UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________.
Commission file number:
AvePoint, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| | | The | ||
| | | The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 9, 2023, there were
AVEPOINT, INC.
FORM 10-Q
For the Fiscal Quarter Ended September 30, 2023
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements, as well as descriptions of the risks and uncertainties that could cause actual results and events to differ materially, may appear throughout this Quarterly Report, including in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2 of this Quarterly Report), “Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Quarterly Report), and “Risk Factors” (Part II, Item 1A of this Quarterly Report).
These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events, or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, sales, earnings, and statements expressing general views about future operating results — are forward-looking statements. These forward-looking statements are, by their nature, subject to significant risks and uncertainties, and are based on the beliefs of, as well as assumptions made by and information currently available to, our management. Our management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Readers should evaluate all forward-looking statements made in the context of these risks and uncertainties. The important factors referenced above may not contain all of the factors that are important to investors.
These forward-looking statements speak only as of the date of this Quarterly Report and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about:
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our future operating or financial results; |
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future acquisitions, business strategy and expected capital spending; |
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changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; |
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the implementation, market acceptance and success of our business model and growth strategy; |
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expectations and forecasts with respect to the size and growth of the cloud industry and digital transformation in general and Microsoft’s products and services in particular; |
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the ability of our products and services to meet customers’ compliance and regulatory needs; |
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our ability to compete with others in the digital transformation industry; |
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our ability to grow our market share; |
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our ability to attract and retain qualified employees and management; |
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our ability to adapt to changes in consumer preferences, perception and spending habits and develop and expand our product offerings and gain market acceptance of our products, including in new geographies; |
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developments and projections relating to our competitors and industry; |
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our ability to develop and maintain our brand and reputation; |
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unforeseen business disruptions or other impacts due to political instability, civil disobedience, terrorism, armed hostilities (including the ongoing hostilities between Russia and Ukraine), extreme weather conditions, natural disasters, other pandemics or other calamities; |
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our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; |
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expectations regarding the time during which we will be an emerging growth company under the JOBS Act; |
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our future capital requirements and sources and uses of cash; |
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our ability to obtain funding for our operations and future growth; |
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the effects of inflation; and |
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the effects of foreign currency exchange. |
The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise, except as required by law.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, the events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. You should refer to the ‘‘Risk Factors’’ section of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2022, and the "Risk Factors" section of this Quarterly Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to the Quarterly Report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless the context otherwise indicates, references in this report to the terms “AvePoint”, the “Company”, “we”, “our” and “us” refer to AvePoint, Inc. and its subsidiaries.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Item 1
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ and $ as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Deferred contract costs | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, mezzanine equity, and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other liabilities | ||||||||
| Current portion of deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Long-term portion of deferred revenue | ||||||||
| Earn-out shares liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Mezzanine equity | ||||||||
| Redeemable noncontrolling interest | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, mezzanine equity, and stockholders’ equity | $ | $ | ||||||
See accompanying notes.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Revenue: |
||||||||||||||||
| SaaS |
$ | $ | $ | $ | ||||||||||||
| Term license and support |
||||||||||||||||
| Services |
||||||||||||||||
| Maintenance |
||||||||||||||||
| Total revenue |
||||||||||||||||
| Cost of revenue: |
||||||||||||||||
| SaaS |
||||||||||||||||
| Term license and support |
||||||||||||||||
| Services |
||||||||||||||||
| Maintenance |
||||||||||||||||
| Total cost of revenue |
||||||||||||||||
| Gross profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
||||||||||||||||
| General and administrative |
||||||||||||||||
| Research and development |
||||||||||||||||
| Total operating expenses |
||||||||||||||||
| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| (Loss) gain on earn-out and warrant liabilities |
( |
) | ( |
) | ||||||||||||
| Interest income, net |
||||||||||||||||
| Other income (expense), net |
( |
) | ||||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense |
||||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss (income) attributable to and accretion of redeemable noncontrolling interest |
( |
) | ( |
) | ( |
) | ||||||||||
| Net loss attributable to AvePoint, Inc. |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss available to common shareholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted loss per share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted shares used in computing loss per share |
||||||||||||||||
See accompanying notes.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive income (loss) net of taxes |
||||||||||||||||
| Unrealized loss on available-for-sale |
( |
) | ||||||||||||||
| Foreign currency translation adjustments |
( |
) | ||||||||||||||
| Total other comprehensive income (loss) |
( |
) | ||||||||||||||
| Total comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Comprehensive loss (income) attributable to redeemable noncontrolling interests |
( |
) | ( |
) | ||||||||||||
| Total comprehensive loss attributable to AvePoint, Inc |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See accompanying notes.
