-GAAP operating margin.

We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business.

In addition to our financial results determined in accordance with GAAP, we disclose non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP research and development expense, non-GAAP operating income and non-GAAP operating margin.

We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and into trends affecting our business.

Management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate financial performance.

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Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue, gross profit, and gross margin during the years ended December 31, 2022 and 2021 were as follows:

Cost of revenue, gross profit, and gross margin during the years ended December 31, 2023 and 2022 were as follows:

(in thousands, except percentages)

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Stock-based compensation expense

Amortization of acquired intangible assets

Non-GAAP cost of revenue

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Non-GAAP gross margin

Cost of revenue expenses increased 23.7% to $65.1 million for the year ended December 31, 2022, driven by an $8.8 million increase from higher aggregated hosting costs resulting from increased SaaS revenue and a $4.9 million increase in personnel costs primarily due to higher headcount.

Within personnel costs, a one-time expense of $0.2 million was associated with the Company's reduction in workforce announced in December of 2022, primarily related to severance and compensation benefits.

Cost of revenue increased 16.9% to $77.5 million for the year ended December 31, 2023 , driven by a $6.6 million increase in aggregated hosting costs and a $4.1 million increase in personnel costs.

Both hosting and personnel costs increased to support the larger number of AvePoint software licenses used by customers.

Operating Expenses

Sales and Marketing

Sales and marketing expenses during the years ended December 31, 2022 and 2021 were as follows:

Sales and marketing expenses during the years ended December 31, 2023 and 2022 were as follows:

(in thousands, except percentages)

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Stock-based compensation expense

Amortization of acquired intangible assets

Non-GAAP sales and marketing

Non-GAAP percentage of revenue

Sales and marketing expenses increased 9.2% to $109.8 million for the year ended December 31, 2022, primarily due to an increase of $10.0 million in personnel costs from higher headcount as well as increasing employee compensation which includes commissions, and also from a $1.2 million increase in travel costs, which have risen as business shifts to a more normalized pre-pandemic state.

Within personnel costs, a one-time expense of $1.9 million was associated with the Company's reduction in workforce announced in December of 2022, primarily related to severance and compensation benefits.

Sales and marketing expenses increased 1.3% to $112.1 million for the year ended December 31, 2023 , primarily due to a $0.9 million increase in personnel costs and a $0.6 million increase in travel costs.

The minimal increase in overall sales and marketing expenses reflects the Company ’s enhanced focus on cost management as well as the continued scaling of the Company ’s channel partner strategy.

General and Administrative

General and administrative expenses during the years ended December 31, 2022 and 2021 were as follows:

General and administrative expenses during the years ended December 31, 2023 and 2022 were as follows:

(in thousands, except percentages)

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Non-GAAP percentage of revenue

General and administrative expenses increased 9.5% to $64.9 million for the year ended December 31, 2022.

The year over year increase was partially due to an increase of $4.8 million in personnel costs as a result of increased headcount and overall costs to support the growth in our business. Within personnel costs, a one-time expense of $0.5 million was associated with the Company's reduction in workforce announced in December of 2022, primarily related to severance and compensation benefits. Of the remaining increase, professional services increased $1.4 million primarily due to increased legal fees relating to acquisitions.

General and administrative expenses decreased 5.9% to $61.3 million for the year ended December 31, 2023 .

The decrease in overall general and administrative expenses reflects the Company ’s enhanced focus on cost management.

Research and Development

Research and development expenses during the years ended December 31, 2022 and 2021 were as follows:

Research and development expenses during the years ended December 31, 2023 and 2022 were as follows:

(in thousands, except percentages)

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Non-GAAP percentage of revenue

Research and development expenses decreased 3.9% to $30.5 million for the year ended December 31, 2022.

Stock-based compensation contributed a decrease of $12.3 million year over year, primarily as a result of a one-time compensation expense related to existing stock-based compensation awards to a group of AvePoint's international employees.

