AvePoint, Inc.

Good afternoon, everyone, and welcome to AvePoint's first quarter 2022 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone keypad. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. For opening remarks and introductions, I will now turn the call over to Mark Griffin, Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to AvePoint's first quarter 2022 earnings call. Today we'll be discussing the results announced in our press release issued after the market closed. With me on the call this afternoon is Dr. TJ Zhang, Chief Executive Officer and Jim Cassie, Chief Financial Officer. TJ will begin with a brief review of the business results for the first quarter ended March 31st, 2022. Jim will then review the financial results for the first quarter followed by the company's outlook for the second quarter and full year 2022, then we'll open up the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause the actual results to differ materially from management expectations. We encourage you to review the safe harbor statements contained in our press release for more complete description. All material in the webcast is a sole property and copyright of AvePoint with all rights reserved. Please note this presentation describes certain non-GAAP measures, including non-GAAP operating income and non-GAAP operating margin, which are not measures prepared in accordance with the U.S. GAAP. The non-GAAP measures are presented in this presentation as we believe they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to financial measures prepared in accordance with the U.S. GAAP. Listeners who do not have a copy of the quarter-ended March 31, 2022 press release may obtain a copy by visiting the investor relations section of the company's website. With that, let me turn the call over to TJ.

Thank you, Mark, and thank you to everyone joining us on the call today. I'm very pleased to report that 2022 is off to a great start. We delivered a solid first quarter, highlighted by robust SaaS revenue growth and continued progress on our innovation roadmap. Total revenue for the first quarter was $50.3 million, ahead of our guidance on strong SaaS revenue of $26.6 million, which was up 45% from the same period, 2021. We grew total ARR 30% year over year to $167.4 million. Our commitment to create innovative solutions to meet the evolving business needs of our customers over the past 20 years continues to set AppPoint apart. The first quarter was no different, with many exciting enhancements to the AppPoint Confidence Platform, which enables organizations to secure collaboration data, sustain connections between people, and ensure business continuity. With 66% of enterprise IT spending shifting to cloud technologies in 2025, and more than half of businesses identifying optimization of their use of cloud as a top priority, our resilience suite ensures business continuity and compliance with data retention and other regulatory guidelines. This is why we were able to successfully onboard a global leader in application testing and quality engineering services to protect the data in its entire Microsoft 365 environment as well as extend that protection to its Salesforce CRM data and the HR application leveraging the Salesforce platform. The global scale of our confidence platform with 14 deployments across data centers around the world ensures the firm can also satisfy its local data sovereignty requirements. Our Fidelity Suite preserves data integrity as organizations transform from one system to the next, capturing data for compliance or integrating SaaS applications to streamline the way users work. Our Control Suite enables IT to deliver central services at scale with automation and repeatable businesses templates. This, in turn, empowers business users and delegated businesses or department owners to control their budgets, licenses, users, and workspaces. In Germany, we're automating the security, provisioning, governance, and lifecycle of Microsoft 365 collaboration spaces for our customers' 10,000 users so it can focus on its mission to develop solutions addressing basic human needs of food, energy, and building. As many companies continue to navigate global supply chain disruptions, our platform's deep integration with Microsoft 365 enables one of the world's largest managed transportation and logistics providers to save time, reduce costs, and increase productivity in order to follow through on its commitment to achieve supply chain excellence for its customers. With that point, this firm is centralizing the management and governance of its Microsoft 365 workspaces. leading the charge to shift its mindset from using file shares to decrease its exposure to risk and ensure its data is protected and easily restored. During the quarter, we released a number of upgrades to our confidence platform to partner with organizations on their digital transformation journeys, including robust data protection capabilities with the introduction of ransomware detection within our resilience suite, the extension of our FedRAMP authorization across our platform and introducing two new products, Outpoint Entrust and Confide. Ransomware attacks hit companies every 11 seconds, with the cost to recover in the millions of dollars. When MCI Group, a global engagement and marketing agency with 60 offices in 31 countries, experienced a ransomware attack with a user's OneDrive, it quickly realized the need for additional data protection to retain documents for five