NABL - Earnings call 4 2023

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Operator

Hello, and welcome to the N-able Fourth Quarter and Full Year 2023 Earnings Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to Griffin Gyr, Investor Relations Manager. The floor is yours. Please go ahead.

Griffin Gyr

operator. Thanks, to XXXX everyone Call. Fourth N-able's welcome, Earnings Quarter and President John and With are N-able's and CFO. me today and Palauca, CEO; EVP Tim O'Brien,

a our Investor our today's Relations remarks, the at to investor.n-able.com. is prepared supplement will can website release, simultaneously question-and-answer also call. which you for intended find being our our during call press session. prepared on Following webcast remarks There, This earnings we line open is

our forward-looking Certain economic our to financial assumptions, by statements duty These update no concerning during on including made and impact environment global available we based currently required business. outlook, law. are opportunities the statements, this the call our and statements information market are undertake as and information those this of on except

a are the of those and also uncertainties, including earnings to in with our filings statements and subject highlighted risks today's release number SEC. These

Additional and the information them and in with statements highlighted today's risks our associated uncertainties in the and concerning these earnings filings release is SEC. with

measures. financial will press call non-GAAP Copies of to financial to on from our will Investor non-GAAP on reconciliation release be financial available we to GAAP website. measures, in non-GAAP Relations discuss measures otherwise various on referring Furthermore, measures or are financial our the certain call. when we we today's Unless on earnings specified, discussed refer A is our available today's Relations Investor SEC website.

to call the And over John. now turn will I

John Pagliuca

plan. MSP XXXX serve, Today, the N-able key meeting Griffin, market want you, strategy Thank welcome our the XXXX of joining our and needs the to and result, we of operating components evolving I on everyone to discuss us call. for

fiscal XXXX fourth Fourth delivered in grew the year revenue year XX% in full constant XX% year-over-year. results. strong Let's grew revenue start quarter our currency We constant 'XX. in currency. with And quarter performance and

free we million, $XXX.X year, expanded million points. a XX% was XX% for the Year-over-year, Our over reflecting quarter XXX margin. reflecting by EBITDA XXX by basis flow adjusted $XX.X EBITDA margin adjusted full and margin the in basis over a cash unlevered our fourth annual margin and points

We are driving profitable growth.

also laying the We believe the solid groundwork XXXX. will across for we a initiatives be transformative on made what company, progress

some XXXX. I'll highlights from share now And

to front, of product offerings. our the customers. MDR QX to breadth upgrades, and augment in increased and of automation management, and security their analytics, better the paves and of partners market RMM technicians N-able the our the Apple service. for script teams The On we empowering to a depth of way N-able AI-generated we IT widened manage our broader level functional critical cybersecurity services launch other a both delivered provide assets. scope differentiated This In and late IT

our image. We and faster standby the and draft more MXXX a Cove Cove, differentiating predictably their our also so data to further protection host helps to partners expanding delivered cutting-edge coverage backup team market. can image service to Standby in our levels customers, of offer adding higher enhancing including capabilities, our offering, enhancements they recover

low currently leadership product our recovery Across recently expansion these Cove XXXX. managed vendors disaster guard average half over 'XX. efforts of this cross-sell is Legacy beginning As change in revenue in crowned a in portfolio, past, the device of opportunity space. the a the opportunity up in backup heralding XXs in is matrix, point, per $XX sharp a second Canalys our has champion and Collectively, monthly future. Cove a the the the validation drove of of N-able's from

engines. our products cross-sell And mission. strategy. sits powerful storefront the space added the opportunity will management, creates. over partner winning is increasingly Product under billion. to this believe devices now white million opportunity we at X on We $X XXXX, with to well our purpose-built growing innovation and success over With begin delivered filling we robust, this XXXX, fuel In in go-to-market realize and a

we main dozens them business engaged account transformation the events, road an is event approach customer the how security global win MSPs head our thousands these drives our of achieve events, operations within translate desire existing sessions, to A touch management to crucial partners shows, us our payer business. goals. fully the competitors. total, MSP hours. home including value. fabric active community at live and of investment relationship In customer these power hosted sets nerd to apart points partnered our to maximize and enabling in This from we executive quarter and uncovered office grow center their customer In their XXXX, groups and and in Through fourth

