Nehal Chokshi

Nehal Chokshi asked for a deeper explanation of why Qualys's patch management remains a key differentiator, especially against competitors like ServiceNow, and inquired about any headwinds contributing to the expectation of no material change in the net dollar expansion rate for Q2 2026 guidance. He also asked if the baseline expectations imply a slow pace for ETM penetration.

Answer

Sumedh Thakar (President and CEO, Qualys) explained that Qualys's highly integrated patch management solution, which can detect, validate exploitability, and fix issues within minutes, is a significant differentiator. He highlighted the ability to deploy 140 million patches in the last 12 months and the innovation of "patchless patching" through mitigating controls. Joo Mi Kim (CFO, Qualys) stated that the guidance assumes no material change in the net dollar expansion rate (currently 103%) based on pipeline, existing customer discussions, and macro expectations. Thakar added that ETM adoption is still very early, with encouraging POC conversions, but not enough to map a confirmed trajectory, and more specific ETM guidance will be provided starting Q1 2026.

Nehal Chokshi asked why patch management remains a key differentiator for Qualys, especially in light of competitors like ServiceNow and Armis. He also inquired about the expectation of no material change in the net dollar expansion rate for Q2 2026 guidance and whether this implies a slow pace of ETM penetration without an inflection point.

Answer

Sumedh Thakar, President and CEO of Qualys, explained that Qualys's highly integrated patch management solution, which deployed 140 million patches in the last 12 months, quickly correlates CVEs, confirms exploitability, and fixes issues within minutes. He also highlighted 'patchless patching' through mitigating controls. Joo Mi Kim, CFO of Qualys, stated that the guidance assumes no material change in the net dollar expansion rate (103%) based on current pipeline and customer spending expectations. Mr. Thakar added that it's still very early for ETM adoption, with encouraging POC conversions, but not enough to map a confirmed trajectory or an inflection point yet.

Nehal Chokshi of Northland Capital Markets followed up on the reference customer discussion, asking if the increased willingness from best and biggest customers was newfound or necessitated by a pipeline of larger prospective customers. He also asked if there were more 'grand slam' type customers in the pipeline.

Answer

President and CEO Ramesh Srinivasan clarified that it's not a necessity but a better situation, as recent successes involving the ecosystem (multiple products) have produced great value for bigger customers, making them willing to take calls. He confirmed the pipeline has a good mix of both bigger size customers and 'singles, doubles, and triples,' with increased reference customer availability for modernized solutions.

Nehal Chokshi followed up on the increased willingness of Agilysys's best and biggest customers to take prospective customer calls, asking if this was a newfound willingness or driven by a higher number of 'grand slam' type prospective customers in the pipeline.

Answer

Ramesh Srinivasan (President and CEO, Agilysys) stated that the improved situation is due to the success of ecosystem implementations with larger customers, who are now willing to share the significant value created, enhancing both the quality and prestige of reference calls. He confirmed the pipeline has a good mix of larger and smaller customers, and reference customer availability for modernized solutions has generally increased.

Nehal Chokshi asked if any single customer represented more than 10% of the Annual Contract Value (ACV) in the second best-selling quarter. He also sought clarification on the specific ACV sales growth for Q2, given it was the second best-selling quarter, and asked for a reiteration of the midterm organic subscription revenue growth outlook.

Answer

Dave Wood, CFO, confirmed that no single customer exceeded 10% of ACV, indicating broad-based sales strength across various verticals. Ramesh Srinivasan, President and CEO, noted that the last three quarters have been the best three sales quarters in company history, but did not provide specific Q2 ACV growth percentages. Dave Wood reiterated the midterm organic subscription revenue growth outlook as 'a little bit over 25% for the quarter and trending to 25% for the year,' highlighting strong backlog and sales momentum.

Nehal Chokshi inquired if any single customer accounted for more than 10% of the Annual Contract Value (ACV) during the second best-selling quarter, and asked for an update on the midterm organic subscription revenue growth outlook.

Answer

Dave Wood, CFO of Agilysys, confirmed that no single customer exceeded 10% of ACV, indicating broad-based sales strength across various verticals. Ramesh Srinivasan, President and CEO, declined to provide specific ACV growth numbers for Q2 but noted that the last three quarters have been the best three sales quarters in company history. Dave Wood reiterated the midterm organic subscription revenue growth outlook of a little over 25% for the quarter, trending to 25% for the year, driven by strong backlog and sales momentum.

Nehal Chokshi of Northland Capital Markets asked about the sustainability of the ~20% growth in the sales pipeline, the rationale for excluding Marriott from FY26 guidance, and whether planned OpEx growth was sufficient to support the pipeline.

Answer

President & CEO Ramesh Srinivasan expressed optimism that pipeline growth could improve beyond 20% due to international expansion and a larger sales team, noting that win ratios also impact revenue. CFO Dave Wood explained the Marriott exclusion is because the rollout will be in an early, non-material pilot phase during the fiscal year. Both executives affirmed that OpEx is sufficient, as significant investments in hiring have already been made.

Nehal Chokshi sought clarification on a 70% year-over-year growth metric, asked for the module attach rate for PMS bookings, and questioned the rationale for expanding the Total Addressable Market (TAM) from $5 billion to $16 billion.

Answer

President and CEO Ramesh Srinivasan clarified that Q3 sales of PMS and related modules (excluding Book4Time) were up 70% year-over-year, and the PMS attach rate is about 8.5 modules per deal. CFO Dave Wood explained the TAM was expanded to $16 billion to reflect the company's full suite of add-on modules, which are now mature enough to compete as best-of-breed products and were not fully accounted for previously.