years and financial documents for 10 years as well as the ability to execute granular restores of data. With AppPoint, MCI Group was able to add to its ransomware resiliency and achieve unlimited retention of data in Microsoft 365 with multiple daily backups and satisfy its 24 by 7 internal support SLAs for data recovery. The digital transformation underway reflects the importance of upholding the highest security standards for companies implementing cloud solutions. including public sector and federal organizations. Since our initial FedRAMP authorization last year, we invested in the authorization of solutions that go beyond our Microsoft 365 offerings, including Salesforce and Google Workspace to help organizations like the U.S. Department of State, U.S. Treasury, IRS, and others in highly regulated industries to collaborate with confidence. As a result of our FedRAMP authorization, AppPoint is now working with a small business administration to reduce risk of data loss for critical business content containing Salesforce through automatic backup and ability to restore content out of place to another Salesforce environment. Digital transformation is also transforming the way that people interact and transact. As companies like WPP continue innovating offerings for how people shop in e-commerce, its 100,000 employees around the world are using Microsoft 365 to power this innovation through greater collaboration and productivity. With that point, WPP manages its growing SaaS operations through streamlined management and can now gain full visibility into its entire Microsoft 365 ecosystem with consolidated and secure dashboards which give a better understanding of the applications, features, and site users are accessing most so they can make appropriate adjustments to increase adoption. We also expanded into innovative purpose-built applications tailored to the modern workplace through the launch of Confide, a virtual data room powering highly secure digital collaboration. A recent Deloitte survey of merger acquisitions professionals found 87% of organizations are managing deals in a purely virtual environment despite half the respondents citing cybersecurity as their greatest concern. Comfy's security stores data within customers' own Office 365 tenant and tailors access for only business leaders who should be privy to sensitive information, a key differentiator from other forms of private channels that exist within Microsoft Teams, Slack, or Google Workspace. The feedback since launching Confide with customers as well as our partner community is positive in terms of how it builds on the power of our confidence platform, positioning us as a holistic partner throughout organizations' M&A journeys, as well as its flexibility to evolve over time to address other typical business user use cases where Confide can apply. Since launching our global partner program last July, we have continued to accelerate our mid-market growth rates as well as reach small and medium-sized businesses with the same enterprise-grade technology available to Fortune 500 businesses. Our channel ecosystem expansion is continuing in line with our geographic and market segment expansion. Our MSP business, primarily focused on the SMB market, continues to grow in triple digits, and this portion of our channel business is expected to reach 10% of our total AR by end of the year. During the quarter, we added new SIs and VARs, as was distributors like DNH, a leading technology distributor of IT solutions in North America. DNH's modern solutions team enables partners to take advantage of the fast-growing market in SMB cloud-managed services by equipping them with key technologies across in-demand solution segments. Strategic distribution partners like DNH play a pivotal role in expanding our partner channel to continue enabling us to scale and deliver cloud services through their cloud marketplaces. Finally, we extend our commitment to meet the needs of an evolving ecosystem with the introduction of our AppPoint certification program, launched with technical and sales tracks to empower partners to best use AppPoint technology and design custom cloud solutions. It will also signal a differentiated level of expertise in our industry-leading technology to help them source more business and exceed competitors. Our direct sales team continue to drive our enterprise business, quickly responding to evolving market trends, and help customers solve their complex business problems. As companies like multinational IT consulting firm Sitecore continue to adopt Microsoft 365 for greater communication, collaboration, and productivity, AppPoint ensures the firm can meet its data protection and GDPR requirements, while enabling smooth management of Microsoft Teams, and automating business processes to save time and reduce costs so they can focus on serving their customers. We also saw success with our existing customer base as they continue their cloud transformation and look to gain more value from their own cloud investments. The number of our customers with over 100,000 ARR increased to 358 in Q1, up 33% year over year. Before Jim goes over the numbers, I want to touch on the share repurchase activity. Since our last earnings to now, we have repurchased approximately $4.8 million in shares. In summary, we report a solid first quarter and continue to execute on our initiatives, which will drive a strong 2022. With that, I'll turn it over to Jim to discuss our financial results in more detail.