MSP X had MSP approximately service. multi-SKU deal events customer business in solution the And even us, our signed on of transformation an including though a security multiyear focused for the This ARR. $XXX,XXX attended MDR with place, MDR, of existing building

brand had also prospective enhancements impact Our and customers. product momentum a real on

model, years. growth Our our believe bodes the was the for nature And XXXX of given new opportunities. snowball well future revenue expansion X customer highest this we in cohort

growth. Despite white an an MSP enhanced uncertain N-able. expand all XXXX, capabilities and product in our exciting space relationship recap our start opportunity, to with community, their we presence chose year, deepened and in environment driving macro the To while MSPs expanded profitable our

today. market Let's stands and MSP now look gears switch as it at the

grow our Canalys piece believe across this revenue in for double-digit MSP of I'll MSP Our XXXX. highlight insights they with from XX% with roughly helping Packed the growth meet horizon SME channel the will learnings globe, is from evolving with firm. X/X the services our conducted the with expecting report. research of Horizons start and a year, of needs. MSPs strategy leading the future managed durability of X MSP A analyst we plans for MSP market. their hundreds surveyed MSP from key our partners future-focused

security the operations. for the Persistent MSPs and headaches of create technology trying forecasts. threats, tailwinds ahead help are IT to and manage IT SMEs their increasing intensifying expertise SMEs landscape standards, drive considerable provide need. compliance costs, these staying Rising fast-changing staffing challenges who critical

we enable as provider and forces purpose-built durable a positioning strategic believe to these of software steadfastly MSPs. powering With demand,

an is abundance There of opportunity.

to the environment their face bottom MSPs their proven protect line tight While customers This N-able strong, heightens top and grow SME operate for budgets. continue empowers MSP's Their that solutions line. need both. is tighter market also challenges.

Our of the integral MSP's solutions offerings, security, are data protection line components driving and revenue. top RMM

software their Our unlike grow solutions our disparate platform approach are line. also scalable technician solutions. of improves protect helping labor. consolidation MSPs and drives This profitability, And and point bottom efficiency

to and priorities. into I'll offense We management The to double-click MSPs showed each. as both areas also looking and offerings MSP's managed MSPs growth. Cloud now in top are enable play the infrastructure their ranked report Horizon's accelerate security differentiate to which defense.

the for simple their cloud Businesses with SME desire a environments cloud reflects be are management XX% to of MSP's running XXXX. run hybrid in reality. operations anticipated in public workloads in

need hybrid answers in the tools world. can well for MSPs devices. that cloud as has as excellent servers the So physical operate networks, N-able and

delivered seamlessly solutions security and industry-leading are the to Our cloud.

also environments. Cove, current cloud MSPs multiple with disjointed And recently of simple a Cloud a headache. Microsoft Commander. launch The in protection operate solution and critically, the portals introduced data management, forces our Navigating market-leading delivered monitoring on-prem cloud Cloud clouds. we MSPs. innovation Commander across and problem to the for solves is is paradigm in cloud administrative statement and protects both the

prone. manually console. through time the cloud process intensive a is leap commander stake MSPs navigate and the approach, consuming single This Cloud to allowing

to apply a users and cloud with a technicians ease. workloads, forward commanders, leap solution empowers believe N-able users combining and policies expand and sprawl and offboard security service for access This capacity. MSP clear better manage serve. Cloud cloud in on-premise point-and-click MSP. Eliminating to capabilities with we capabilities IT onboard is And efficiency. the technician dashboard management strength win we and our Our is MSPs historic device devices management and the generates for

IT also The increased by attack landscape also threat department in SecOps category, have security and want of market pace the between discussion the of MDR. the growing top We've from is security compliance our mind, want to Security IT C-suite. listened of by ops. XXXX the protection. line has the was concentrated medium elevated velocity, intensifying adversaries eroded standards not expansion needs threat the innovation businesses and to suite They and highlighted silos. product the in the and Small do

great market out with secular momentarily, about feel growing play tailwinds. positioning. We So durable a in our large we zooming

align to XXXX. us of products our bringing priorities market are and This business demand. the to offerings we brings customers, market with that Our align with

deserve. We protection ambitious data the first, plan objectives: have solutions that an they their SME and by and empowering guided following peace MSPs mind security of leading themselves clients, the give with

enabling rapid Second, doubling level third, RMM environments a the differentiated our manage delivering digital model, customer down hybrid innovation on platforms, of MSP MSPs to our to engagement at driving service and scale; into community. better

higher. $XX-plus employing our sophisticated and where ROI. approximately month white opportunity. pathways, on at engaging customer are With seen engagement. with our mind, per events Let's we per that have go-to-market driving start more our Today, realized customer XXXX, this In customers focused are high while bespoke teams in-market of our device number in $X we space caring with we

customer have to IT outcomes engagement technicians customer inception over and which seen facilitate also have recently continued our year. positive opportunities platform, We through its launched last used XX,XXX since

firmly protection rising The holds another XXXX mutual believe are adding need our and levels to Deep and success choice focus higher to threat MDR flexibility stack, a both the suite avenue. We is security, this opportunity. initiative. cements our growth area N-able the MSPs. longer-term point. Driving a new as key unlocking is offerings another elevates This benefit multi-SKU Bundled of vendor Security environment for in our of contracts of MDR and N-able for

proverbial a MDR In our Offering engine. and their to added bolstering the SME is enable, our our over across past, changes new new powerful acquisition equation. this fundamentally customer snowball rolled time we RMM grow generally MSPs customers. on solution. and It software a would customers landed as way out entry SKUs

price It at cross-sell In MDR higher with sizes. device times significantly creates snowballs point more RMM. a per short, also several opportunity our larger expands than with

point is optimism deep Our meets. pain by underscored MDR the

substantial Specifically, unfavorable SME unit economics, leads particularly for requires services is considerable. smaller This demand generally enhanced services the staffing. providing But these MSPs. for to security