Nehal Chokshi asked about the competitive landscape for spa booking software, specifically which other companies offer tight integration with PMS and POS systems and how Agilysys views competitors like Mindbody. He also questioned if the continued headwinds in hardware product revenue were the reason for the modest increase in total revenue guidance despite the Book4Time acquisition.

Answer

CEO Ramesh Srinivasan asserted that with the acquisition, Agilysys now owns the two leading spa software products for the hospitality vertical, Book4Time and Agilysys Spa, differentiating on modern technology and feature richness. He clarified that Agilysys does not compete with general spa software like Mindbody, as its focus is exclusively on hospitality. CFO Dave Wood confirmed that product revenue remains a challenge, trending toward a 10% annual decline, which is the primary factor limiting a larger increase in the full-year revenue guidance.

Nehal Chokshi asked Rukmini Sivaraman if Nutanix had stated the year-over-year bookings growth rate and sought clarification on the term 'cancelable backlog'. Chokshi then asked Rajiv Ramaswami for an estimate of Nutanix's market share capture in VMware migrations and whether organizations are increasingly seeking container-only or mixed virtualization solutions.

Answer

Rukmini Sivaraman, Nutanix's CFO, stated that Nutanix does not typically report specific bookings growth rates but clarified that cancelable backlog is a small component of RPO that usually converts to revenue. Rajiv Ramaswami, Nutanix's CEO, indicated that while a precise market share estimate for VMware migrations is difficult, Nutanix believes it is winning a significant portion, particularly against Red Hat, by offering strong virtualization and container solutions. Ramaswami added that most customers have a mixed environment, with the majority still virtual machine-based, while newer applications are built on containers.

Nehal Chokshi asked if Nutanix had stated how much bookings were up year-over-year, and for clarification on the components of RPO, specifically cancelable backlog. He also inquired about Nutanix's estimated market share in VMware migrations and whether organizations are increasingly seeking container-only or mixed solutions.

Answer

CFO Rukmini Sivaraman stated that Nutanix does not typically report specific bookings growth rates but confirmed bookings were ahead of expectations. She clarified that RPO includes deferred revenue and non-cancelable backlog, with cancelable backlog being a small component that mostly converts to revenue. CEO Rajiv Ramaswami noted it's hard to quantify VMware migration market share but qualitatively stated Nutanix is winning a good chunk against competitors like Red Hat, especially where virtualization and mission-critical workloads are key. He added that most customers have a mixed environment, with existing estates being VM-based and new builds on containers.

Nehal Chokshi of Northland Securities, Inc. asked how incremental ARR performed relative to internal expectations and questioned the reason for the sequential decline in service revenue.

Answer

CFO Rukmini Sivaraman did not comment on ARR relative to expectations but expressed satisfaction with overall performance against guidance. She explained the sequential decline in support revenue was not unusual and was partly impacted by the runoff of old device licenses, while noting that product revenue grew strongly, aided by a large deal's revenue recognition.

Nehal Chokshi of Northland Capital Markets questioned why ARR was decelerating and why incremental ARR was weak, especially given the reported strength in new logo acquisition.

Answer

CFO Rukmini Sivaraman explained that the primary driver of net new ARR is land-and-expand ACV. She pointed to a divergence where new customer 'land' was strong, but 'expand' with existing customers, which constitutes the majority of land-and-expand, was negatively impacted by the weak U.S. federal quarter. She also reiterated that longer sales cycles for larger deals affect overall ARR growth.

Nehal Sushil Chokshi inquired about the drivers behind increased traction with a major telecom customer, specifically whether it stemmed from higher tax rates or increased bundling, and sought details on the first customer for OPNET Secure, including its profile and materiality. He also asked for an update on the Smart product pipeline.

Answer

CEO Eyal Harari confirmed good progress with new customer launches, noting positive trends in both tax rates and new services, highlighting MassMobile in Panama. Regarding OPNET Secure, Mr. Harari explained its value in providing 24/7 protection beyond the operator's network, but declined to provide specific customer details, emphasizing its importance and pipeline potential. He also affirmed a strong Smart pipeline, mentioning multi-million dollar deals, demand for Terra 3, and a healthy mix of new and existing customers, with CFO Liat Nahum adding that Smart contributed to strong quarterly results.

Nehal Chokshi inquired about the drivers behind increased traction with a major telecom customer, specifically whether it stems from higher tax rates or more 'at-bats' due to bundling. He also asked for details on the first customer for OPNET Secure and the continued strength of the Smart product pipeline.

Answer

CEO Eyal Harari indicated good progress with new customer launches, noting positive trends in both tax rates and new services, citing Más Móvil in Panama. Regarding OPNET Secure, Mr. Harari explained its aim to enhance security beyond the operational network, confirming a pipeline is building with multiple sales opportunities, but did not disclose specific customer materiality. He affirmed the continued strength of the Smart pipeline, mentioning multi-million dollar deals and demand for the Terra 3 product, with CFO Liat Nahum adding that Smart results were strong this quarter.

Nehal Chokshi of Northland Capital Markets questioned the drivers of the record incremental CCaaS ARR, the attach rate profiles for Verizon and Vodafone, the status of the sales pipeline after the landmark deal, and how that deal would be reflected on the balance sheet.

Answer

CEO Eyal Harari confirmed the incremental ARR was driven by a full quarter of Verizon's MyBiz promotion and the Vodafone migration reaching full capacity. He noted Verizon's attach rate is near 100% as the service is a default opt-in. He also affirmed the sales pipeline remains strong with more multi-million dollar opportunities. CFO Liat Nathom added the landmark deal is a CapEx project with revenue recognized in 2026-2027, which will impact deferred revenue and RPO over time.

Nehal Chokshi inquired about the timing of the Verizon Business Mobile deal's contribution to SECaaS ARR, the primary drivers of the record Q1 SECaaS growth, the specific meaning of the 'around 50% or more' growth guidance, the cross-selling potential of SECaaS into the Smart business, and the competitive landscape's impact on the Smart pipeline.