Thank you, TJ, and good afternoon, everyone. As I review our first quarter results today, please note that I'll be referring to non-GAAP metrics unless otherwise noted. A reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is also available on our website. Total revenues for the first quarter ended March 31, 2022, were $50.3 million, up 30% year-over-year. Within total revenue, SAS revenue came in at $26.6 million, up 45% year over year and constituting 53% of total revenue compared to 47% of total revenue last year. Term license revenue came in at $10.2 million, up 17% year over year and constituting 20% of total revenue compared to 22% of total revenue last year. The uptick in term license is due to shifting business continuity requirements as a result of the dynamics in the global market. Some of those drivers include data sovereignty, disaster recovery, and regional redundancy. As of the quarter end, we had total ARR of 167.4 million, representing growth of 30% from a year ago. Our core ARR ended the quarter at 156.4 million, up 26% year-over-year, We had record growth in our SMB ARR with a $1.6 million increase in the quarter. SMB ARR now totals $11 million, representing 100% year-over-year growth rate and 7% of our total ARR, up from 4% a year ago. As customers continue their cloud transformation and expand their SaaS operations, our average core ARR per account continues to grow as well. At quarter end, the average core ARR per account was approximately 38,500, which represents an increase of 11% year over year. This growth was driven by 358 customers with ARR of over $100,000, up 33% from the prior year. Our core ARR dollar-based net retention rate for the quarter was 108%, a slight decrease year over year. This was primarily due to the realigning of our sales force which caused upsell and cross-sell numbers to be lower than expected. As a reminder, we are in the process of realigning our sales force to implement the hunter and farmer sales motions. Moving forward, we expect to see improvements in our NRR. Now let's review the income statement in more detail. Gross profit in the quarter was $36.2 million, representing a gross margin of 72.1% compared to 72.5% in the year-ago period. The slight margin decline is the result of year-over-year increases in service revenue, our lowest margin business. Going forward, we are continuing to drive our sales efforts toward our fastest-growing revenue stream, our SaaS solutions. At the same time, we expect service revenue as a percentage of overall revenue to decline by transitioning more services revenue to our channel partners, resulting in overall margin improvements. Sales and marketing expenses were $24.6 million, or 49% of revenue, compared to 47% of revenue a year ago. This represents an increase of $6.4 million year over year, or 35%. This was driven by an increase in headcount and personnel-related expenses as we expanded our sales and customer success organizations, as well as additional marketing spend as we invested in both our media and event strategies. We have grown our sales and marketing headcount by 13% year over year, with hires evenly distributed across our sales functions as well as marketing and customer success functions. The increase in headcount has resulted in $3.2 million increase in total compensation, primarily driven by salary and benefits. Programmatic spend in marketing is up $2.2 million year over year, primarily driven by brand awareness efforts and marketing events. R&D expense was $5.6 million, or 11% of revenue, compared to 10% or $4 million in the year-ago period, a year-over-year increase of $1.6 million, or 41%. Our headcount was up 48% for the quarter compared to last year as we continue to invest in the development of innovative technologies that help our customers stay competitive amidst evolving workplace trends and digital transformations. G&A expense was $11 million or 22% of revenue compared to 21% or $8.3 million in the year-ago period. This represents an increase of $2.7 million year-over-year or 33%. The increase in G&A expense largely reflects an increase in people and infrastructure-related expenses associated with our public company readiness and ramp-up efforts, including headcount increases of approximately 26%. Included in our G&A expenses were approximately $500,000 of professional fees related to our M&A activities. This is the first time we've incurred these type of expenses, and without such expenses, our G&A expense would represent approximately 21% of revenue. Non-GAAP operating loss was $5.6 million compared to a loss of $2.6 million in the year-ago period. Turning to the balance sheet and cash flow, we ended the quarter with $260 million in cash and short-term investments. Cash used in operations was $6.4 million in the quarter, while free cash flow, which includes CapEx, was negative $7.4 million. We also utilized $0.7 million for the repurchase of shares in the quarter, as well as approximately $1.5 million in completing our first acquisitions. Our use of cash in the quarter was in line with our expectations. We've continued to purchase shares subsequent to the quarter end, and to date, we have repurchased a total of 945,000 shares at an aggregate price of approximately $4.8 million. I would now like to turn to our outlook for the second quarter and the full year 2022. For the second quarter, we expect total revenues of $54 million to $56 million, and non-GAAP operating loss of 1.5 to 2.5. For the full year, we expect total revenues of 238 million to 244 million. We expect our non-GAAP profitability to be in the range of a loss of 3.5 million to income of 1 million. And we expect year-end ARR to be in the range of 212 million to 216 million. In summary, we continue to execute well delivering strong top and bottom line results, and believe that AvePoint remains well positioned to maintain this momentum and operating discipline throughout 2022. With that, we'll open up the call for questions. Operator?

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment as we pull for questions.

Operator, before we begin questions, our investor relations team pointed out that I misspoke regarding our cash flow, so I wanted to clarify that before we take questions. Our cash used in operations for the quarter was $6.1 million, and our free cash flow for the quarter which includes CapEx, was negative $7.1 million. We can now go to the questions.

Our first question is from the line of Derek Wood with Cohen and Company. Please go ahead.