The primary driver of the offsetting increase resulted from $8.9 million higher compensation costs for research and development personnel as the Company seeks to expand development of new offerings and improvements to existing offerings.

Within personnel costs, a one-time expense of $0.5 million was associated with the Company's reduction in workforce announced in December of 2022, primarily related to severance and compensation benefits.

Research and development expenses increased 15.9% to $36.3 million for the year ended December 31, 2023, primarily driven by a $4.3 million increase in personnel costs, as the Company continues to invest in the development of new offerings and enhancements to existing offerings.

Income Tax Provision

Income tax provision during the years ended December 31, 2022 and 2021 was as follows:

Income tax provision during the years ended December 31, 2023 and 2022 was as follows:

(in thousands, except percentages)

Income tax expense

Our income tax expense for the year ended December 31, 2022 was $5.0 million as compared to $0.5 million for the year ended December 31, 2021. The effective tax rate, which equals the income tax provision divided by income from continuing operations, was (15.0)% for the year ended December 31, 2022, compared to (1.4)% for the year ended December 31, 2021. The change in effective tax rates for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates than 21%, a permanent item recorded for the executive compensation limitation and changes in the valuation allowance in the U.S.

Income tax expense for the year ended December 31, 2023 was $2.9 million as compared to $5.0 million for the year ended December 31, 2022.

The effective tax rate, which equals the income tax provision divided by pretax loss from continuing operations, was (15.5)% for the year ended December 31, 2023 , compared to (15.0)% for the year ended December 31, 2022 .

The change in effective tax rates for the year ended December 31, 2023 , as compared to the year ended December 31, 2022 , was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates than 21%, a permanent item recorded for stock-based compensation and changes in the valuation allowance in the U.S.

and certain foreign jurisdictions.

Non-GAAP Operating Income and Non-GAAP Operating Margin

Non-GAAP operating income and non-GAAP operating margin are non-GAAP financial measures that our management uses to assess our overall performance.

We define non-GAAP operating income as GAAP operating income plus stock-based compensation and the amortization of acquired intangible assets.

We define non-GAAP operating margin as non-GAAP operating income divided by revenue.

We believe non-GAAP operating income and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics eliminate the effects of stock-based compensation, which has had historical volatility from period to period due to marked-to-market securities, and of acquired intangible assets, which are unrelated to current operations and are neither comparable to the prior period nor predictive of future results. The elimination of the effect of variability caused by stock-based compensation expense and the amortization of acquired intangible assets, both of which are non-cash expenses, provides a better representation as to the overall operating performance of the company. We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to our peers, (b) to set and approve spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, and (e) to assess financial discipline over operational expenditures.

GAAP operating margin for the years ended December 31, 2022 and 2021 was (17.7)% and (27.9)% respectively.

Non-GAAP operating margin for the years ended December 31, 2022 and 2021 was (1.2)% and 3.1%, respectively. The reduction in non-GAAP operating margin was primarily attributable to higher personnel costs across the organization, increased Azure costs to support the growth in SaaS revenue, returning to a more normalized post-COVID travel routine and the full-year inclusion of expenses related to becoming a publicly traded company.

Non-GAAP Operating Income (loss) and Non-GAAP Operating Margin

The following table presents a reconciliation of non-GAAP operating income from the most comparable GAAP measure, operating income, for the periods presented:

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Amortization of acquired intangible assets

Non-GAAP operating (loss) income

Non-GAAP operating income (loss)

Non-GAAP operating margin

Non-GAAP operating income and non-GAAP operating margin are non-GAAP financial measures that our management uses to assess our overall performance.

We define non-GAAP operating income as GAAP operating income plus stock-based compensation and the amortization of acquired intangible assets.

We define non-GAAP operating margin as non-GAAP operating income divided by revenue.

The elimination of the effect of variability caused by stock-based compensation expense and the amortization of acquired intangible assets, both of which are non-cash expenses, provides a better representation as to the overall operating performance of the company.

