AVPT - AvePoint: Back In The Spotlight

2023-04-17 06:23:34 ET

Summary

• Today, we are doing up a follow-up article on SaaS concern Avepoint, Inc. for the first time in almost a year.
• The company continues to grow the share of overall revenues provided from recurring subscription fees but faces headwinds from the slowdown in tech spending.
• Is now the time to buy or should investors wait for a more certain economic outlook? An updated investment analysis follows in the paragraphs below.

No man really wants his freedom. He gets a habit as quickly as possible - its a form of immortality . - Djuna Barnes, Nightwood

Today, we circle back on AvePoint, Inc. ( AVPT ) for the first time since our initial article on this small cap concern back in May of last year. The company continues to make strides growing its SaaS revenue stream and has a strong balance sheet. AvePoint has also been impacted by the strong dollar and a slowdown in tech spending overall. An updated analysis follows below.

Company Overview:

The stock currently trades just north of four bucks a share and sports an approximate market capitalization of just north of $750 million. The company is headquartered across the Hudson from Manhattan in Jersey and came public via a SPAC a few years ago.

The company is a provider of cloud solutions with its software-as-a-service [SAAS] platform centered on managing, migrating, and protecting data primarily for 500+ user seat clients of Microsoft ( MSFT ) 365, as well as Dynamics 365, Salesforce ( CRM ) , and Google ( GOOG ) ( GOOGL ) Workspace. Just over 50% of overall sales come from subscriptions and that percentage is rising at a good clip.

Fourth Quarter Results:

On March 9th, the company reported its fourth quarter numbers . AvePoint had a GAAP loss of seven cents a share, three cents below the consensus. It should be noted that the earnings miss was entirely attributable to the onetime expenses related to the workforce reduction the company announced in December, which involved roughly five percent of its overall workforce. Excluding these non recurring costs, AvePoint would have had non-GAAP net income of $4.5 million in the fourth quarter.

Revenues did rise just over 18% on a year-over-year to $63.6 million, roughly in line with the consensus. SaaS revenue grew 36% for the quarter compared to 4Q2021 to $33 million. It should be noted that for the quarter and FY2022, AvePoint took a huge hit because of the strong dollar. SaaS Revenues would have been up 46% for the quarter on a common currency basis as but one example of these impacts. Revenues overall would have risen 26% in common currency terms.

Leadership lowered guidance a bit for FY2023, a common occurrence in the technology sector in recent months. Management now expects this fiscal year's revenue to be in a range of $253.8 million to $260.8 million. At midpoint, this represents sales growth of 11% for this fiscal year. However, it was significantly under the roughly $274 million the analyst firm consensus had penciled in at the time.

Analyst Commentary & Balance Sheet:

Since fourth quarter results hit the wires, Cowen & Co. reiterated their Outperform rating on the stock but lowered their price target 50 cents a share to $5.50. Evercore maintained its Buy rating and $6 price target and called AvePoint's long-term market opportunity ' robust '. Citigroup stuck with its Hold rating and $4.70 a share price target on the equity.

There has been no insider activity in the shares since December of 2021. Approximately five percent of the stock's outstanding float is currently held short. The company ended the 2022 fiscal year with just under $230 million of cash and marketable securities on its balance sheet. AvePoint has no long term debt and it purchased nearly $20 million in its stock in FY2022.

Verdict:

The current analyst firm consensus has the company with a 7 cent a share profit in FYF2023 followed by a 13 cent a share profit in FY2024. Revenues are expected to rise 11% this fiscal year to just over $258 million. Mid-teens sales growth is projected for FY2024.

AvePoint is targeting a large and growing market. The company also has a pristine balance sheet. However, the shares are likely to continue to see headwinds from the current uncertain economic outlook and deteriorating in tech spending. That said, on a longer term basis, AVPT would seem to merit a small ' watch item ' holding for now. Options are available against this equity making a covered call strategy viable. This is providing decent downside protection and how I have established a small position in this tech concern.

Ah, but a man's reach should exceed his grasp, Or what's a heaven for? - Robert Browning

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