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spk07: Hello everyone and welcome to the Enable second quarter 2021 earnings call. We will begin shortly. If you would like to register a question ready for the Q&A session, please press star followed by one on your telephone keypads. Thank you for your patience. Thank you. Hello, everyone, and welcome to the Enable second quarter 2021's earnings call. My name is Daisy, and I'll be coordinating this call. You will have the opportunity to ask a question at the end of the presentation. If you would like to register a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Howard Marr, the Senior Director of Investor Relations from Enable, to begin. So, Howard, please go ahead.
spk05: Great. Thank you, Daisy. And welcome, everyone, to Enable's second quarter 2021 earnings call. With me today are John Pagliuca, Enable's president and CEO, and Tim O'Brien, EVP and chief financial officer. Following our prepared remarks, we will open the line for a question and answer session. This call is being simultaneously webcast on our investor relations website at investors.n-able.com. On our investor relations website, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities, our expectations following the recently completed spinoff of our business from SolarWinds, and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including risks related to the spin-off transaction. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our investor relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified when we refer to financial measures, we will be referring to the non-GAAP financial measure. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call are available in our earnings press release on our investor relations website. Finally, please note that the spinoff transaction was completed on July 19th after the end of our second quarter. Throughout our second quarter, we operated as part of SolarWinds. and our financial results for the period have been prepared from SolarWinds' historical accounting records and presented on a standalone basis as if our business operations had been conducted independently from SolarWinds. While the allocations and estimates in these carve-out financials are based on assumptions that Enable's management believes are reasonable, the financial results presented for our second quarter may not be indicative of the financial position, results of operations, and cash flows of Enable in the future, or if Enable had been a separate standalone publicly traded entity during the periods presented. And now I will turn the call over to John.
spk03: Thanks, Howard. I want to thank everyone for joining today's call and for your interest in Enable. Given that this is our first earnings call as an independent company, I want to start off by highlighting some of the differentiated aspects of our business model before touching on second quarter performance and then turning it over to Tim for more detail on our financial results and outlook. One year ago, SolarWinds announced the intent to spin off SolarWinds MSP, which we have rebranded as Enable. I'm delighted to say that we completed the spinoff and began trading as a standalone public company on July 20th. This marks a significant milestone for our entire Enable organization, which is over 1,300 employees strong and services MSP partners in approximately 150 countries worldwide. I want to express my admiration for and gratitude to both the internal and external teams for their tremendous dedication, hard work, and perseverance during the separation process. This has been a dynamic journey filled with valuable learnings that we believe enhances our ability to execute on our strategic initiatives and build a brand identity that aligns with our partner-centric mission. As we begin to write the next chapter at Enable, there are many factors that give me confidence in executing on our commitment to be the trusted partner for MSPs and deliver reliable IT management and security solutions for millions of small and medium enterprises around the world. For clarity, what other companies may refer to as their customers, we refer to as our partners, as their success drives our success, creating a unique and powerful business model. First, it all starts with our people. We added key members to the senior leadership team over the last year, including a chief technology and product officer, chief customer officer, chief marketing officer, chief security officer, general counsel, and finally, our chief people officer. I often refer to Enable's extended leadership team as a quilt, one comprised of industry veterans and new thought leaders. Having the right team in place has allowed us to increase our organizational focus and begin executing on initiatives across product, go-to-market, and partner success. Second, we have re-energized our strategy. We continue to improve our platform and strive to be the one-stop shop for integrated monitoring and management security, data protection, and business management tools for MSPs at all stages of their business lifecycle. Third, We believe we have set ourselves up to be a growth-oriented, Rule of 50 company over the long term that can appeal to a wider range of investors who appreciate a balanced mix of growth and profit. With increased flexibility and capital allocation as a standalone company, we can pursue