Answer

CEO Eyal Harari clarified that the Verizon mobile deal had minimal impact in Q1, with significant contributions expected from Q2 onward. The strong Q1 SECaaS growth was driven by the ramp-up of previously announced deals with partners like Vodafone, MEO, and O2. Harari explained the 'around 50%' guidance reflects reliance on partners' marketing efforts and could land slightly above or below that figure. He confirmed Verizon is now the largest SECaaS revenue contributor due to its fixed wireless and initial mobile services. Harari also affirmed the strategy to cross-sell to the Smart customer base and noted the growing Smart pipeline is driven by strong demand for the new Tera III platform.

Nehal Chokshi asked about the drivers for the Q4 revenue mix, particularly the rise in support revenue and the sharp decline in product revenue. He also sought clarity on the 2025 outlook for both product revenue and the SECaaS growth rate, the reasons for a sequential slowdown in incremental ARR, future OpEx plans, and the strategy for expanding security offerings to include off-net protection.

Answer

CEO Eyal Harari and CFO Liat Nahum explained that the support revenue increase was due to typical year-end renewals, while the product revenue drop reflected the lumpy nature of large deals. Harari projected stable but unpredictable product revenue for 2025, reaffirmed a high double-digit growth target for SECaaS, and attributed the ARR slowdown to non-linear partner launch timings. Nahum cited product mix for a slight gross margin dip. Harari outlined a strategy for 'off-net' security R&D and projected flattish OpEx before investments increase later in the year.

Nehal Chokshi of Northland Capital Markets inquired about Allot's Security as a Service (SECaaS) Annual Recurring Revenue (ARR) growth, the drivers for the record quarterly increase, and the outlook for Q4 and calendar year 2025. He also asked about the reasons for the flattish operating profit guidance, the improvement in gross margins, and the recent reduction in R&D spending.

Answer

Executive Eyal Harari confirmed that SECaaS ARR is expected to continue growing quarter-over-quarter, attributing the recent record increase to new service launches with existing partners like Vodafone and NEO, as well as increased subscriber penetration. He explained that Q4 operating profit guidance is conservative due to the non-recurring nature of some revenue streams, though the company is focused on long-term profitable growth. Harari also clarified that the R&D reduction was partly due to a recurring annual government grant received in Q3, not program cuts. CFO Liat Nahum added that the strong Q3 gross margin was influenced by a one-time SECaaS revenue catch-up and a favorable product mix, with a long-term target of 70%.

Nehal Chokshi from Northland questioned the necessity of repeating the strategy of taking a margin hit to ramp up new customers on V300s, similar to the xAI Plus 8 Plus 1 situation, asking why it's necessary to continually prove Super Micro's engineering prowess.

Answer

Charles Liang, Founder, President, and CEO, affirmed xAI as a valuable long-term partner, stating Super Micro works with them to learn and offer the best service. He noted the company's significantly increased capacity and capability, but emphasized selective revenue growth based on cash flow. David Weigand, CFO, explained that these instances validate Super Micro as the premier provider of advanced DCBBS solutions and AI data centers, leading to additional business from successful installations.

Nehal Chokshi questioned the necessity of repeating the strategy of taking a margin hit for new large customers, similar to the xAI ramp-up a year and a half ago, to demonstrate Supermicro's engineering capabilities, asking why this 'rinse and repeat' approach is still required.

Answer

Charles Liang, Founder, President, and CEO, affirmed xAI as a valuable long-term partner and reiterated that the company's expanded capacity allows for selective revenue growth based on cash flow. David Weigand, CFO, explained that these instances validate Supermicro as the premier provider of advanced DCBBS solutions and AI data centers, leading to additional business and market share gains.

Nehal Chokshi asked about the drivers for the sequential revenue increase guided for September and why this growth is not expected to translate into operating leverage. He also sought to clarify if DCBBS is a discrete service or a bundled offering.

Answer

CFO David Weigand attributed the Q1 revenue growth to the ramp of new GPU platforms but noted that the production learning curve for these new technologies limits immediate operating leverage. CEO Charles Liang described DCBBS as a pre-validated, modular total solution, implying it is bundled to enhance the value and margin profile of a GenAI factory deployment.

Nehal Chokshi sought clarification on the Q3 inventory reserve, asking if a similar reserve is anticipated for Q4 and included in the 10% gross margin guidance. He also questioned if the Q3 revenue shortfall was related to inventory that is now being resold at a lower price.

Answer

CFO David Weigand confirmed the Q3 inventory reserve reduced margins by about 220 basis points, primarily for older products, and that the Q4 margin guidance is driven more by prudence around tariffs. He explained that the Q3 revenue shift was due to customers moving to newer platforms, necessitating a write-down on the expected value of older inventory. CEO Charles Liang added he hopes the margin impact from reserves will be smaller in Q4 and near zero by the September quarter.

Nehal Chokshi asked if the company's backlog increased quarter-over-quarter. He also challenged the reliance on historical growth rates for the $40 billion forecast, asking if it was validated by the current demand pipeline. Finally, he requested a concrete example to clarify the 'data center building block architecture' concept.

Answer

CFO David Weigand did not provide a specific backlog figure but noted that backlog tends to follow chip cycles, building with new solutions. CEO Charles Liang affirmed that the $40 billion target is validated by multiple dimensions, including historical growth, customer demand, backlog, and sales commitments, calling it a 'very conservative target.' He explained the 'Data Center Building Block Solution' as a one-stop shop for customers building a data center, providing everything from racks and liquid cooling components (pumps, water towers) to software, management tools, and deployment experience.

