AvePoint, Inc. Q1 FY2021 earnings

Apex Technology Acquisition Corporation reported revenue of $38.8 million for the quarter ended March 31, 2021, with gross profit of $28.0 million, a 72.2% gross margin. Operating costs ran well ahead of that: the operating loss was $1.89 million, wider than the $0.24 million loss in the prior-year quarter, a 674.5% swing. Operating margin for the quarter was negative 4.9%.

The bottom line looked nothing like the operating line. Net income attributable to the company was $28.31 million for the quarter, up 454.1% from $5.11 million in the prior-year quarter. Diluted EPS was still a loss of $0.14. The profit came from non-operating items, chiefly a change in the fair value of the warrant liability and interest earned on marketable securities held in the Trust Account, partly offset by operating costs and franchise taxes. None of that reflects an operating business. The result is also attributable to the company itself; the consolidated figure that includes noncontrolling interests was a loss for the quarter.

Cash usage stayed small. Operating cash flow was negative $0.36 million for the quarter, up 6.5% from the $0.38 million used in the prior-year quarter. Capital expenditures came to $0.27 million for the quarter. The company left the IPO proceeds sitting in its Trust Account and withdrew nothing from it during the three months ended March 31, 2021, with only a small cash balance held outside the account.

The quarter's real story is the pending deal. Apex signed a Business Combination Agreement with AvePoint on November 23, 2020 and amended it several times, most recently on May 18, 2021. The structure folds AvePoint into the company through two merger subsidiaries, with AvePoint surviving as a wholly owned subsidiary. Alongside the transaction, PIPE investors agreed to buy 14,000,000 shares at $10.00 each for $140,000,000, contingent on the deal closing. The Outside Date on those subscription agreements was extended to July 21, 2021. The company gave no guidance for the next quarter or for the full fiscal year.

Risks cluster around the closing. Apex has until September 19, 2021 to complete a business combination. Management states that a failure to do so would trigger mandatory liquidation and dissolution, and that this raises substantial doubt about the company's ability to continue as a going concern. The underwriters are owed a deferred fee that is payable out of the trust account only if a deal closes, so the obligation sits on the books until then. Apex also pays an affiliate of its Sponsor $15,000 a month for office space, utilities and administrative support. In February 2021 it issued a convertible promissory note to the Sponsor, with $300,000 outstanding as of March 31, 2021 and up to that amount convertible into units at $10.00. Sponsor loans of up to $1,500,000 could also convert at $10.00 per unit, and no borrowings were outstanding at quarter end. If planned costs run over budget, the company would lean on those sponsor arrangements rather than on new outside capital.