We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance and trends as well as our performance relative to our peers, (b) to set and approve spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, and (e) to assess financial discipline over operational expenditures.

GAAP operating margin for the years ended December 31, 2023 and 2022 was (5.6)% and (17.7)% respectively.

Non-GAAP operating margin for the years ended December 31, 2023 and 2022 was 8.1% and (1.2)% , respectively.

The increase in non-GAAP operating margin was primarily attributable to the Company ’s enhanced focus on expense management and continued scaling of the Company ’s channel partner strategy.

Liquidity and Capital Resources

As of December 31, 2022, we had an accumulated deficit of $416.9 million, $227.2 million in cash and cash equivalents and $2.6 million in short-term investments.

Our short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation. Our long-term capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, and the timing of new product introductions.

Refer to “

Note 13 - Commitments and Contingencies ”

for more information regarding the purchase commitments.

We also maintain a loan and security agreement with HSBC Venture Bank USA, Inc.

HSBC ”) as lender for a revolving line of credit of up to $30.0 million, with an additional $20.0 million accordion feature for additional capital we may draw at our request.

Borrowings under the line bear interest at a rate equal to LIBOR plus 3.5%. The line carries an annual unused fee of 0.5%. The line will mature on April 7, 2023. We are required to maintain a specified adjusted quick ratio and a minimum annual recurring revenue tested by HSBC each quarter. We pledged, assigned and granted the HSBC a security interest in all shares, future proceeds and assets (except for excluded assets, including material intellectual property) as a security for the performance of the loan and security agreement obligations. As of December 31, 2022, we are compliant with all covenants under the line and had no borrowings outstanding under the line of credit.

We believe that our existing cash and cash equivalents, our cash flows from operating activities, and our borrowing capacity under our credit facility with HSBC, described below, will be sufficient to meet our working capital and capital expenditure needs and debt service obligations for at least the next twelve months.

In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing.

As of December 31, 2023 , we had $223.2 million in cash and cash equivalents, $3.7 million in short-term investments and no outstanding debt.

Our short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation.

Our long-term capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, and the timing of new product introductions.

Refer to “ Note 12 - Commitments and Contingencies ” for more information regarding the purchase commitments.

On November 3, 2023, the Company entered into a new (i) Loan and Security Agreement (the “ Loan Agreement ”), (ii) a Pledge Agreement (the “ Pledge Agreement ”) and (iii) a Revolving Note (the “ Revolving Note ”) with HSBC Bank USA, National Association (“ HSBC ”), replacing the Company ’s previous line of credit with HSBC Venture Bank USA, Inc.

The Loan Agreement provides for a revolving line of credit of up to $30.0 million, with an additional $20.0 million accordion feature for additional capital which the Company may draw upon at its request.

Borrowings under the line bear interest at a rate equal to term SOFR plus 3.00% to 3.25% depending on the Consolidated Total Leverage Ratio (as defined in the Loan Agreement).

The line carries an annual unused fee ranging from 0.50% to 0.55% depending on the Consolidated Total Leverage Ratio.

The proceeds of borrowings under the Loan Agreement will be used for general corporate purposes.

Currently, there is no outstanding balance under the revolving line of credit.

The Company, on a consolidated basis with its subsidiaries, is required to maintain a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the Loan Agreement) as well as a maximum Consolidated Total Leverage Ratio, tested by HSBC each quarter.

Pursuant to the Loan Agreement, the Company pledged, assigned and granted HSBC a security interest in all shares of its subsidiaries, future proceeds, and assets as security for its obligations under the Loan Agreement.

The line will mature on November 3, 2026.

As of December 31, 2023, the Company was compliant with all covenants and had no borrowings outstanding under the Loan Agreement.

We believe that our existing cash and cash equivalents, our cash flows from operating activities, and our borrowing capacity under our Loan Agreement will be sufficient to meet our working capital and capital expenditure needs and debt service obligations for at least the next twelve months.