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity
(In thousands, except share amounts)
(Unaudited)
| Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||
| Net loss attributable to and accretion of redeemable noncontrolling interest | ( | ) | ( | ) | — | |||||||||||||||||||||||||||
| Total other comprehensive income | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Income | Equity | |||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon acquisition | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for canceled officer awards | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
See accompanying notes.
AvePoint, Inc.
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity (continued)
(In thousands, except share amounts)
(Unaudited)
| Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Income | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable |
Total |
Accumulated |
||||||||||||||||||||||||||||||||||||||
| noncontrolling |
mezzanine |
Additional |
Other |
Total |
||||||||||||||||||||||||||||||||||||
| interest |
equity |
Common Stock |
Paid-In |
Treasury Stock |
Accumulated |
Comprehensive |
Stockholders’ |
|||||||||||||||||||||||||||||||||
| Amount |
Amount |
Shares |
Amount |
Capital |
Shares |
Amount |
Deficit |
Income |
Equity |
|||||||||||||||||||||||||||||||
| Balance, December 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options |
— | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units |
— | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon acquisition |
— | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for canceled officer awards |
— | — | ( |
) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of redeemable noncontrolling interest in MaivenPoint Pte. Ltd. (1) |
||||||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||
| Repurchase of common stock |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): |
||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Total other comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||
(1) Formerly AvePoint EduTech Pte. Ltd.
See accompanying notes.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Operating lease right-of-use assets expense | ||||||||
| Foreign currency remeasurement loss | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Other | ||||||||
| Change in value of earn-out and warrant liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deferred contract costs and other assets | ( | ) | ( | ) | ||||
| Accounts payable, accrued expenses, operating lease liabilities and other liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Investing activities | ||||||||
| Maturities of investments | ||||||||
| Purchases of investments | ( | ) | ( | ) | ||||
| Cash paid in business combinations and asset acquisitions, net of cash acquired | ( | ) | ||||||
| Capitalization of internal-use software | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Investment in notes | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Repurchase of common stock | ( | ) | ( | ) | ||||
| Proceeds from stock option exercises | ||||||||
| Repayments of finance leases | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rates on cash | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Income taxes paid | $ | $ | ||||||
| Contingent consideration in business combinations | $ | $ | ||||||
See accompanying notes.
1. Nature of Business and Organization
AvePoint, Inc. (collectively with its subsidiaries, hereinafter referred to as “AvePoint,” the “Company,” “we,” “us,” or “our”) was incorporated as a New Jersey corporation on July 24, 2001 and redomiciled as a Delaware corporation in 2006.
AvePoint provides a cloud-native software platform that organizations rely on to optimize 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.
Our principal corporate headquarters are located in Jersey City, New Jersey, with our principal operating headquarters in Richmond, Virginia and additional offices in North America, Europe, Asia, Australia and the Middle East.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated balance sheet as of December 31, 2022, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and include the accounts of the Company. All intercompany transactions and balances have been eliminated. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted.
In the opinion of management, these financial statements contain all material adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2023.
These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2022 and 2021, and for the years ended December 31, 2022 and 2021, and the related notes included in our most recent Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 31, 2023, and amended on June 13, 2023 (“Annual Report”).