Oh, great. Thanks. It's Andrew. I'm for Derek. I'll start maybe with Jim on the shape of net new ARR over the course of the year to get to your full year guidance. It implies an acceleration in the back half. Is that just the hunter farmer model kind of kicking in or anything else to think about on the net new ARR through the year?

Yeah, great question, and good to talk to you again. So the short answer is yes. We definitely will see the benefit of that model kicking in. So that's one. And then two, our business is still seasonal in nature, so the second half of the year is always much stronger for us than the first half. So I think it's the combination of those two components.

Okay. And TJ, maybe just walk us through – like how far the way through you are uh through this hunter farmer model transition uh you are and and kind of what what type of um what type of work left there is to do or any anything to think about um as as we work through that yeah so it's a pretty big change to have the focus of just

farmers with a farming patch with also dedicated AR upsell quotas. So there are a lot of account assignment that happened. This occurred end of Q4 and beginning of Q1. So we're through it now. So all the account executives have their patch accounts and businesses to focus and go after. So yeah, we're looking forward to a good year.

Okay. I'll pass it on. Thanks guys.

Thank you. Thank you.

And our next question is from the line of Brian Essex with Goldman Sachs. Please.

Hi, good afternoon, and thank you for taking the question. Can you hear me okay? It sounds like you cut out a little bit.

Yeah, you're good.

Great. Yeah, I guess I was wondering if we could talk a little bit about cash flow and what the outlook is throughout the rest of the year? Is that going to be relatively seasonal as well? And kind of how to think about modeling that out over the next 12 months or so?

Yeah, no, good question. So short answer is yes. Similar to how we think about our revenue, cash flow follows a similar trend where our first two quarters of the year, we're definitely consuming cash. And then generally the second two quarters of the year, we will be producing cash. And, again, we're forecasting to be, you know, free cash flow positive for the full year. So the way I would look at that is, again, we're expecting negative for Q2 and then positive Q3 and Q4.

Got it. That's helpful. And then maybe if I could hit net dollar attention rate, understand the comments on, you know, cross-sell, up-sell. What did churn look like in there, and is that a part of it? And do you think that – I mean, should we anticipate a meaningful recovery in net dollar retention rate now that you've kind of like vetted out the hunter-farmer model?

Yeah, so maybe two thoughts, right? One is on the gross retention or the gross churn. We haven't been publishing those numbers yet. But we are seeing steady improvement on the growth retention. So I think there's a positive trend there. So that's good. And then on your second point in terms of NRR, I mean, we firmly believe that the shift in this model that, again, started in Q4 of switching to the hunter-farmer, the real driver for that was seeing that as a very positive impact on NRR. So, again, we expect to see improvements on that the rest of the year.

Got it. Maybe I'll sneak one last one in. Maybe for TJ, are you starting to see any kind of focus on the backup aspect of the business, particularly with, you know, elevated ransomware in the market? And, you know, is there maybe an enterprise focus, perhaps particularly on the SMB side, with regard to, you know, kind of looking to your platform for greater reliance on backups?

Yeah, that's absolutely right, Brian. We are really benefiting from the platform play of business data security and governance. So ransomware attack, ransomware detection, and also for the SMB customers, especially MSPs, we're offering ransomware warranty. So it's exactly what the market is asking for and need and security bend. It's definitely a natural expansion and extension of our existing customers who have backup today.

Got it. That's real helpful. All right. I'll jump back in the queue. Thank you.

Thank you, Brian.

And as a reminder for questions, if you do have one, you can press the one followed by the four on your telephone keypad. And our next question is from the line of Kirk Matern with Evercore ISI. Please go ahead.

Yeah, thanks very much. TJ, I was wondering if you could just talk a little bit more about the small business momentum you've been seeing and and I guess the stability or trends behind that, how comfortable you are with those trends, just given what's going on from a macro perspective. I think people are a little bit nervous about smaller businesses potentially starting to run into more budget constraints, things like that. So you can just talk about maybe your progress and then just what gives you comfort that that should be able to continue through the year.

Thank you, Kirk. Yeah, small businesses is the fastest growing segment for us in the three digits. We are forecasting that should be 10% of our AR for the year. It's really growing fast. And we have a definition of 1,000 employees or less, companies being small business. So that's a pretty generous definition. So in that regard, there is a very, very big market. In fact, we look at Microsoft's total M35 ecosystem. For that segment, that's about 50% of their market. So for us, we are seeing massive growth. It's a greenfield for us. We're now treating managed service providers, MSP, as a vertical to tackle. So we're adding a lot more resources to that to continue that growth trend.