N-able MSP time the opportunity this as MSPs, At clients will problem. requested. protection opportunity greenfield We strong with for he where business. able $XX,XXX through end ARR deal the particularly believe resources intensive be external scale easier to But Our provide the security can seeing Cove allow market, additional desired, the MDR, need or at us achieving for be person strong expand pathway client also mechanisms which while them critical but at his that tech-enabled and security a profitable only deliver replicate a the service our enable services outcomes as to how MDR see the their have he services. MSP scope demand more aligns MSPs. recent told a own utilizing implementing illustrates didn't expand staff profitably to its for not the and is to also was a was customers, of the business, solve security running sleep we at deliver growth to of personnel By land secure, to We for augmentation low success night. to the stop tends breach of sufficient. companies LTV can

breach. as quickly related are to in Stallworth restore to the we In XXXX, by acted fast-growing energized failsafe, Cove space. share in a of continuing take market this data case prospect of

the also enjoys And our total ambitious through improved further systems, data well-known where ensure eye Cove up environments to to with and PSA safe. cost ease develop an of enhance popular of Cove use of backup copies the to continue broaden Our restore to aims with scope competitors. and pricing ownership XX% road of can maintaining on map Cove advantage. clean IT we Cove's integrations compared are

supporting an is our a view economics Cove, Over MSPs proposition. answer. our MSP that and needs protect capabilities value the data, half of When strong to use are great winning Cove

devices, liability, our additional to of modernize other secure a and form Commander on will operating and take and our automated and sight, solutions the SME increasingly the our messier, digital cloud value RMM focused use to MSPs focused XXXX, the With MSP is more map to solutions. With platforms. of N-able cases modernization making and the bring believe provide manage path SME. third-party RMM are in road a to environments relentlessly to in environment plan systems, clear software and wave innovation we in in continuing and RMM platforms. workforce ability we even MSPs hybrid hybrid Lastly, we connect resonate steps cloud APIs customer to via to

We've today. while into all covered financials. Tim go will want to means a for detail, And more lot of outline I our ground 'XX this what

market. demand from by environment the tempered a reflects our for of environment resilient and Looking assessment ahead strong to SMEs growth a XXXX, tight operating MSPs.

with healthy XX%, year cross-selling accelerated results quarter from line near expect our suite. of customers, continued gross product We and contribution growing new full in fourth retention

device impact for budgetary However, digits this with market SME ourselves overall to which Net-net, term. will to in double we additions, expect and in on while have position growth long also low that the slower growth broader our MSP we will growth with to constraints acceleration rigor, mid- operate XXXX, lead year. investing in expect a executing moderating line of

I turn and with remarks. to then some will discuss for Tim closing financial results and And back Tim? call that, O'Brien, our the over to I'll outlook, CFO, circle our

Tim OBrien

Thank you, today. John, you all thank for and joining us

our cross-sell over and expanding and adjusted testament market. year by quarter results We basis a fourth resilient year-over-year. annual road proposition, expanded opportunity compelling product our are full points strong and XXX our profitable margin our drove business Our to growth, advanced model EBITDA value maps,

XXXX driving of made is a XXXX the beyond. to company model, power in goal XX on Rule XXXX foundation was sustained an solid substantiating excellent of of on and progress in our for the step us build our a forward we

the growth or results. I'll full basis. Total was revenue in on a representing Now year-over-year year fourth our $XXX.X fourth XX% quarter million, constant review XX% quarter and XXXX currency

now approximately represent which maintenance $X.X contributing representing with million, our perpetual $XXX.X was currency the XX% million, basis. primarily Other more XX% total revenue ago. partners We year year-over-year. ARR $XX,XXX from quarter which or Subscription on revenue down XX% a is constant license or of growth over represents XX% approximately was revenue, X,XXX of ended model discontinued up of with our X% from year-over-year XX% Partners year-over-year. $XX,XXX up ARR, ARR, a

was on on a Dollar-based basis. calculated both net XX-month approximately trailing revenue basis retention, is reported which a currency and XXX% constant

both full of growth finished reported with currency of and total XXXX of a our year-over-year revenue year, For on basis. million, we ahead representing outlook $XXX.X constant the XX.X%

total year-over-year Subscription growing reported revenue $XXX.X was and million, revenue XX% and XX% basis. currency representing constant a of both approximately approximately on