Nehal Chokshi asked about the presence and revenue concentration of 10% customers in the quarter. He also questioned CEO Charles Liang on the potential benefits of separating the Chairman and CEO roles at Super Micro.

Answer

CFO David Weigand confirmed the company had 10% customers but declined to disclose the specific revenue percentage. On the topic of corporate governance, CEO Charles Liang stated that he is open-minded about separating the Chairman and CEO roles and regularly considers what is in the best interest of the company and its shareholders, though he made no commitment to a change.

Nehal Chokshi from Northland Capital Markets questioned Quantum's debt structure, including interest rates and paid-in-kind amounts for term debt, and sought clarification on the 10Q filing status. He also probed into the drivers of Q2 EBITDA guidance, specifically asking about gross margin and non-GAAP operating expense trends, typical Q2 seasonality, and the impact of federal vertical buying. Additionally, Chokshi asked CEO Hugues Meyrath to detail Quantum's most differentiated products and the reasons behind the DXi All-Flash product's market performance.

Answer

Chief Accounting Officer, Laura Nash, directed Nehal Chokshi to the upcoming 10Q filing for specifics on term debt interest rates and segment data. She explained that Q2 gross margin is expected to be in line with fiscal Q2 2025, influenced by one-time Q1 expenses and revenue mix, and anticipated a non-GAAP operating expense decline of approximately $3 million Q-o-Q due to restructuring. Nash confirmed Q2 typically sees federal government buying but maintained the current guidance is accurate. CEO Hugues Meyrath highlighted DXi, ActiveScale cold storage, and StorNext as key differentiated products, noting DXi's underperformance was due to issues in lead generation, sales compensation, and the need to build a stronger enterprise channel.

Nehal Chokshi of Northland Capital Markets inquired about the product focus of a large U.S. federal deal, future OpEx levels, backlog trajectory, demand for key products, the biggest future growth driver, and the competitive landscape for DXi appliances.

Answer

CEO Jamie Lerner detailed that the federal deal involved high-margin, differentiated products for defense and intelligence, including high-speed analytics and cybersecurity solutions. He also highlighted strong demand for the DXi portfolio, StorNext, and the new i7 tape appliance, positioning them as key growth drivers. CFO Ken Gianella confirmed the $30 million quarterly OpEx guidance is appropriate and noted that federal revenue was up 54% year-over-year. Lerner emphasized DXi's competitive advantage, stating major rivals lack a comparable all-flash deduplication offering.

Nehal Chokshi from Northland Capital Markets inquired about the composition of a large U.S. federal deal, the future trajectory for operating expenses, backlog expectations, demand trends for key products, and the expected primary growth driver for fiscal 2026.

Answer

Chairman and CEO Jamie Lerner detailed that the federal deal involved high-margin products for defense and intelligence agencies. He also highlighted strong demand for the DXi portfolio and new i7 tape product, positioning the company for growth in both primary and secondary storage. CFO Ken Gianella confirmed that OpEx should be modeled around $30 million quarterly, the backlog target remains $8-$10 million, and noted that Federal revenue was up 54% year-over-year, validating their strategy.

Nehal Chokshi inquired about the pipeline conversion rates needed to achieve breakeven free cash flow, whether win rates differ across product lines like Myriad and ActiveScale, and why the elevated backlog isn't expected to buffer the March quarter guidance.

Answer

CFO Ken Gianella explained that achieving positive cash flow is more dependent on managing the recurring revenue base and a lower OpEx structure rather than a specific pipeline conversion rate. Chairman and CEO Jamie Lerner noted that DXi win rates are significantly up, attributing this to recent product innovation compared to competitors like Dell. Regarding the forward-looking guidance, Gianella stated that the company is being cautious due to both persistent supply chain headwinds and a planned factory transition occurring at the end of the quarter.

Nehal Chokshi inquired about the pipeline conversion rates needed to achieve breakeven free cash flow and whether win rates differ across product lines like Myriad and ActiveScale versus legacy products. He also asked if the elevated backlog was expected to persist and why it wasn't buffering the Q3 guidance more significantly.

Answer

CFO Ken Gianella explained that the path to positive free cash flow is driven more by structural improvements, like a lower OpEx base (down 8% YoY) and a focus on recurring revenue, rather than a specific pipeline conversion rate. CEO Jamie Lerner noted that DXi win rates are 'significantly up' against competitors like Dell, and ActiveScale rates are on par, while enterprise tape saw a dip. Gianella confirmed the elevated backlog is expected to persist due to ongoing supply chain headwinds and a planned factory transition, both of which are factored into the Q3 guidance.

Nehal Chokshi of Northland Capital Markets questioned the year-over-year decline in subscription bookings, the significant drop in service gross margin, and the quarter-over-quarter bookings trend for the Myriad and ActiveScale product lines.

Answer

CFO Kenneth Gianella and CEO Jamie Lerner explained that the drop in subscription bookings was due to supply chain delays preventing hardware shipments, which are necessary to recognize the associated software revenue. Gianella attributed the lower service gross margin to regional operational inefficiencies and higher staffing costs, which are being addressed. Lerner added that while specific booking numbers for Myriad and ActiveScale are not disclosed, ActiveScale is seeing strong adoption, and Myriad is successfully converting proof-of-concept trials into sales.

Nehal Chokshi of Northland Capital Markets inquired about the year-over-year decline in subscription bookings, the significant drop in service gross margin, and the quarter-over-quarter bookings trend for the Myriad and ActiveScale product lines.

Answer

CFO Kenneth Gianella attributed the lower subscription bookings to supply chain delays that prevented shipments, which are required for revenue recognition. He also explained the service margin decline was due to regional operational inefficiencies and higher staffing costs. CEO Jamie Lerner added that Myriad is showing strong performance in trials that are converting to sales, while ActiveScale continues to gain traction due to its ease of use and unique tape integration capabilities.