targeted investments, partnerships, and opportunistic acquisitions with the goal of accelerating growth over time while maintaining high profit margins and We believe we are still in the early stages of a large and growing opportunity for MSPs to further support the increasing demand by SMEs for fully managed IT. According to Frost and Sullivan, our addressable market was approximately $23 billion globally in 2020 and expected to grow at a compounded annual growth rate of 14% to approximately $44 billion by 2025. While IT outsourcing has been around for decades, the complexity and sophistication of cyber threats that SMEs face every day have reached record heights. Unlike larger enterprises, SMEs often don't have the resources and talent to navigate mission-critical IT issues that can directly impact their operations and productivity. For SMEs of all sizes and across all industry verticals and geographies, MSPs are increasingly their trusted partner for IT management and security, and we are a trusted partner for MSPs, providing them with a purpose-built solution and resources and education to help our partners grow their businesses. Our partners are at the center of a distinctive aspect of our business model, which we call partner-enabled growth. There are multiple levers to partner-enabled growth. We grow when we acquire new MSP partners. We grow when our partners add new end customers, and we grow when partners leverage additional services powered by our platform to manage and secure their end customers. In this manner, our partners act as an extension of our sales force and facilitate standardization on the enabled platform. This allows us to access the SME market efficiently and profitably. To accelerate this growth, we've been making significant investments in our partner success organization, which is dedicated to help our MSP partners drive and expand their sales and marketing strategies, train them in pricing and packaging best practices, and use automation to streamline their operations so that they can build successful businesses. There are three key pillars that make us a platform of choice. The first is the breadth and depth of our remote monitoring and management capabilities. Given our origins in remote monitoring and management, we offer what we believe is unparalleled scalability, reliability, and support for MSPs and end customers of all sizes. We have continued to expand the breadth of our monitoring coverage, including through native integrations and partnerships with leading enterprise tech vendors like Microsoft, Apple, and Cisco. And we continue to deepen our capabilities across remote control, patch management, and reporting and analytics. Second, security is deeply ingrained in Enable's culture. We are well aware of recent cyber attacks in our industry. We understand that purpose-built technologies for MSPs, if used for malicious purposes, could potentially expose end users and their devices to attack. But we also understand, more importantly, that such technologies enable MSPs to efficiently manage and secure their end customers. Therefore, Given where we sit in the industry supply chain, we believe the processes required to be a leading provider of IT security need to span multiple levels. At the product portfolio level, our MSP partners depend on us for a comprehensive set of security solutions across endpoint, mail, web, patch, and data protection used to protect their end customers. But equally as important, we actively enforce security principles designed to ensure that our platform and our internal protocols are secure. At Enable, security is part of our core. We have a layered approach to security, following a NIST framework and leveraging CIS benchmarks to protect our company, employees, MSP partners, and their customers. We've invested in our people, processes, and technology as it relates to effective security management. This includes numerous controls like MFA, privileged access management, centralized logging, 24 by 7 remote monitoring operations, vulnerability identification and remediation, employee training, and much more. We want security to be top of mind for all employees and believe that our focus on security is a critical piece of our culture. Our third key pillar, which I mentioned earlier, is our focus on partner success. Our partner success organizations consist of non-quota-bearing reps whose sole purpose is to facilitate the best possible partner journey, which we believe leads to greater partner satisfaction, reduced churn, and expanded utilization of our platform. To that end, we have a number of initiatives, including hands-on training and free resources through our MSP Institute, consultations and boot camps with our head nerds, sales and marketing training programs, a variety of peer-to-peer groups, and partner-focused events, all of which are designed to help partners drive both retention and expansion. We will continue to invest in our platform, security, and partner success as a standalone company. Turning to the second quarter, we are pleased with our performance, delivering 16% year-over-year revenue growth that exceeded the outlook we gave in mid-April. We continue to expand the number of devices managed and secured on the platform, while our partners continue to deploy or cross-sell more services powered by our platform. Demand for data protection solutions remained