year and quarter profit and to release. measures to unless stated, adjusted Note the on profit Turning expenses $XXX.X an representing XX% margin approximately XX% end of provided items press adjusted XXXX all and the in a year-over-year margin. up in EBITDA coming Fourth approximately margins. high $XX.X non-GAAP well million, today's are XX%. up outlined and XX.X% representing EBITDA our in of was otherwise ahead GAAP basis outlook, reconciliations non-GAAP calculated that exclude the references of million, to adjusted EBITDA EBITDA year-over-year, a Full was adjusted

of million, the software in quarter. of revenue flow $X.X $X.X of XXXX. XX.X% inclusive unlevered X.X% in grew was X.X% Fourth capitalized was million, to quarter software was quarter XX% compared free year Full million margin XXXX. CapEx inclusive fourth was XX% or gross in development to of capitalized in or quarter. margin XXXX flow year-over-year. XXXX of $XX.X was cash the revenue $X.X million free compared $XXX.X million development gross of fourth for $XX.X Unlevered and costs year. million cash costs, in of XX.X% CapEx XXXX full the XX.X% the fourth

in outside earnings trailing on diluted on and balance year. of based had million X.Xx year North per the loan Non-GAAP for quarter the principal was representing share fourth million average of revenue the on leverage shares and an net our of in XXX XX-month full weighted average shares. equivalents based approximately and XX% Approximately of the XXX $X.XX and $XXX.X $X.XX cash $XXX outstanding million, of America EBITDA. full was million diluted based We year ended with the quarter weighted

to outperformance expectations. exceeded guidance. P&L. end our line brings year commentary for with strong and Before expectations. the was continued the products, outlook, fourth relative attributable profit in bottom drivers our and full give range quarter also came the across XXXX FX us first our revenue Adjusted quarter XXXX turning of above our This to the results. Fourth cost of beat the and Key guidance demand EBITDA continued to to full revenue this of year high quarter our and will to strong on impact flow-through were coupled positive I management

building points several to consider regarding for are of our the year. guidance There the blocks

for assumes the for of our XXXX. X.XX FX of and the First, euro remainder the guidance rate for $X.XX pound

half revenue. that the want to America, update I North on around the Given FX our is of nearly of guidelines impact outside movements revenue generated of

proxy, for point XXXX. about million As a revenue annual approximately every euro the impact every of $X.X while impact, the point revenue is of on of is annual $XXX,XXX pound

but and tailwinds product cost-conscious We assessment Second, of by see solutions, our indicators market expanded our enduring demand stable our suite. a revenue our for reflects software environment. buoyed encouraging guidance

our cross-sell believe we additions. current have in to device budgetary we additions tightened opportunity rate of the exists base, market. slower SME new that observe the about brought in to excited customer expect product said, growth level, within continue of result we are will That which conditions the We inclusive at to the SME

SME expect As be our model, growth to device this component helps muted. of algorithm our to continue we growth feed

our guidance and from the Third, in packaging planned XXXX given the than pricing XXXX, our inflationary our and changes changes grow-over reflects contracts, headwind revenue typical environment. higher

profit, drive a hand We maintain XXXX steady fund and guidance growth continued and beyond. important demonstrates to in our it balanced a expenses Regarding approach. is to business initiatives and believe

We TAM in a investing mind. and operating are growing with

balanced our with are to desire costs align forces propelling by These growth.

rule consistently, of stated we XX we've aim As operate to framework. a within

achieve to our a for while On term. align towards the acceleration whole, of operating profile XXXX of also plan growth advance driving long the that we initiatives delivering our believe with positions Rule to levels sustainable necessary future us profit goal XX

financial full the outlook quarter XXXX. year provide and our I'll first Now for

representing growth a million, basis. both XX% $XXX.X we currency XXXX, of million XX% year-over-year revenue reported range in and quarter expect on constant approximately total to $XXX First the to

$XX first million approximately the representing XX% adjusted EBITDA of margin. range to expect in quarter $XX.X million, We

currency total to we representing to to X% year expect X% on year-over-year For growth XX% XX% XXXX, of the $XXX revenue constant $XXX full growth or million a million, basis.

EBITDA of the $XXX approximately XX% $XXX million range to year full expect to adjusted We representing an in XX% margin. million,

For to and unlevered free development be revenue the full of cash to software capitalized approximately year costs be to conversion X% XXXX adjusted EBITDA XX%. flow includes approximately

interest and assumes interest XXXX, the our million year, $XX approximately X%. SOFR. effective approximately fixed reminder, of debt In is a for anticipate in full rate which to an As we floating currently expense

$XXX first weighted total expect million of to for for shares the We the year. million million approximately outstanding full average $XXX to diluted approximately and $XXX quarter $XXX million

non-GAAP to XX% be and our tax in to first year. approximately expect the both full rate XX% we quarter the Finally,

to Now hand over closing John? it back I'll John for remarks.