In the future, we may attempt to raise additional capital through equity or debt financing.

The sale of additional equity would be dilutive to our stockholders.

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(in thousands)

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Operating Activities

used in operating activities for the year ended

provided by operating activities for the year ended

December 31, 2023, was

$0.8 million, reflecting our

net loss of

$38.7 million, adjusted for non-cash items of

$46.2 million and net cash

outflows of

$8.3 million from changes in our operating assets and liabilities.

The main considerations for non-cash items were stock-based compensation, which reflects ongoing compensation charges for the entity’s equity- and pre-merger liability-classified awards, operating lease right-of-use asset expense and mark to market adjustments on earnout and warrant liabilities.

The main considerations of changes in operating assets and liabilities that resulted in cash outflows related to an increase in deferred contract costs and operating lease liabilities.

This was partially offset by cash inflows related to an increase in deferred revenue that is partially offset by an increase in accounts receivable as a result of the business growth, and an increase in accrued expenses primarily due to personnel related expenses.

Net cash provided by operating activities for the year ended

December 31, 2021, was 

$34.7 million, reflecting our

net loss of

$33.2 million, adjusted for non-cash items of

$39.9 million and net cash

outflows of

$1.6 million from changes in our operating assets and liabilities.

The primary drivers for non-cash items were stock-based compensation, which reflects ongoing compensation charges for the entity’s equity- and pre-merger liability-classified awards, mark to market adjustments on earnout and warrant liabilities and changes in deferred tax assets as a result of timing differences in tax related to stock option awards.

The primary drivers of changes in operating assets and liabilities related to an increase in accounts receivable due primarily to timing of payments from customers and an increase in prepaid expenses and other current assets primarily related to prepaid insurance in Q3 2021 and an estimated tax payment in Q2 2021, partially offset by an increase in accounts payable and accrued expenses primarily due to billings related to professional services and an increase in deferred revenue due to continued increases in sales of our SaaS offerings which result in increased up-front payments.

$21.5 million, adjusted for non-cash items of

$58.6 million and net cash

$2.4 million from changes in our operating assets and liabilities.

The main considerations of changes in operating assets and liabilities that resulted in cash outflows related to an increase in deferred contract costs and operating lease liabilities.

This was partially offset by cash inflows related to an increase in deferred revenue that is partially offset by an increase in accounts receivable as a result of business growth.

used in operating activities for the year ended

December 31, 2022, was

$0.8 million, reflecting our

$38.7 million, adjusted for non-cash items of

$46.2 million and net cash

$8.3 million from changes in our operating assets and liabilities.

The main considerations of changes in operating assets and liabilities that resulted in cash outflows related to an increase in deferred contract costs and operating lease liabilities.

This was partially offset by cash inflows related to an increase in deferred revenue that is partially offset by an increase in accounts receivable as a result of business growth, and an increase in accrued expenses primarily due to personnel related expenses.

Investing Activities

Net cash 

used in investing activities for the year ended

December 31, 2023, was

$21.5 million, consisting of $18.6 million in acquisitions and $3.9 million of purchases of property and equipment, as well as $183.5 million in maturities of short-term investments and $180.9 million in the purchase of investments.

Net cash 

$5.6 million, consisting of $2.1 million of purchases of property and equipment, as well as $2.6 million in maturities of short-term investments and $3.5 million in the purchase of investments.

used in investing activities for the year ended

December 31, 2022, was

$3.4 mill

ion, consisting of $2.5 million of purchases of property and equipment and $1.4 million of purchases of short-term investments.

ion, consisting of $18.6 million in acquisitions and $3.9 million of purchases of property and equipment, as well as $183.5 million in maturities of short-term investments and $180.9 million in the purchase of investments.

Financing Activities

used in financing activities for the year ended

used in financing activities for the year ended

December 31, 2023, was

$17.1 million.

$33.7 million.