robust, led by our SaaS cloud-to-cloud backup solution. We have one of the leading fully cloud-based data protection offerings in the market, which continues to outpace our overall company growth. Demand for security solutions has also been a consistent source of strength, led by our Enable EDR offering powered by Sentinel-1. Further broadening our security portfolio, during the second quarter, we announced a partnership with DNS Filter to integrate its cloud-based web and content filtering solution into the Enable platform. We expect the integration will be made generally available later in the year. In addition, we saw solid traction with partners leveraging our integration with Microsoft Intune, which was launched at the end of the first quarter. MSPs now have the ability to perform in-tune device management functions directly within the enabled platform. We continue to expand our Apple device management capabilities with deeper performance monitoring, web, and TCP service checks as we prepare to support the upcoming macOS Monterey release. Lastly, we continue to add our partner success resources and platform flexibility. We launched Market Builder, which provides MSPs with complete campaigns they can quickly and easily brand and use in their own sales and marketing programs. And in addition, we now have over 50 active technology providers in our Technology Alliance program, which is a testament to the flexibility we offer to our partners via our open ecosystem framework. This is aligned with our goal to be the industry leader in platform functionality and extensibility and to maximize choice for our partners. With our security, data protection, business management, and TAP solutions all integrated with our leading RMM capabilities within a single pane of glass, we believe we matter the most where it's the messiest for MSPs. With that, I will hand over the call to Tim to recap our Q2 results and provide a financial outlook.
spk01: Thank you, John, and thanks to everyone joining us on the call today. I will review our second quarter results and then update you on our expectations for the remainder of the year. As we mentioned at the beginning of the call, please note that our financial results are presented using carve-out allocation methodology as we still operated as a part of SolarWinds during all of the second quarter prior to the completion of our spinoff on July 19th. Our financial results include all revenue and costs directly attributable to Enable, as well as the allocation of expenses related to certain functions, facilities, and services provided by SolarWinds. Total revenue in the second quarter was $85.3 million, representing 16% year-over-year growth and exceeding the high end of our guidance range. Subscription revenue of $82.8 million increased 17% year-over-year and represented 97% of total revenue. Other revenue declined 3% year over year and represents maintenance revenue from customers that bought our solutions under a legacy license and maintenance model in the past. We discontinued license sales in the first quarter of 2020. Our quarterly performance was driven by continued strong demand for our security and data protection solutions among both existing and new partners as our layered security strategy continues to resonate with MSP partners. In particular, both our SaaS cloud-to-cloud backup and enable EDR solutions continue to outpace overall revenue growth and have exceeded initial internal expectations. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, increased slightly to 110%, up from 109% in the second quarter of 2020. We continue to add new managed devices and see increased adoption of incremental services on our platform. which we believe are the most appropriate indicators for growth and a testament to the effectiveness of our partner-enabled growth model. Trailing 12-month gross revenue retention was 86% in the quarter, up slightly from 85% in the first quarter and in line with the second quarter of 2020. We ended the quarter with 1,647 MSP partners spending over $50,000 of ARR with us, a 32% year-over-year increase. Partners spending over $50,000 of ARR now represent 46% of our total ARR, up from 38% a year ago. International revenue mix outside of the US and Canada was approximately 50% in the second quarter. We saw similar strength in both direct sales and sales via our distributor channel. As a reminder, we partner with distributors for a significant percentage of our international sales. Turning to our profitability and free cash flow metrics, please note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. Second quarter gross margin was 86.4% compared to 86.6% last quarter and 87.6% in the second quarter of 2020. Adjusted EBITDA was $28.2 million, representing approximately 33% adjusted EBITDA margin. Unlevered free cash flow was approximately $15 million in the quarter and reflects some transitory cash outlays, including elevated capital expenditures for build-outs of offices in four locations to support our operations as a standalone company, and other investments related to the spinoff. CapEx was approximately $10 million in the quarter, or 12% of revenue, and we expect CapEx to remain elevated at about $9 million in both Q3 and Q4 as we complete our office build-outs. We expect CapEx to return to historical levels of approximately 4% of total revenue following the completion of these