Nehal Chokshi questioned the relevance and drivers of the volatile Net Dollar Retention (NDRR) metric, which jumped to 131%. He also requested a normalized year-over-year bookings breakdown by geography and segment, and asked for a recap of recent capital raises and their impact on share count.

Answer

CFO Erick DeOliveira defended NDRR as a key metric, explaining the jump was due to a few large customers significantly expanding their zSpace software footprint. He provided a normalized H1 bookings breakdown (down 16% YoY), with the U.S. down 17% and China up 88%. DeOliveira also recapped a $13 million convertible debt drawdown in Q2 and a new $30 million equity line of credit facility established for Q3.

Questioned the relevance and driver of the volatile Net Dollar Revenue Retention (NDRR) metric, asked for a normalized year-over-year bookings breakdown by segment (CTE vs K-12), and requested a recap of recent capital raises and the capacity of the new equity line of credit.

Answer

The company affirmed NDRR is an important metric, with the recent jump to 131% driven by significant expansion from a handful of existing large customers. On a normalized six-month basis, the K-12 mix of bookings increased while CTE decreased, though the quarterly view shows CTE acceleration. The company recapped a Q2 $13M convertible debt drawdown and announced a new equity line of credit (ELOC) with a maximum capacity of $30 million.

Nehal Chokshi questioned the drivers behind the stronger-than-expected bookings, the linearity of bookings during the quarter, the software mix within the order backlog, and the specific booking splits between Inspire vs. Imagine and CTE vs. K-12.

Answer

CFO Erick DeOliveira explained that year-over-year growth in U.S. bookings was a key area of strength, offset by declines in smaller international markets. He confirmed the backlog's software mix remains healthy and representative of recent trends. He provided a bookings split of 71% K-12 and 29% CTE for the quarter. CEO Paul Kellenberger added that it was too early to provide a booking split for the newer 'Imagine' product versus the established 'Inspire' line.

Inquired about the impact of the IPO timing on bookings, inventory availability for new products, the drivers of weak Q1 guidance, the geographic mix of bookings, the future of R&D, the reasons for a lower Net Dollar Retention Rate (NDRR), and the rationale behind a recent debt issuance.

Answer

Executives explained that IPO timing delayed new product launches, which impacted bookings. Inventory for new products became available in late Q4 and Q1. The Q1 outlook is affected by lengthening sales cycles in the U.S. K-12 market due to funding uncertainty, though international (ex-China) remains strong. R&D will focus on user interaction. The lower NDRR was partly due to renewal orders being caught in backlog. The recent debt was to secure "dry powder" amid market turbulence.

Nehal Chokshi of Northland Securities, Inc. questioned the drivers of TSA PreCheck enrollment growth amid declining market renewals and sought clarification on the specific mix changes causing the sequential gross margin improvement guided for Q3.

Answer

Executive VP & CFO Mark Bendza explained that while overall market renewals are down, the rapid expansion of enrollment locations is driving overall enrollment growth. He confirmed that Q3's higher gross margin is due to a favorable revenue mix across various high-margin streams, including but not limited to the DMDC program, and noted this fluctuation is normal for their portfolio.

Nehal Chokshi of Northland Capital Markets asked about the trajectory of free cash flow for the upcoming quarter and full year, which segment drove the Q1 revenue outperformance, and the status of renewal activity post the five-year COVID anniversary.

Answer

EVP and CFO Mark Bendza stated that while he would not guide Q2 free cash flow due to working capital timing, he expects it to be significantly better than the prior year's quarter. He and CEO John Wood confirmed that Security Solutions, driven by DMDC and TSA PreCheck, was the primary driver of Q1 outperformance. Mark Bendza also confirmed that the renewal market had contracted as anticipated.

Nehal Chokshi asked about the realization risk of the full $485 million DMDC contract value, whether the new Air Force contract vehicle contributes to the 2025 outlook, and about the company's confidence in achieving positive free cash flow at maturity.

Answer

EVP & CFO Mark Bendza clarified that $125 million of the DMDC contract is base services over five years, with the remainder being variable. He also stated that any revenue from the new Air Force vehicle is incremental to the quantified 2025 drivers. Chairman & CEO John Wood emphasized that management is compensated on achieving revenue growth and positive free cash flow. Bendza added that the free cash flow breakeven point is now likely lower than the previously guided $200 million revenue level due to the favorable working capital profile of TSA PreCheck.

Nehal Chokshi of Northland Securities, Inc. questioned the drivers behind the increase in the dollar-based net retention rate to 112% and asked if data access management is at a similar inflection point as identity management due to generative AI.

Answer

CFO Jim Caci explained that the NRR improvement was broad-based, driven by strong cross-selling and large expansion deals across all customer segments and geographies. CEO Tianyi Jiang agreed that data access management is at an inflection point, highlighting the critical role of data governance and control for AI deployment and referencing the company's unique delegated administration model as a key enabler.

Nehal Chokshi sought to confirm if there was material upside in incremental ARR beyond the favorable impacts of currency and the Ydentic acquisition. He also asked for an estimate of what percentage of customers are now in the deployment phase of Microsoft Copilot, rather than just testing.

Answer

CFO James Caci acknowledged the strong Q1 performance but explained that the full-year ARR guidance was not increased beyond the FX tailwind, citing a prudent approach due to the uncertain macro environment. He noted that a stronger-than-expected term license mix contributed to the Q1 revenue beat. CEO Tianyi Jiang estimated that while 80% of customers are testing Copilot, fewer than 10% are in the deployment phase, though this is improving. He stressed that the broader deployment of AI functionalities, beyond just Copilot, is actively happening.