That's helpful. And then, obviously, Microsoft started pushing through a price increase on Office 365 in March. I was wondering, does that have any bearing on your business at all in terms of as people sort of reevaluate the bundle that they're getting from Microsoft and what might be in it, what might not be in it? I guess, does it have really any bearing on your business or trends from a bookings perspective?

Overall, there's an inflationary pressure across the market. You see various platform providers increasing prices across storage, across compute. So for that, it's really our value add for our customers to maximize their investment on Microsoft Cloud and now extend to Google as Salesforce. So we actually see a benefit from that as well. So it's only helpful for us to continue to provide that value add. So to help our customers and partners to maximize their investment.

That's great. Thanks, alternative dollars.

Thank you.

And our next question is from the line of Jason Adder with William Blair. Please go ahead.

Yeah, thank you. Good afternoon, guys. Just first question on the macro environment. TJ, did you specifically address whether you're seeing any impact globally? I didn't catch that. You might have said in your prepared remarks, but any update on kind of early signs of of, uh, of cracks or, or, you know, kind of leading indicators, um, that, that might suggest things are slowing down. And then also, um, from, from you, Jim, any, any impact from currency in the quarter or in the guidance?

Um, I'll, I'll take the first one and Jim will talk about the FX. Um, from our perspective, the, the, the global climate and the conflicts in Europe, uh, it doesn't impact us directly because we don't have any businesses in, uh, Eastern Europe or Ukraine or Russia. But what we are seeing, though, is our Western European customers, we have very large German customers, for example, looking to expand their hybrid deployment scenarios for business continuity purposes. Historically, we see multi-cloud as a strategy for that. But now we see because data sovereignty, because of regional business resiliency concerns, there are a lot more of that ask. So this is where you see some term license up creep as well. So for us, we're very well situated to handle all type of deployment scenarios, whether it's on-prem, private data centers, or hybrid, or multi-cloud. So we just see that there's the trend for that focus around business continuity and contingency planning. So it's actually, for us, it's something that we lean into, especially because we're physically in 17 different countries. we can excel into that offering some of the quote-unquote hyper localization offerings. So on FX, Jim?

Yeah, so Jason, thanks for the question. So, you know, thinking about FX, we had factored in really FX into our planning process. And then what we saw in really Q1 was of the almost unanticipated FX was only about a half a point in terms of impact on revenue. So not really material, you know, compared to what we had kind of baked into the plan.

Great. Thank you. And then for you, TJ, which specific SKUs are you seeing the most momentum from now?

We continue to see our backup as a service, the resiliency skew. As we stated last quarter, at the quarter-to-quarter mix, it's about 50% of the mix now, uplift from about a third of the mix. So that's definitely a big uplift. The second one is in Q1 specifically, we continue to see a tremendous amount of migration. So that's something that we see that people are continuing to go digital transformation into different environments. We don't think migration will ever end, honestly. From moving on-prem to cloud or even divestiture, merger acquisitions, that will be a continued use cases there.

All right. And then last one from me just for you, Jim. Any update on cross-sell metrics? I know in the past you've talked about a number of customers with more than one product, more than two products, more than three products. Any updated metrics there would be helpful.

Yeah, we haven't really, you know, gone into detail on that and publishing it. It is something I think I mentioned in Q4 that we're looking to gather enough information there and report on that, you know, repeatedly. But as of right now, we're we're not providing any guidance along those lines.

Okay. Good luck, guys. Thank you.

All right. Thanks, Jason.

And our next question is from the line of Nihal Chokshi with Northland Capital Markets. Please go ahead.

Yep. Thank you. Can you just double-click here on the why the reorganization of the sales organization has resulted in a step back in the March Q showing 12-month dollar-based net revenue retention rate?

Yeah, I think when we were talking about it earlier, I think just it's the normal kind of function of having some disruption in the organization as you look at realigning people and having them focus on things they weren't previously focused on. I think that naturally creates a little change, and it took a little while for that change to really be absorbed and for people to embrace it and ultimately move forward with it. So, again, I think we anticipated some of that change, and, again, hopefully we're past most of it in Q1. And again, we think this is the right strategy to move forward and have people focused and embrace those individual roles. But in the meantime, going through that transition like any other transition has some challenges with it. And this was no different for us, but we believe we're through it now.

Understood. And just to be clear, that transition began sometime during the December quarter. When exactly within the December quarter did that transition begin?