office build-outs and spinoff-related costs. As we enter 2022, we expect adjusted EBITDA conversion to unlevered free cash flow to be approximately 70%. Note that both adjusted EBITDA and unlevered free cash flow exclude approximately $6 million of spinoff-related costs in the second quarter, representing primarily accounting, legal, advisory, and other professional fees. As a reminder, the spinoff was completed on July 19th. These one-time spinoff-related costs will continue through the third quarter due to the remaining accounting and legal workstreams. We expect that they will be significantly less in the third quarter compared to the second quarter and will largely subside by year end. Non-GAAP EPS in the second quarter was $0.09 based on pre-spend weighted average share count of approximately $158 million. I will now give some comments on our cash position, capitalization, and share count post-spend. We ended the second quarter with approximately $50 million in cash. Based on a planned cash peg at the time of spin-off on July 19th, our cash position was also approximately $50 million. In conjunction with the spin, we raised a $350 million term loan and an undrawn revolving credit facility of $60 million. Based on current interest rates, we expect annual cash interest expense to be approximately $13 million. Concurrent with the spinoff from SolarWinds, we also completed an issuance of primary shares via a private placement offering to select institutional investors. Proceeds from both the term loan and private placement were distributed to SolarWinds. Following this transaction, our outstanding share count was approximately 179 million, which reflects the two-for-one distribution ratio from SolarWinds, as well as approximately 21 million shares issued in our private placement. Now I'm going to provide our financial outlook for the third quarter and full year. For the third quarter, we expect total revenue of $86.5 to $87 million, representing 13% to 14% year-over-year growth, and adjusted EBITDA of $27.5 to $28 million, representing an adjusted EBITDA margin of approximately 32%. For the full year 2021, we are raising total revenue expectations to $343 to $345 million, representing 13% to 14% year-over-year growth, and adjusted EBITDA to $109 to $111 million, representing an adjusted EBITDA margin of approximately 32%. We expect total weighted average diluted shares outstanding of approximately $176 million in the third quarter and approximately $182 million in the fourth quarter. We expect our non-GAAP tax rate to be approximately 25% to 26% for the third quarter and for the full year. When you think about our revenue growth cadence throughout 2021, recall that the impact of the COVID pandemic was most pronounced in Q2 of 2020, which created a more favorable year-over-year comparison relative to what we will see for the remainder of the year. Additionally, our Q3 and full-year EBITDA forecasts reflect growth investments in our go-to-market motion, partner success, and R&D, as well as investments in security, standalone public company costs, and incremental expenses needed to operate on a standalone basis. Lastly, I want to provide some color on the extent to which we will rely on transition service agreements, or TSAs, from SolarWinds in the near term, heading into the completion of our spinoff. We believe we have already added nearly all incremental infrastructure and personnel necessary to support independent operations, with minimal expected reliance on TSAs. That said, as a standalone public company, beginning on July 20th, our results will include the costs associated with TSAs that we have entered into with SolarWinds. The TSAs are intended to provide and enable with certain corporate and shared services for a limited period, as well as some knowledge sharing and training, primarily to ensure smooth operational transitions. We expect to exit the majority of the TSAs by the end of this year. with the coverage services transition to new or existing Enable employees, all of which is factored into full-year guidance. I'll now turn the call back over to John for some closing remarks.
spk03: Thanks, Tim. As we think about the future of Enable and how we can create more value for our partners, employees, and shareholders, we will take a measured build, buy, and partner approach to our platform expansion while targeting the Rule of 50. In the near to medium term, we are focused on a few key initiatives and investment areas. The first is in international sales, where we see opportunities to attract some larger MSPs and plant our flag in new accounts via channel partners. Second, we're investing more in partner success and support to further execute on our retain, land, and expand strategy. Third is our investment in product and innovation. we will continue to invest to bring new solutions to market to meet the growing and evolving needs of the SME. Also, when MSPs choose their tech stack, they are increasingly mindful of the willingness and ability of vendors to invest in the security of their products. We're investing more in the security of our platform and our security processes, which is just as important to us as performance and extensibility. Finally, I want to conclude by thanking our employees, partners, and stakeholders for their trust and their commitment to Enable. With that, operator, we are ready to take questions.