Nehal Chokshi probed the significant spread between constant currency ARR and revenue growth guidance, the rationale for flat EBIT margin guidance after years of expansion, and whether top-line outperformance would be reinvested.

Answer

CFO James Caci attributed the growth spread to the declining mix of term license revenue, which provides an upfront revenue bump, in addition to FX. He explained the flat margin guidance reflects a strategic decision to invest in sales, marketing, and R&D for long-term growth. He indicated that any top-line beat would be evaluated for a balance of reinvestment and current-period profitability.

Nehal Chokshi questioned how Generative AI transforms privileged access to be more data-centric, particularly for the Control suite, and asked for the foreign exchange impact on reported ARR.

Answer

CEO Tianyi Jiang explained that because Microsoft 365 Copilot is tied to the Office Graph, controlling access to specific data assets is critical for its successful deployment. He noted that large enterprises are implementing AvePoint's Control suite for permission and lifecycle management as a prerequisite for rolling out Copilot. CFO Jim Caci clarified that the FX impact on ARR was approximately 1%.

Nehal Chokshi from Northland Capital Markets inquired about the dynamics driving the increased Annualized Run Rate (ARR) guidance and requested more details on the company's recent MLPerf benchmark results.

Answer

CFO Maria del Dado Alonso Sanchez confirmed strong ARR momentum, growing from $249 million in March to $430 million in June, with the positive trajectory continuing into July. She noted the new guidance is supported by contracted capacity. Co-Founder & Chief Product & Infrastructure Officer Andrey Korolenko explained that the MLPerf results demonstrated linear scaling comparable to bare metal performance, a key differentiator for customers.

Nehal Chokshi from Northland asked for details on the dynamics behind the increased Annualized Run Rate (ARR) revenue guidance, requesting a quarterly update, and sought more elaboration on the company's recent MLPerf benchmark results.

Answer

CFO Maria del Dado Alonso Sanchez reported strong ARR growth from $249 million in March to $430 million in June, with the positive trend continuing into July. She attributed the raised full-year guidance to contracted capacity and strong demand, noting the impact is back-end weighted due to Q4 GPU installations. Co-Founder Andrey Korolenko added that the MLPerf results showed linear scaling comparable to bare-metal performance but achieved in a more flexible and cost-effective cloud environment.

Nehal Chokshi of Northland Securities, Inc. inquired about the drivers of profitability, the reason an EBITDA guidance increase didn't fully flow to EPS, and the specific Return on Invested Capital (ROIC) metric CSG uses.

Answer

CEO Brian Shepherd and CFO Hai Tran explained that while gross margin improvement was driven by both operational efficiencies and SaaS mix, the outsized Q2 result was boosted by a $6M non-recurring license deal. The disconnect between the EBITDA and EPS guidance raise was attributed to adverse foreign currency impacts on the balance sheet. Regarding ROIC, management focuses on generating returns well in excess of their high single-digit WACC, translating this into a focus on cash-on-cash returns for internal investment decisions.

Nehal Chokshi requested a more quantitative characterization of the 'strong pipeline' mentioned in the prepared remarks and asked if the strong Q1 cash from operations was also ahead of internal expectations.

Answer

CEO Brian Shepherd explained that 'strong pipeline' refers to the overall size being slightly larger than the prior year, with healthy deal progression and win rates across product lines like Ascendant, CPQ, and payments. He confirmed Q1 results, including cash flow, came in slightly ahead of expectations. Executive John Rea added that despite the strong start, Q1 is still expected to be the low point for free cash flow for the year, with growth anticipated in the coming quarters.

Nehal Chokshi asked for more color on how much the increasing SaaS mix is contributing to gross margin expansion. He also inquired about the incumbents displaced in recent major wins and the company's success rate against competitors like NetCracker and Amdocs.

Answer

CFO Hai Tran described the SaaS mix shift as a 'meaningful' contributor to gross margin improvement, along with broad efficiency actions. CEO Brian Shepherd declined to name displaced incumbents but confirmed that CSG competes against major players like Amdocs, Oracle, and NetCracker in every significant deal. He emphasized that CSG's competitive advantage lies in its cloud-native Ascendon platform and its ability to simplify business processes for clients.

Nehal Chokshi asked for the annual contract value (ACV) of recent non-Comcast wins and questioned why free cash flow guidance was not raised in line with the increase in adjusted EBITDA guidance.

Answer

CEO Brian Shepherd stated that CSG does not disclose ACV for new wins but affirmed they contribute to confidence in achieving future growth targets. CFO Hai Tran explained that free cash flow guidance remained unchanged because the benefits of higher EBITDA were offset by the near-term cash impact of restructuring charges taken during the year to drive long-term efficiencies.

Nehal Chokshi inquired about the necessary conditions for subscription revenue growth to accelerate into calendar year 2026, following up on the drivers for such an acceleration.

Answer

CFO Stefan Schultz stated that while the company is pleased with its current momentum and raised guidance, the present forecast represents what they are highly confident in achieving. For future acceleration, he highlighted initiatives like optimizing the top of the sales funnel, leveraging new partnerships like the one with Commerce, and expanding their sales reach. He noted that more details on the 2026 outlook would be shared in coming quarters.

Nehal Chokshi from Northland Capital Markets asked why full-year guidance was only reiterated despite strong demand signals, and questioned the reason for the guided sequential decline in Q2 adjusted EBITDA.

Answer

President and CEO Andres Reiner responded that while confidence in the guidance has increased, the company is remaining prudent and not getting ahead of itself given the broader macro risks. CFO Stefan Schulz explained the Q2 adjusted EBITDA decline is due to seasonally high spending for the company's Outperform conference. He noted this is a return to a more typical spending pattern, unlike the prior year which saw expense relief from lower incentive compensation due to weaker performance at that time.