The Company's significant accounting policies are discussed in Note 2 to the consolidated financial statements included in the Annual Report. There have been no significant changes to these policies during the three and nine months ended September 30, 2023.
Recently Adopted Accounting Guidance
In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments — Credit Losses on Financial Instruments which replaces incurred loss methodology to estimate credit losses on financial instruments with a methodology that reflects expected credit losses. This amendment affects entities holding financial assets that are not accounted for at fair value through net income including trade receivables. Subsequently FASB issued ASU 2020-02 which deferred the adoption date. The amendments in this ASU are effective for Emerging Growth Company entities, which elected to take advantage of the extended transition period, for fiscal years beginning after December 15, 2022. Early application of the amendments is permitted. The Company adopted the standard on January 1, 2023. The adoption of the standard did not have a material impact on its condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815 — 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in GAAP. The Company adopted the standard on January 1, 2023. The adoption of the standard did not have a material impact on its condensed consolidated financial statements.
Comparative Data
Certain amounts from prior periods have been reclassed to conform to the current period presentation, including:
| • | The reclassification of perpetual license revenue to be included in maintenance revenue on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022; | |
| • | The reclassification of depreciation and amortization to be included in cost of revenue, sales and marketing, general and administrative and research and development on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022; | |
| • | The reclassification of long-term unbilled receivables to be included in deferred contracts and other assets within net cash provided by (used in) operating activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2022; and | |
| • | The reclassification of provision for doubtful accounts and loss (gain) on disposal of property and equipment to be included in other within net cash provided by (used in) operating activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2022. |
Goodwill
No events or circumstances changed since the acquisitions that would indicate that the fair value of our reporting unit is below its carrying amount.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The amounts of assets and liabilities reported in our condensed consolidated balance sheets and the amounts of revenue and expenses reported for each of its periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, deferred contract costs, valuation of goodwill and other intangible assets, income taxes and related reserves, stock-based compensation, purchase price in a business combination, and earn-out liabilities. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.
Foreign Currency
Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the Company’s condensed consolidated statements of operations. Transaction losses totaled $
Cash and Cash Equivalents
The Company maintains cash with several high credit-quality financial institutions. The Company considers all investments available with original maturities of three months or less to be cash equivalents. These investments are not subject to significant market risk. The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts. The Company maintains cash balances used in operations at entities based in countries that impose regulations that limit the ability to transfer cash out of the country. As of September 30, 2023 and December 31, 2022, the Company’s cash balances at these entities were $
Short-Term Investments
Short-term investments consist mainly of certificates of deposit held by financial institutions which have an initial maturity greater than three months but less than or equal to one year at period end.
Prepaid Expenses and Other Current Assets
The prepaid expenses balances as of September 30, 2023 and December 31, 2022 were $
Deferred Contract Costs
Amortization of deferred contract costs of $
Revenue Recognition
The Company derives revenue from four primary sources: SaaS, term license and support, services, and maintenance. Services include installation services, training and other consulting services.
Term license revenue recognized at point in time was $
Accounts receivable, net is inclusive of accounts receivable, and current unbilled receivables, net of allowance for doubtful accounts. We record an unbilled receivable when revenue is recognized prior to invoicing. We have a well-established collection history from our direct and indirect sales. We periodically evaluate the collectability of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on the age of the receivable, expected payment ability, and collection experience. As of September 30, 2023 and December 31, 2022, the allowance for doubtful accounts was not material.
We record deferred revenue in the condensed consolidated balance sheets when cash is collected or invoiced before revenue is earned. Deferred revenue as of September 30, 2023 and December 31, 2022 was $
The opening and closing balances of the Company's accounts receivable, net, deferred revenue and deferred contract costs are as follows:
| Accounts | Deferred | |||||||||||
| receivable, | Deferred | contract | ||||||||||
| net (1) | revenue | costs | ||||||||||
| (in thousands) | ||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | |||||||||
| Balance, September 30, 2023 | ||||||||||||
(1) Includes long-term unbilled receivables.