The primary driver of cash flows from financing activities was due to $39.0 million in purchases of common stock, partially offset by $5.6 million of proceeds from the exercising of stock options.

provided by financing activities for the year ended

December 31, 2021, was 

used in financing activities for the year ended

December 31, 2022, was

$17.1 million.

The primary driver of cash flows from financing activities was a result of the Apex Business Combination, which resulted in a $441.6 million cash inflow, net of issuance costs paid immediately prior to the merger, partially offset by $130.9 million of cash outflows to Legacy AvePoint's preferred stockholders and $106.2 million of cash outflows to Legacy AvePoint's common stockholders.

Other cash flows from financing activities included $7.5 million of cash outflows to holders of Legacy AvePoint options, $3.0 million of cash outflows for Apex Business Combination transaction costs paid directly by us, and $1.6 million of cash outflows related to Legacy AvePoint's purchase of pre-Apex Business Combination Apex shares, which are now recorded as treasury stock.

These cash outflows were partially offset by $5.6 million of cash inflows from the proceeds collected upon exercise of stock options.

The primary driver of cash flows from financing activities was due to $19.9 million in purchases of common stock, partially offset by $2.8 million of proceeds from the exercising of stock options.

Credit Facility

We maintain a line of credit under a Loan Agreement, as amended (the “

Amended Loan Agreement ”) with HSBC, as the lender.

Note 10 –

Line of Credit ”

in Part II, Item 8 “

Financial Statements and Supplementary Data ”

of this Annual Report.

The Amended Loan Agreement provides for a revolving line of credit of up to $30.0 million, with an additional $20.0 million accordion feature for additional capital we may draw at our request.

Borrowings under the line bear interest at a rate equal to LIBOR plus 3.5%.

The line carries an unused fee of 0.5% per year.

Any proceeds of borrowings under the Amended Loan Agreement will be used for general corporate purposes.

On a consolidated basis with our subsidiaries, we are required to maintain a specified adjusted quick ratio, tested by HSBC each quarter.

Pursuant to the Amended Loan Agreement, we pledged, assigned, and granted HSBC a security interest in all shares of our subsidiaries, future proceeds, and certain assets as security for our obligations under the Amended Loan Agreement.

Our line of credit under the Amended Loan Agreement will mature on April 7, 2023.

To date, we are in compliance with all covenants under the Amended Loan Agreement.

We have not at any time, including as of and for the fiscal year ending as of December 31, 2022, borrowed under the Amended Loan Agreement.

The description of the Amended Loan Agreement is qualified in its entirety by the full text of such agreement, a copy of which is attached as an exhibit to our Annual Report.

We maintain a line of credit under the Loan Agreement with HSBC, as lender.

See “ Note 9 – Line of Credit ” in Part II, Item 8 “ Financial Statements and Supplementary Data ” of this Annual Report.

The Loan Agreement provides for a revolving line of credit of up to $30.0 million, with an additional $20.0 million accordion feature for additional capital we may draw upon at our request.

Borrowings under the line bear interest at a rate equal to term SOFR plus 3.00% to 3.25% depending on the Consolidated Total Leverage Ratio.

The line carries an unused fee ranging from 0.50% to 0.55% depending on the Consolidated Total Leverage Ratio.

Any proceeds of borrowings under the Loan Agreement will be used for general corporate purposes.

On a consolidated basis with our subsidiaries, we are required to maintain a minimum Consolidated Fixed Charge Coverage Ratio as well as a maximum Consolidated Total Leverage Ratio, tested by HSBC each quarter.

Pursuant to the Loan Agreement, we pledged, assigned, and granted HSBC a security interest in all shares of our subsidiaries, future proceeds, and certain assets as security for our obligations under the Loan Agreement.

Our line of credit under the Loan Agreement will mature on November 3, 2026.

To date, we are in compliance with all covenants under the Loan Agreement.

We have not at any time, including as of and for the fiscal year ending as of December 31, 2023, borrowed under the Loan Agreement.

The description of the Loan Agreement is qualified in its entirety by the full text of such agreement, a copy of which is attached as an exhibit to this Annual Report.