Nehal Chokshi questioned why positive demand drivers and improved metrics only led to reiterated full-year guidance and the Q2 adjusted EBITDA decline.

Answer

CEO Andres Reiner cited macro risks as a reason for prudent guidance. CFO Stefan Schulz attributed the EBITDA decline to the Outperform conference and incentive comp timing.

Nehal Chokshi sought clarification on ARR growth figures, questioning why the 11% subscription revenue growth guidance for 2025 exceeds the 10% constant currency ARR growth at the end of 2024. He also asked about the focus of increased S&M investments and the drivers of the Q4 revenue beat.

Answer

CFO Stefan Schulz clarified the ARR calculation and explained that 2025 subscription revenue will benefit from the recognition of previously booked deals, making it a close proxy but not an exact match to year-end ARR growth. CEO Andres Reiner specified that S&M investments will target demand generation and quota-carrying personnel. Both executives confirmed that better linearity and strong bookings drove the Q4 revenue beat.

Nehal Chokshi asked for a review of the synergies from the EveryMundo acquisition. He also inquired about the company's capital allocation priorities, specifically regarding debt repayment versus M&A, given the rising free cash flow.

Answer

CFO Stefan Schulz and CEO Andres Reiner both praised the EveryMundo acquisition, highlighting its role in driving fast value in the travel sector and its emerging potential in B2B via the new AI-driven SEM product. On capital allocation, Schulz stated the focus is on building capital to provide options, keeping the door open for strategic M&A. Reiner added that M&A is not a necessity for growth, but the company's strong position allows them to be opportunistic with strategic, culturally-aligned tuck-ins.

Nehal Chokshi of Northland Securities, Inc. sought to clarify if 'high single-digit' growth meant a 7-9% range and asked if the expected growth deceleration from 2025 to 2026 would be primarily driven by ARPU.

Answer

CFO Kim Nelson declined to provide a specific numerical range but reiterated the outlook is for 'at least high single digits.' She explained that future growth will be driven by both customer additions and ARPU expansion through upsells and cross-sells, without specifying which would be the primary driver of any change in the growth rate.

Nehal Chokshi from Northland Capital Markets asked about the rate at which Carbon6 is adding new customers. He also inquired about the industry vertical of the new retailer that drove the strong organic customer additions in the quarter.

Answer

Executive Kimberly Nelson explained that the Carbon6 customer base consists of many smaller Amazon sellers with higher churn, resulting in a net customer count that was roughly flat from the acquisition date to the end of the quarter. Executive Chad Collins stated that the strong organic adds in Q1 came from a mix of enablement campaigns across their typical verticals like grocery, retail, and distribution, rather than from one specific new retailer.

Nehal Chokshi asked about the size of the Amazon-only supplier community within the TAM and inquired about the size profile of the customers who are already at or above the new target wallet share of $40,500.

Answer

Executive Kimberly Nelson clarified that the new TAM of 275,000 potential customers includes the first-party (1P) supplier space for revenue recovery but not the third-party (3P) marketplace. Executive Chad Collins added that the 3P Amazon seller market is large, with over 200,000 sellers doing over $1M in GMV, but this was not in the scope of the analysis. Regarding wallet share, management explained that the distribution of customers relative to the average is similar across small, medium, and large segments, implying that customers of all sizes are represented in the group that already exceeds the target ARPU.

Nehal Chokshi asked for a refresh on the North American portion of the company's TAM and questioned the risks that prevent management from being certain that North American go-to-market techniques will work in Europe.

Answer

Executive Kimberly Nelson recalled the original TAM estimate was roughly 50% North America, but noted they now see more opportunity in the U.S. than initially thought and will provide a formal update in 2025. Executive Chad Collins identified the risks in Europe as the model being unproven there, a different balance of power with smaller, regional retailers, and the complexity of executing programs across multiple languages and countries from a central location.

Nehal Chokshi of Northland Securities, Inc. questioned the 8% year-over-year decline in invoiced subscription revenue despite positive commentary on new logos and expansion. He also asked about the wide $10 million Q4 revenue guidance range and the magnitude of recent cost-cutting measures.

Answer

CEO Paul Walker clarified that the subscription revenue decline was influenced by some clients downsizing their subscriptions, smaller expansion deal sizes in the current environment, and a large client converting their subscription to an IP agreement, which created a drag of several hundred basis points. CFO Jessica Betjemann explained the wide guidance range reflects the timing risk of closing and delivering on a high volume of deals in Q4, which is historically the largest quarter for the Education business. Betjemann also detailed that cost savings were $3 million in Q3 and are expected to be $4 million in Q4, actions that were increased in response to the revenue environment.

Nehal Chokshi sought clarity on the revenue guidance reduction, specifically the $3 million 'additional impact', the breakdown of realized versus anticipated cuts, the logic behind the EBITDA guidance cut range, the drivers of negative free cash flow, and plans for share buybacks.

Answer

CEO Paul Walker explained the additional impact was an allowance for potential spillover headwinds in the U.S. from government actions. CFO Stephen D. Young addressed the guidance, noting the $5 million government cut is realized while other amounts are forecasts. He explained the EBITDA range reflects fixed SG&A adjustments. The negative free cash flow was driven by higher cash taxes paid ($6M+), lumpy customer deposits (a $7M negative swing vs. last year), and lower net income. He affirmed the company will continue to evaluate buybacks as part of its capital allocation strategy and expects to be free cash flow positive for the full year.

Nehal Chokshi of Northland Capital Markets asked if the timing-related decline in invoiced subscriptions was linked to the sales model transition. He also inquired about the pace of share buybacks, which metric (churn, hunting, or expansion) would be most impacted by the new model, whether FY25 guidance confidence had changed, the reason for a perceived dip in the service attach rate, and the specific new logo targets for FY25.