John Pagliuca

A proved of ago, we the were focused Tim. in the Thanks, customers increasing all XXXX XXXX, economic market there the our uncertain clear was while with most rising flow promising operating model landing wind strategy, to increasing In net cohort we faced profit We as years, meaningfully. sales year conditions. past be resilient, market we plan the and and inflationary retention and cash X and in enter significant believe our prospects. exciting with believe

Our the deliver to and XXXX We across solutions for delivering are transformative forward our determined SMEs commitment MSPs resolute. globe for IT a and look critical to and to is stakeholders. customers

up And with we will that, questions. line for open Operator? the

Operator

first from Needham comes The Instructions] Cikos question [Operator with Mike

Michael Cikos

outlook And I X as color a looking could see there's as to 'XX. little bit your We're more here. if get dynamics for calendar far

that? follow-up. But that currency cross-sell, to just guys And I'm [ assuming, both from from I playing point say, device course coming a new device a to well. the basis, are that And way figures, to Like the Tim, growth customer X X about another the probably quick XXX know, and assuming? a this let's think ] to know John, don't for algorithm if points have count NRR as constant on the think is guess, think you're how first, we of net then count. it retention do over ballpark guys think then those in the there free be are I out different pieces is of about maybe trying acquisitions? what you here. I muted calling I from composition you Tim, would what's 'XX? point above Is I feel about the a chime good new, out but

Tim OBrien

absolutely, Overall, our Yes, question. for Mike. Thanks guide the is XXXX unchanged. philosophy

kind of retention. of about on for guide to and part responsibly outcomes, unpack is of couple accounting to One continue range think of We XXXX. as bunch but a the of a on different we moving you touched prudently pieces kind

So retention. gross John touched on

to to of and -- standpoint points a the touched the mentioned impact We pricing probably SME and level. across steady to is steady packaging on cross-sell on and seen some net about some at I versus the from expecting portfolio. touching from we've MSP in you more so very then think growth continue level. and the trend that that's gross And kind a at at due the in see expansion the Back the where dollar-based growth there, more impact Where very grow-over X.X that in SME we've mentioned, 'XX. as also at retention, sales impact device retention We're 'XX level. on that year-over-year. growers X the impact, retention you also perspective then some the we range, And seen device

new touched expecting within that some throughout offerings. focus XXXX. of XXXX And the we on with the perform opportunity that the That's cross-sell of of a aspect of area the that of one expanded big entered here, as at we've the for exists course we're level a and is how we've higher path on to growth algorithm the themes -- us

Michael Cikos

growth. rearchitect 'XX, contribution I'm already rollover you X.X point to as because And at to citing happy a that second question it. Got you're calendar going so the which us X I that -- XX% ask -- I'll serves the serves was headwind impact, to

that say, did think calendar question, John other incited, 'XX in prepared just the remarks, gross think guys the -- you in let's calendar expectations XX% retention I versus 'XX. I I in the know XX%

points that anything on device is is gross what on a else to it that there? count? weighing decline there the year-over-year Is it we're that's So Or retention X really expecting basis? that

Tim OBrien

there, we're with it. and seeing kind retention steady where dollar-based double total. It's at No, more I'll We're SME level. very on seeing in our the atrophy back of of mostly MSPs it's

driven I SME perspective. So think it's going the from we where model a see what's our expansion more at broadly. is that And it more on device in macro

Operator

to Markets. turn now Hedberg with Matt We Capital RBC

Matthew Hedberg

increase planned been a last that I as increases there Or I'm follow-up Tim, there's because anything curious, talking this and have Maybe additional for year, were year of from increases? appreciate But year? sort color. any last price to if pricing the just you that a than of about little -- know wondering of are normal. sort price I just bigger was embedded this year for sort

Tim OBrien

the of kind Matt, brought as pricing we we year, on kind of environment. the road execution number different kind thanks for question. Every a plan based factors from competition value to changes of perspective, well on inflationary map strategically as packaging market of

of So annually, pricing packaging and some we always changes. form plan

impact So the year-over-year. we to kind in is that size do of what that I XXXX, have where compared we in XXXX spoke to did

it's -- time doing we is a same in perspective just something impactful 'XX size not probably lens, the 'XX. from but versus are XXXX So it's frame April in in as

quick. a just maybe So

net points. I said year's So this X increase, to maybe X.X too. sort price you think That's of of

be So of that's inclusive last of plus like year's. sort would

John Pagliuca

right the it. That's way Correct. to about think Right.