Leasing Obligations

We are obligated under various non-cancelable operating leases for office space.

We are obligated under various non-cancelable operating leases for office space.

The initial terms of the leases expire on various dates through 2030.

During the years ended December 31, 2022 and 2021, total rent expense for facilities amounted to $6.8 million and $6.4 million, respectively.

As of December 31, 2022, letters of credit have been issued in the amount of $0.9 million as security for operating leases.

During the years ended December 31, 2023 and 2022, total rent expense for facilities amounted to $6.8 million and $6.8 million, respectively.

As of December 31, 2023, letters of credit have been issued in the amount of $1.0 million as security for operating leases.

The letters of credit are secured by certificates of deposit.

Operating Segment Information

We operate in one segment.

We operate in one segment.

Our products and services are sold throughout the world, through direct and indirect sales channels.

Our chief operating decision maker (the “

CODM ”) is our Chief Executive Officer.

Our chief operating decision maker (the “ CODM ”) is our Chief Executive Officer.

The CODM makes operating performance assessment and resource allocation decisions on a global basis.

The CODM does not receive discrete financial information about asset allocation, expense allocation, or profitability by product or geography.

Note 18 

Segment Information ”

(Part II, Item 8 of this Annual Report) for more information.

Critical Accounting Policies and Estimates

The CODM does not receive discrete financial information about asset allocation, expense allocation, or profitability by product or geography.

See “ Note 17 – Segment Information ” (Part II, Item 8 of this Annual Report) for more information.

Critical Accounting Estimates

Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities.

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Actual results may differ from these estimates.

While our significant accounting policies are described in more detail in the section titled “

Notes to Consolidated Financial Statements ”

(Part II, Item 8 of this Annual Report), we believe the following critical accounting policies are most important to understanding and evaluating our reported financial results.

While our significant accounting policies are described in more detail in the section titled “ Note - 2 Summary of Significant Accounting Policies ” (Part II, Item 8 of this Annual Report), we believe the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Revenue Recognition

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Many of our contracts with customers include multiple performance obligations.

Judgment is required in determining whether each performance obligation is distinct.

Our products and services generally do not require a significant amount of integration or interdependency;

therefore, our products and services are generally not combined.

We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“

SSP ”) for each performance obligation within each contract.

We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“ SSP ”) for each performance obligation within each contract.

We use judgment in determining the SSP for products and services.

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Term licenses are sold only as a bundled arrangement that includes the rights to a term license and support.

In determining the SSP of license and support in a term license arrangement, we apply observable inputs using the value relationship between support and term license, the value relationship between support and perpetual licenses, the average economic life of our products, software renewals rates and the price of the bundled arrangement in relation to the perpetual licensing approach.

Using a combination of the relative fair value method or the residual value method, the SSP of the performance obligations in an arrangement is allocated to each performance obligation within a sales arrangement.

In determining the SSP of license and support in a term license arrangement, we utilize observable inputs and consider the value relationship between support and term license when compared to the value relationship between support and perpetual licenses, the average economic life of our products, and software renewals rates.

Using a combination of the relative fair value method or the residual value method, the SSP of the performance obligations in an arrangement is allocated to each performance obligation within a sales arrangement.

Company Earn-Out Shares

In evaluation of the Company Earn-Out Shares and Company Earn-Out RSUs, management determined that the Company Earn-Out Shares represent derivatives to be marked to market at each reporting period, while the Company Earn-Out RSUs represent equity under ASC 718.

"Note 16 —

Stock-Based Compensation" for more information regarding the Company Earn-Out RSUs.

In order to capture the market conditions associated with the Company Earn-Out Shares, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out Shares’

contractual life based on the appropriate probability distributions.

Refer to "Note 15 — Stock-Based Compensation" for more information regarding the Company Earn-Out RSUs.

In order to capture the market conditions associated with the Company Earn-Out Shares, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out Shares’ contractual life based on the appropriate probability distributions.