spk07: Of course. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by 2. And when preparing to ask your question, please ensure you are unmuted locally. So that's star followed by 1 on your telephone keypad to register a question. Our first question comes from Mike Sikos from Needham. Mike, your line is open. Please go ahead.
spk00: Hey, good morning, guys, and thanks for taking the questions. Congratulations on the beat and raise first quarter out of the gate. Had a question for... For John, I know in your closing remarks you were talking about some of the near-term investment initiatives, and I thought that's probably a good place to start as people get ramped up on the story here. Can you explain between international, the partner success and support, and then the R&D innovation, which of these investments we should be looking to near-term versus longer-term, understanding that these are going to take some time to play out as you guys are putting those investments in place?
spk03: Yeah, thanks, Mike. Appreciate the time and appreciate the comments and the interest in Enable. And actually, your question's perfectly framed because we do look at our investments in a laddered way. And as I think about the three areas of investment, It actually runs near-term to mid-term, I would say, in the order that we presented them. So we've already begun increasing our level of investment in our international sales and marketing effort, and we've already begun to see some degree of success and return there. So that I expect to be measured in. you know, months and really starting to show up, really. It's been showing up already. Our international traction, I think, is outpacing our North American one. And we continue that to expand. We think the opportunity there is quite strong, in particular in the high end of the market. So, that's the shortest return. I often – look at investments as like a J curve. And that one has probably the steepest and shortest kind of curve, if you will. The second one, partner success, this is a continuation on our story here. We've always been big on partner success, but we're really increasing that investment in and really making sure that we're touching the customer, the MSP, in a way that helps them grow. And we've been investing there. We have our new chief customer officer there. We've brought in a bunch of folks and really new teams to make sure the MSPs are touched right there. So when I go back to the J curve there, that's a little bit more medium term. I expect that one to really start showing up toward the end of this year, beginning of next year. And then lastly, on the technology front, We brought on Mike Adler, who's our new Chief Technology and Product Officer. And Mike's done a great job focusing on what's important, making sure that our products are the highest quality, but then also looking at ways that we can bring new solutions to market. And so as I mentioned in the prepared remarks, we'll have, you know, our DNS filtering available this year. We'll have other offerings, you know, beginning to line up in the second half, excuse me, in the first half of 22. But given the nature of our business, the fact that we have, you know, all these MSPs, it takes what I refer to as our snowball. So those new products, those new solutions take a little bit of time to accumulate in this subscription recurring revenue model. And so that J curve will be a little bit of a longer slope, and we'll get a return more in the midterm there.
spk00: That's very helpful and makes a ton of sense as far as those solutions ramping over time. Thanks for the color there. And then just one other question, if I could, and I'll cede the floor. I guess a lot of the feedback I've been getting from different clients, they're trying to discern, I guess, the criticality of the core RMM solution that you guys are bringing to your MSP partners. Can you kind of detail, I guess, that criticality level or the value of that asset to your partners and maybe to be helpful, Culler, as well, how many of these MSP partners are operating multiple RMM solutions, or is it really they're going to just one RMM solution? Yeah, perfect. Any color there would be helpful. Yep.
spk03: Yeah, I'll start with your second question because it will help answer your first question. So broadly speaking, an MSP has one RMM in their platform. Why? Because it's really their central nervous system to run their business. We often refer to it internally, the RMM, as the operating system for the MSP. Mike, it's effectively a fabric that allows the MSP to run all their technical services. So what do I mean? If an MSP is obviously monitoring and managing all these devices and workstations, leveraging the RMM, but then via our platform, think of the platform as this fabric where we're actually plugging in all these different offerings, whether they be monitoring or security. So This allows the MSP to properly patch, which you know is a fundamental part of any type of good security hygiene. It allows them to deploy efficiently and effectively in a rules-based way, endpoint protection, whether it be traditional AV or EDR. It allows them to deploy backup and disaster recovery. So it becomes this conduit and this fabric for the MSP to really do everything they need to do remotely and efficiently. And it's really the secret sauce that led to this industry being what this industry is, allowing these MSPs to, one, create a recurring revenue stream and manage services, and really the RMMs enabling them to do so efficiently and profitably. So it is the core bit. Our technicians, it's effectively a lifeline for these technicians.