Answer

CEO Paul Walker stated the invoice timing issues were unrelated to the sales transition, citing a government contract delay and a client's fiscal year alignment. CFO Stephen D. Young confirmed a $6 million share repurchase in Q1 but did not project future activity. Paul Walker expects the new model to positively impact retention, expansion, and new client acquisition, all driving invoiced subscription growth. He affirmed confidence in FY25 guidance and noted the service attach rate was stable at 55% year-over-year. He added that specific new logo targets are not being shared yet but may be in the future.

Nehal Chokshi asked if the timing-related decline in invoiced subscriptions was connected to the sales model transition, inquired about the pace of share buybacks, and questioned which metric (churn, landing, or expansion) would benefit most from the new model. He also probed on guidance confidence and new logo targets.

Answer

CEO Paul Walker clarified the subscription timing issues were unrelated to the sales transition, citing a government contract delay and a client's fiscal year alignment. CFO Stephen D. Young stated the Q1 buyback amount ($6M) but did not project future activity. Paul Walker explained that they expect improvements across retention, expansion, and new logo acquisition, and he affirmed confidence in the FY25 guidance.

Nehal Chokshi of Northland Capital Markets asked if the increase in AI wins from around 100 to 150 was due to a higher win rate or simply more deal flow. He also inquired about the foreign exchange impact in Q4 and the expectation for FY26.

Answer

CEO George Kurian clarified that the 5x growth figure was for revenue, but confirmed the acceleration in the number of wins. He attributed this to very strong win rates and a strategic push for the sales team to engage in more opportunities, armed with a broader set of tools and certifications. CFO Wissam Jabre stated the Q4 FX impact was minimal (less than 1%) and that FY26 guidance reflects current rates, but he declined to provide a specific forecast.

Nehal Chokshi from Northland Securities, Inc. asked if the increase in AI wins from 100 to 150 was due to a higher win rate or simply more deal flow. He also inquired about the foreign exchange impact in Q4 and the expectation for fiscal 2026.

Answer

CEO George Kurian clarified that the 5x growth figure was for revenue, not customer count, but confirmed the acceleration in wins. He stated that win rates are already very strong, and the focus is on engaging in more opportunities by equipping the sales team with a refreshed portfolio and broader certifications. CFO Wissam Jabre noted the FX impact in Q4 was minimal (less than 1%) and that the FY26 guidance reflects current rates, without providing a specific forecast.

Nehal Chokshi of Northland Securities, Inc. questioned if the increase in AI wins to 150 was due to a higher win rate or simply more deal flow. He also asked for the foreign exchange impact in Q4 and the expectation for fiscal 2026.

Answer

CEO George Kurian clarified that the previously mentioned 5x growth was in revenue, but confirmed the acceleration in customer wins. He attributed this to very strong win rates and a competitive position, stating the focus is now on engaging in more opportunities with an expanded toolset. CFO Wissam Jabre noted the Q4 FX impact was minimal (less than 1%) and that the FY26 guidance reflects current rates, without providing a specific forecast.

Nehal Chokshi asked for confirmation of a key element of NetApp's AI vision and inquired about the development timeline and effort required.

Answer

CEO George Kurian confirmed that decoupling the scaling of data management compute and data storage is part of the company's AI vision. He clarified that the development effort is not comparable to the lift required for clustered ONTAP and that NetApp expects to deploy these solutions to customers by the end of the next calendar year.

Nehal Chokshi requested details on the bookings trajectory needed to drive the expected ARR acceleration in the second half of 2025 and asked for the specific dollar amount of on-premise erosion in 2024 and 2025.

Answer

CFO Claire Bramley explained that the second-half ARR improvement aligns with historical seasonality, where the majority of customer erosion occurs in the first half of the year, rather than requiring a significant acceleration in new bookings. She did not disclose a specific dollar amount for erosion but noted a meaningful improvement in retention exiting 2024 that is expected to continue.

Nehal Chokshi asked how total workloads are affected by the lower cloud ARR outlook if total ARR is unchanged, given that migrations typically involve an uplift. He also inquired about the concentration of the $50 million cloud ARR takedown and the frequency of 'boomerang' customer wins.

Answer

CFO Claire Bramley acknowledged that migrations typically include an uplift but stated this impact was absorbed within the existing total ARR guidance range. CEO Stephen McMillan confirmed the revision was due to a 'handful' of 8-figure deals becoming multiple 7-figure deals. He also noted that as Teradata's platform capabilities improve, its ability to win back customers from competitors is increasing.

Nehal Chokshi asked about the new property management system, the percentage of bookings previously from Wyndham, the status of key cash returns, quarter-over-quarter guidance, the meaning of "bringing life back to assets," and the working capital required for new revenue initiatives.

Answer

COO Robert Origo identified the new property management system as Cloudbeds and detailed plans to add ancillary revenue streams like valet and grab-and-go marketplaces, stating most would not require significant working capital. CEO Shanoop Kothari declined to disclose the percentage of Wyndham bookings or give specific Q-o-Q guidance but noted strong momentum. He confirmed the key cash is booked as a liability and its return would be a drain on cash.

Nehal Chokshi asked about the new property management system, the percentage of bookings from Wyndham, the potential return of 'key cash' from the partnership, quarter-over-quarter guidance, the meaning of 'bringing life back to assets,' and the working capital required for new initiatives.

Answer

COO Robert Origo stated the company reverted to its previous property management system, Cloudbeds, and clarified that 'bringing life back' refers to adding ancillary revenue streams like valet and marketplaces, which require minimal working capital due to partnership structures. Executive Shanoop Kothari declined to provide specific booking percentages or Q-o-Q guidance but confirmed the 'key cash' is booked as a liability and its potential return would be a cash drain.