The fair value was determined by taking the average of the fair values under each Monte Carlo simulation trial.

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Our competitors are developing new software while also deploying competing cloud-based services for consumers and businesses.

Customer preferences evolve rapidly, and choices in hardware, products, and devices can and do influence how users access services in the cloud, and in some cases, the user’s choice of which suite of cloud-based services to use.

We must continue to evolve and adapt to keep pace with this changing environment.

We must continue to evolve and adapt to keep pace with this changing environment.

The investments we are making in infrastructure, research and development, marketing, and geographic expansion will continue to increase our operating costs and may decrease our operating margins.

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We hire a mix of university and industry talent worldwide.

We compete for talented individuals globally by offering an exceptional working environment, broad customer reach, scale in resources, the ability to grow one’s career across many different products and businesses, and competitive compensation and benefits.

Aggregate demand for our software, services, and devices is correlated to global macroeconomic and geopolitical factors, which remain dynamic.

In 2022, Russia initiated significant military action against Ukraine.

In response, the U.S.

and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S.

and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen.

It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S.

and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.

The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.

Our international operations provide a significant portion of our total revenue and expenses.

Many of these revenue and expenses are denominated in currencies other than the U.S.

Additionally, demand for our software and service is correlated to global macroeconomic and geopolitical factors, which remain dynamic and currently include multiple ongoing conflicts where the outcomes and consequences are not possible to predict, but could include regional instability and geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.

These in turn could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.

Our international operations provide a significant portion of our total revenues and expenses.

Many of these revenues and expenses are denominated in currencies other than the U.S.

As a result, changes in foreign exchange rates may significantly affect revenue and expenses.

Refer to the section titled “

Risk Factors ”

(Part I, Item 1A of this Annual Report) for a discussion of these factors and other risks.

Our quarterly revenue fluctuates and does not necessarily grow sequentially when measuring any one fiscal quarter’s revenue with another (e.g.

comparing the fourth fiscal quarter of fiscal year 2021 with the first fiscal quarter of fiscal year 2022). Historically, our third and fourth quarters have been our highest revenue quarters, however those results are not necessarily indicative of future quarterly revenue or full year results. Higher third and fourth quarter revenue is driven primarily by increased sales resulting from our customers’

fiscal year ends.

Refer to the section titled “ Risk Factors ” (Part I, Item 1A of this Annual Report) for a discussion of these factors and other risks.

Our quarterly revenue fluctuates and does not necessarily grow sequentially when measuring any one fiscal quarter’s revenue with another (e.g.

comparing the fourth fiscal quarter of fiscal year 2022 with the first fiscal quarter of fiscal year 2023).

Historically, our third and fourth quarters have been our highest revenue quarters, however those results are not necessarily indicative of future quarterly revenue or full year results.

Higher third and fourth quarter revenue is driven primarily by increased sales resulting from our customers’ fiscal year ends.

Additionally, new product and service introductions (including the timing of those introductions) can significantly impact revenue.

Revenue can also be affected when customers anticipate a product introduction.

Revenue can also be affected when customers anticipate a product introduction.

Our operating expenses have generally increased sequentially due to increases in personnel in connection with the expansion of our business.

Emerging Growth Company Accounting Election

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

We will be an emerging growth company at least until June 30, 2023.

As a result, we have elected to avail ourselves of the extended transition period and will take advantage of the benefits of the extended transition period emerging growth company status permits.

During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used.

We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2024, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer”

under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

The next determination date as to whether we have satisfied the criteria set forth in the foregoing (b), (c), and (d) is the last day of our second fiscal quarter in 2023.

Recently Issued and Adopted Accounting Pronouncements

For information about recent accounting pronouncements, see Note 2 to the Consolidated Financial Statements of this Annual Report.

For information about recent accounting pronouncements, see Note 2 to the consolidated financial statements of this Annual Report.

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What changed 10-K

Item 5. Market for Registrant’s Common Equity