Matthew Hedberg

growth you guidance Okay. beyond in either, -- for John, understanding guess, Can And to XXXX. your accelerate like be for or your counts sort it. opportunities? a MBR You slower just could it like big understanding think on device is Got target? them But big. then, you cross-sell the clear. about of rank through the expectations Tim Very I of went wondering, opportunities call, those includes guidance ranking initial number how that feels do

John Pagliuca

And XXs a we in SKUs significant, type focusing our mid-XXs is what up a and with we're white in that's achieved of -- And ability And opportunity market, XXXX uptick right? in on space to go pretty early markets a in we long more device. allows And adjacent in us from see to per prepared what I to mentioned and small of of starting As that. couple white of ago, creative the really too opportunity white opening per low to were to bundled also large end opportunity we'll the remarks, the increase on that that material an really ratcheted right? to or market see The not really was we of, with space success of now couple Sure. created, we that really ways. the I'd say, begin the opportunity addition realize $XX-plus so but device. key and now of space the that we're different a just indicators packages in on help the of couple MSP days small will in side, not the the the

white for So in and by far to begin that the is away, opportunity #X say I'd enormous opportunity to that here realize space us is our base.

giving a is. these me, drive them helping where focus $X.X to efficiency, MSPs, there. multiple XX,XXX That's drive SKUs, have -- in opportunity platform line. million, leverage them We million SMEs our by the and out they're top them their servicing $X.X And over well helping excuse way

or driving it up. impact dollar And that business. devices has And by -- ASP as a result, that pennies our start even significant with moving on X a million per will device

Operator

Keith turn of Bachman now with to Bank We Montreal.

Keith Bachman

to pricing lower look pricing need of in the my And enterprise of across, through the concerns raise I customers; results I that basis? you're the and is being entire offer including Is congratulations what night, other the b, pretty about I And first water security understand of APOLLO spectrum security, like-for-like understand is you'll the certainly a risk and What direction. leads I just question. solid a prices broadly market, player, the to sort a, me which security of number the including commentary, on want actually go to a on different in is speaking, to opposite. think, take challenging want in sort areas, APOLLO, area to cold I an a endpoint. different endpoint, more But aggressive and

see And pricing? aggressive to that a SMB on you of having -- you like-for-like be the thinking about how not to the risk understand basis in Or so are just within unit? more a risk wanted do

John Pagliuca

I quite Great pretend the point my and a my on to understanding expert platform opposed to from and it robust. security play will more an he business But strong the for question. results. quite security and remains toward we're more platform play. APOLLO demand services to understanding solution Well, be And And was already clear, listening a the not moving was a he as play. his cash

our it's also offering. point provides solution technical so customers, those a offerings and economic that combination gives packaging different moat And also around an but in strength not the the our And of that to a us right? it

that's And provide giving ability and an MSPs It's platform businesses so the they can effectively. way. And exist. and offerings monitor, endpoint as X combination. why that that really We we in moat. to MSPs their our and what so to in and view we're security manage economic and example, to again, monitor allow highly technical X manage manage provides And effective a is secure exist really, our that that,

combination the allows a we this us and their our together driving for So and top in monitoring profitable market, via to MSPs this our a bring management price security and that results monitoring is bottom growth And we line better we differentiator a are lot way of we're and and what's in of that know believe that that line in MSPs. very and is but on was combination security. mindful of the going management that value algorithm

of an that keeping on that on combination protection. us gives of moat the what's that it's some eye going that market, We're killer mindful always we believe we're in it. but So and

Keith Bachman

Okay.

how to -- you maybe not in it that ever your spectrum, rates I if you are across of guys customers, Cove And landscape Do could just a for kind that the that winning? advantage, you rubric you're targeting Or growth wanted me second. -- segment, And is be market the Let how But see and just robust address competitive bit cohesities? but we'll there, little out. but transition sure a competing great. demand are competitive see opportunities, would the me. just disadvantages, in that's to Cove I'm is for the about plays they larger how

John Pagliuca

Sure.

in the history rebranded protection cross-sell because Historically, the backup as quick with offering. really lesson. offering we motion. our we protection Cove XXXX, data made data a going offerings our were we market investment with and and that then And a just to of So expansion offering our with of and really offering our

not began there. cross-sell, in just new acquisition. to And win customer as to go also we we but a market, So

So we so enterprise. don't of necessarily There bump into rubrics bit of the more a was [indiscernible] little the much world.