It was end of Q4. So Jim mentioned earlier the gross retention improved. So what we're seeing is actually the gross retention renewal improved. And what we're seeing is this adjustment where people are literally reassigning new accounts to their names or taking away new accounts to their names, create some distraction in the upsell side of it. That's where you see the NR change. So we started that process end of And that also goes along with everyone's comp plan. Think about every salesperson will have a different number in their comp plan, depending on the patch, how many accounts they now cover. Some reps could be going from 70 accounts down to 30 accounts. And each patch will have their own natural ARR amount. And then thereby we derive a upsell quota for that rep. So every rep actually has different size quotas, depends on the counts and patch they own. So there's a lot of accounts being reassigned, and that introduces adjustment periods. I see. Okay.

And did I hear you correctly saying that you have completed your first acquisition?

That is correct. We completed first tucking acquisition. The details are hash in your 10K. It's in the education vertical sector. It's a domain expert in the training management space because we have a integrated, industry-only integrated learning management, training management, and now training management solution that's fully integrated with Microsoft, 3G5, and Teams to offer to higher educations as well as commercial.

I see. I'm sorry. I didn't capture that from the 10K. Could you just briefly review the financial details of that acquisition then?

Sure. So, essentially... It's a, like TJ said, it was an acquisition we completed at the end of February. It was in actually Singapore where we made the acquisition. The transaction had a value of 10 million Sing, equivalent of about a little less than $8 million US, had a couple components to it. But again, end of February had very little impact on our revenue for the quarter. Got it. Okay, very good.

And then why not deploy your repurchase faster than what you did?

That's a great question. What we decided to do when we first implemented that plan was we set a target. We set a systematic process where we were purchasing a fixed amount with our advisors, where we set up a recurring purchase every week, and we kind of set it. and said we're not gonna touch it for the first six to seven weeks of the program to see what happens. So we kind of, this is the first time we're doing a repurchase program. And so we wanted to kind of see how it goes. And again, we, you know, with the help of advisors, we set a specific number and we set a systematic approach and we've just executed upon that. That is something we are revisiting to see if we want to continue at the same level or, as you suggested, either increase or decrease. But that's something we're currently looking at now. Great. Thank you. Thanks, Neil.

And we do have a follow-up question from the line of Brian Essex with Goldman Sachs. Please go ahead.

Hey, great. Yeah, thanks for pulling me back in. Just a real quick housekeeping question. Just noticed a purchase of investments on the cash flow statement, about $180 million. Maybe just touch on that and give us a little clarity in terms of what's going on there.

Sure. This just has to do with, you know, we're purchasing T-bills, essentially. So, this quarter, we actually went out and bought T-bills that were extended beyond three months. And so, just the accounting rules is you got to classify them as short-term investments as opposed to cash. And so, it's just a technical accounting thing, but essentially, we're still viewing it as cash and cash equivalents. Yep.

Fair enough. Great. Thank you.

Great.

And we have no further questions in the queue. I will now turn the call back over to TJ Jiang for closing remarks.

Well, thank you, everyone, for your questions and your time today. We continue to be very enthusiastic about the global growth potential for both the market and AppPoint. With a powerful brand, we continue to increase our access to help organizations worldwide collaborate with confidence at scale. We recently announced the appointment of our newest member of our board of directors, Janet Shines, Her experience leading channel programs and disruptive go-to-market strategies will provide a unique perspective as we continue to scale our global channel, one of our key growth vectors. It's clear that we're operating in a highly dynamic market right now, one where it is important to continue to grow while being prudent with expenditures. Throughout our company's 20-year history, we have proven our ability to do just that, and I'm confident that we'll continue to do so. We'll continue to achieve positive cash flow on an annual basis, which will enable us to evolve our product offerings, continue our expansion, and stay on the bleeding edge of innovation. Our go-to-market strategy positions us well for the new local acquisitions, a growing partner ecosystem, and the ongoing expansion of existing customers to whom we deliver exceptional service today. And in the process, create value for our shareholders, partners, and customers. Lastly, I want to thank our shareholders for your recent vote of confidence at our annual shareholder meeting to renew my appointment to the board of directors and to approve our senior executive compensation. With nearly 70% of all shares voted and at over 99% in affirmative, we know it is a privilege to have our shareholders' trust and faith in our ability to navigate the current market conditions. focus on consistent execution, and ultimately deliver long-term shareholder value. With that, thank you.

That does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a great day.