There were no significant changes to the Company’s contract assets or liabilities during the nine months ended September 30, 2023 and the year ended December 31, 2022 outside of its sales activities.
As of September 30, 2023, transaction price allocated to remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $
Treasury Stock Retirement
We account for treasury stock transactions under the cost method. For each reacquisition of common stock, the number of shares and the acquisition price for those shares is added to the existing treasury stock count and total value, respectively. We periodically retire treasury shares that we acquire through share repurchases and return those shares to the status of authorized but unissued. When treasury shares are retired, we allocate the excess of the repurchase price over the par value of shares acquired between additional paid-in capital and accumulated deficit. The portion allocated to additional paid-in capital is limited to the pro rata portion of additional paid-in capital for the retired treasury shares. Any further excess of the repurchase price is allocated to accumulated deficit.
Emerging Growth Company
The Company is considered an emerging growth company. 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 (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under Section 21E of the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
Because the market value of our common stock held by non-affiliates exceeded $
Recent Accounting Pronouncements
Recently issued accounting pronouncements are not expected to have a material impact on our financial position, results of operations or cash flows upon adoption.
3. Goodwill
The changes in the carrying amounts of goodwill were as follows:
| Goodwill | ||||
| (in thousands) | ||||
| Balance as of December 31, 2022 | $ | |||
| Acquisitions | ||||
| Effect of foreign currency translation | ( | ) | ||
| Balance as of September 30, 2023 | $ | |||
4. Intangible assets, net
Intangible assets consist of acquired intangible assets and self-developed software. Amortization expense for intangible assets was $
A summary of the balances of the Company's intangible assets as of September 30, 2023 and December 31, 2022 is presented below:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| September 30, | December 31, | |||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Technology and software, net | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Customer related assets, net | ( | ) | ( | ) | ||||||||||||||||||||
| Content, net | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
As of September 30, 2023, estimated future amortization expense for intangible assets, net is as follows:
| Year Ending December 31: | ||||
| (in thousands) | ||||
| 2023 (three months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total intangible assets subject to amortization | $ | |||
5. Concentration of Credit Risk
The Company deposits its cash with financial institutions and, at times, such balances may exceed federally insured limits. Additionally,
6. Accounts Receivable, Net
Accounts receivable, net, consists of the following components:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (in thousands) | ||||||||
| Trade receivables | $ | $ | ||||||
| Current unbilled receivables | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
7. Line of Credit
The Company maintained a loan and security agreement with HSBC Ventures Bank USA, Inc., (“HSBC Venture”) as lender, for a revolving line of credit of up to $
Effective November 3, 2023, the Company entered into a loan and security agreement with HSBC Bank USA, National Association. See the section titled “Notes to Consolidated Financial Statements” (Part I, Item 1 of this Quarterly Report) under the sub-heading “Note 18 – Subsequent Events” for more information.
8. Income Taxes
The Company had an effective tax rate of (
The change in effective tax rates for the three-month period ended September 30, 2023 as compared to the three-month period ended September 30, 2022 was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, and tax losses for which no benefit can be taken.
The change in effective tax rates for the nine-month period ended September 30, 2023 as compared to the nine-month period ended September 30, 2022 was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, impact of foreign inclusions, stock-based compensation and tax losses for which no benefits can be taken.
The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances. In making such an assessment, management would consider all available positive and negative evidence, including the level of historical taxable income, future reversals of existing temporary differences, tax planning strategies, and projected future taxable income.
9. Leases
The Company is obligated under various non-cancelable operating leases primarily for office space. The initial terms of the leases expire on various dates through 2030. We determine if an arrangement is a lease at inception.
The components of the Company's operating lease expenses are reflected in the condensed consolidated statements of income for the three and nine months ended September 30, 2023 and 2022 as follows:
| Three Months Ended September 30, | |||||||||||||||