Cove does win the at mid-market.

a differentiated. And do or potentially even a Storage required where mid-market. data appliance. But that's are Axion the and have our appliance. see the the into We technology other of product selling [indiscernible] Craft. there is we A because a competition in or don't win historically, really protection of an folks like an We lot like companies dedicated require lot Dato we offering team

we to the less required The to Ours to TCO have back is to X Xx drives up use Xx technicians we because directly algorithm really cloud. that in up machine for we're snapshot better this time a true storage up bit. then less X virtual of Cove server a really to pushing where image on the workstation MXXX the the or Delta taking changes and or the a through and the updating technology, or cloud either the only we're to

Again, is disruptive a to the differentiator. It it so time. offering saves at technology also And the us allows price bit. technician's a that

the are technology mentioned -- mid-market and category for in the I is disruptive. remarks, And definitely is points we're leading in the now now particular data protection the there, the as So Canalys, we've that in of prepared MSP. the validation pricing with ahead. offering, for The

So and customers overall TCO is much very just the for technology with price it's story our disruptive. and point a the powerful the a

Keith Bachman

Excellent. on is that comments growing? how Any business

John Pagliuca

at Enable strong. growing a whole. overall faster clip as is remains I'd quite Sure. a than Cove say demand The

Operator

Essex with question comes Brian next Our JPMorgan. from

Brian Essex

price I was do the you given for wondering demand? see far? of if traction in XXXX? little expectations How pent-up the talk you what launch kind contribution a substantial about could the there amount -- of been a the Is lift in of And are so has MDR. bit

John Pagliuca

there's Sure. management. the pop always we shops when large our Thanks shops, for MSPs demand or that One of With X and up. is areas question. survey MDR, small cloud

why service And lot The the right? And reason we're is seeing regulatory second demand and services. with remains has bodies, need to so high, with customers. security their is MSPs The cybersecurity do a compliance what they're now small, them turning regulatory they're it a compliant. whether to that servicing, be or looking help making medium with whatever they're particular to be And are compliant a enterprises MSPs body sure vertical. to that to government

And of response. requires a detection that a lot deeper and of level protection and

into that's so And comes really play. MDR where

or small it you're my thing And not the customers, of that that's as just interesting it's The the seeing demand for probably with for providers. from large we're So MSPs. demand area or choices. faced in exciting MSPs, if view X thing this also #X [indiscernible] have X you for is the the your

sock, security dollars, a you center, to technology leverage the do so. of cost on you the partner MDR offering and work technology not Or and sure do personnel that go millions some can you going for augment or our making you which You teams can have help is customers build and might that allow operations N-able servicing like the to a secure are you of and and their focus and running their businesses. to your or customer

So it's days. early

asked in only this couple we've pre-things we've to But good did a started earlier of QX. really January. We market quarter. a You market about in in gotten really

far the spirit so demand, appreciate in has The so technology. And they transparency The good. the the that technology. story simple and resonating, growing. technology in MSPs our is for making the pipeline It been is of

early how So look in give offering you is to on days the that updates tracking. future more and

Brian Essex

MSPs some, existing the MSPs. that incremental Cove points incentives potential how it into that customers? they're where to your for maybe where space the up response, white the think the penetrating within question it think should we incremental the How of follow then about on the about and base And installed I adoption? friction Excellent. are Is last was base? I installed focusing of there's with are ripe ability -- and already potentially customers with adoption guess, penetrating their for tail it for penetration your on they're guess, I long this aligned is unpenetrated Or

John Pagliuca

And And a through their long right, X little largest but upper customers. in flip their endpoint our So how base, go X with endpoint that is to cost is by the a our smaller of their shops. a are say time. so security and be a maybe but remind the a or offering. want security right? we X, I our I'd cost. X, that's need reticent model is our quartile, protection, decile some go also a data MSPs, a is preach X, to on to XX that typically they'll standardize also software And shops managing an The backup that from that a I'd pull, bits efficiency customer drives or and mean of different our And of labor little offerings, some bunch of from particular here and their to faced it big whether the that we're and more that sometimes standardize N-able beauty in can flip technology MSPs the that sell-through. more of of bit lot mature, ease a upper backup are what the do everyone what do MSPs takes sell that. offering stack because smaller

to quartile, majority to just their for bit we win MSP -- little it so logos more it that and the MSPs we push bit journey, standardize could the with time takes the their education, bottom account, to through a XX% in that reflect of only requires little of the of entire realize it push a to and through But can of MSP might that the Cove. through. them it's And win base base. an to getting a efficiencies estate So and gained SMB X%

is push I standardization that to to longest help that and we that's try really process. think So through And the automate what takes what time. them do

Operator

today William from question Blair. with final Jason Our Ader comes

Jason Ader

I per the on device tried wondering RMM kind loss device there but ask as pressure on want the use just competitors cost. RMM impact out any to of talked I leader in know device if kind having pricing you that a commentary. there's additions, pressure I know an well? and to just of about have whether as terms been that's that there's of

John Pagliuca

of beauty That's the A.J., question. of the space thanks Sure. for the for the expansion and Jason. the thanks opportunity, call, white

as really from you So the that gives customer. of little the revenue it and us disclose team, with XXs know LTV for leadership into allowing bundling low we a I for play lot to a from revenue of the a on can asked, "Hey, your your bit an more for present ability the -- XXs, now the LTV again, RMM really to folks MSP. have business, versus always a focus backup as us

little particular bundling. means a from protection security data that bigger SKU freedom on a if bit allows a so our white SKU can point that endpoint so we And RMM them of more and and X customer creative incentivizing A like space us little view. a more bit get opportunity

point. So expansion on bit more that's The X allows the bundling. little a us freedom

is last for year we're we're committed mentioned is committed exchange we in as better we to And contract, white "Hey, around us potential economic a exchange, MSPs for what finding lock the long -- different did that's on on saying, there's we we're in contracts. some that economics retention second what And them visibility we're allow helping a better a choice they prefer opportunity. the what look, want much than these customer we're us into And term, XXXX that point But The and long-term the choice. giving there, in focus focused it's get somewhat give you. commitment. which of space our doing MSPs on really prefer terms to and will

to looking relates do the initiatives some So we're of XXXX. it there for as what that's to

Jason Ader

Got you.

Okay.

-- that talked the get about not you it. say I just because my but position answer to been it's on leverage some worried about the kind it So ability broader you actually exactly that I there? -- that there it has and of think I too didn't you're pressure you're opportunities your is pricing, question, but fair to market mean other of of sort

John Pagliuca

Yes.

and to management. follow-up. fair monitoring new that a in our it NCA, customer winning It's We're no. we're and no, winning and quarters RMM our acquisition of No, X is So. as relates -- our QX that bookings category, strongest

what prize it, there. on the prize price estate the protection management the security. for we're when on and monitoring the, is. flexibility the the as $XX our challenge So nodes. add we'll of or the I the the and points really call a Is is price $X on don't winning $X on to It's the see entire node you data more to RMM really

So trying more we're it bit to a little look holistically. at

competitive on pricing So we're the seeing the change in an in increase note. and a not really No, I'm market not.

Jason Ader

Okay.

on in almost QX, with year out? we're any commentary commentary versus, but And you just, there's this let's of of call months then Good. Demand-wise color it, now. gave months February, the February the kind of the any for changes Tim, last call January, of know done on couple first to whether guidance Okay. I this -- X saying XXXX?

Tim OBrien

very pipe demand -- I strong of been in December month our as our the has of the XXXX. best in mean very year we've best QX Yes. solid month booking booking and was was and demand best was year. quarter booking started it and our steady

I product the very into I fold parts coming that's XXXX. to deals, those able beginning demand multi-SKU the of kind would with build a has as positive think John of of and gotten been But XXXX beginning pipe space -- some that to the around more some expansion to put of creation QX offerings with strong, of pipeline Cloud being net the was heels kind was to MDR that's and and we've on Commander we've as the together steady well the and of of bundling new new here. and spoke more been say, entered as that the white into combination

Jason Ader

Okay.

revenue bookings, was different saying a at QX was in you're look basis, XX%. year But the rate growth of a on story? it terms would you of the that it year-over-year lowest in be if So

Tim OBrien

minimal. very, generated from a bookings very Yes. perspective. Yes. the next And as impact a shows the up is of From revenue of in-quarter revenue lot bookings reminder, quarter the A in-quarter revenue on in

Jason Ader

Got you.

Okay. And question for then last me.

as It things plan free XXXX, should the and is takes there Is of thinking expectation some a 'XX. as in puts for any or about just revenue And higher of the build looks a are percentage in of like margin that were the free XX% we we -- cash the models? be on our there? Just out what it flow will be cash you flow about 'XX. again,

Tim OBrien

Yes.

how flow cash to increase margin free of is expect EBITDA I'd similar margin to think increasing. kind I

on We to EBITDA converting flow at focus and continue to a free optimizing rate. cash higher

able front, perspective for the to rate wildcards flow of an free free optimize a happens what on flow with just for a 'XX cash to unlevered from will that improved be But just cash conversion. pretty we been One here. the get interest we've that capital working looking standpoint, significant from into environment. XXXX drive through as things of of as as couple kind we're tax we And a get at as well growth

kind well we on grow free free from of room to cash that. as flow there's XXXX. is But our perspective margin cash chart an as think I continuing a as margin focus to flow unlevered way improve So through

Jason Ader

contracts flow get you because of work? that that cash does How term, does committed have more more you longer help kind deferred If free revenue?

Tim OBrien

to free expect to long-term will that change still model. expect cash But would not monthly commitment would a I not the long-term perspective, from a billing the via it drive model billing I like flow. impact monthly the

swings I So revenue. expect wouldn't additional big in deferred

Jason Ader

revenue deferred from impact that. no There's

Tim OBrien

be deferred revenue there. won't there impact Yes,

Operator

for you your gentlemen, Ladies call. and conference thank and like We'd this today's concludes our Q&A to participation.

your disconnect lines. You may now

N-able (NABL) 22 Feb 242023 Q4 Earnings call transcript