spk00: Thanks again.
spk07: Our next question comes from Edward Maggie from Berenberg. Edward, your line is open. Please go ahead.
spk04: Morning, guys. Congrats on a great first print following the spinoff, and thanks for taking my question. I'll start here on the security front. In the wake of the most recent headlining breach this past July 4th weekend, can you shed a little light on how conversations may have changed with your MSP partners, and if they've shared the ways their conversations with their customers have changed as well? Thanks.
spk03: Yeah, great question, Edward, and again, appreciate your interest in Enable. So look, what happened to Kaseya is unfortunate, and as a member of the MSP community, we recognize that, and it's unfortunate. Incidents that appear in the news are really the ones where the bad guys were successful. But there are numerous attacks that happen every day that aren't reported, right? And broadly speaking, my guidance to our MSPs, our conversations that we have internally, it's really along three areas and three topic points, right? One is you need to make sure you're investing in Technology security. Security that's really focused, I'm sorry, technology that's focused on the different surface areas along whatever vector that might be in a layered approach, number one. Number two, you need to have dedicated security personnel that's completely dedicated and focused on security initiatives. It's not a shared thing or something that people can do as a side priority or focus. It needs to be a dedicated focus. And third, and this is the one that's often, I'd say, overlooked, you need to really adopt a cybersecurity culture. And look, that's something that we preach internally at Enable, and that's something that we preach on to the MSPs. We've been preaching this, frankly, for a number of years. And it resonates. I think the MSPs understand it. You know, the evolution of the story, really, it went from an inconvenience maybe back four or five years ago to now folks are understanding that it can be an extinction event for a small-medium enterprise. So the MSPs are leading the charge. They're looking to us to help provide the council, the technology, and an integrated platform for them to deploy this layered security approach efficiently and profitably. And so, yeah, I think it's getting a little bit more attention. I'm glad it's getting a lot more attention. We need to raise the awareness for the SME, for the small-medium enterprise, for the MSPs, and really across the industry.
spk04: Great. That's really helpful. And like you guys said, you guys have been preaching the importance of security. Just to follow up here, some competitors have mentioned stronger adoption of some parts of their platform in the wake of the breach. I wanted to get a sense. I know it's quite early, but I wanted to get a sense of how you guys may have seen some sort of demand change or increase in adoption of your RMM tools for any of the riders on it.
spk03: Yeah, Tim and I, I think, touched on it briefly in the prepared remarks, but I'll go into a little bit further detail. We're seeing MSPs taking a little bit more holistic approach across their entire SME estate, and we're also seeing the SME, I think, that they're understanding the need to invest in And this layered security approach. So what does that mean for us? That means we're seeing backup and disaster recovery continuity solutions. Our backup, our cloud-to-cloud backup offering has gotten significant traction. Endpoint protection continues to outpace our growth. We have our traditional antivirus offering. But we also have our Enable EDR offering. And that, I would say, is also outpacing our overall growth. So it's top of mind for the MSPs. We have a password management offering that we have. Because for the MSP, the surface area is twofold, right? It's their own environment. And we have offerings that we give them, like our password management, to help them with their own environment. But then it's also the environments of their customers, of course. And so really we're seeing anything to do with security along the lines of protection, anything really in the NIST framework really, right, anything that's along the protection detection and the ability to recover, we're seeing kind of being more top of mind for both the MSP and the SME.
spk04: Great. Really helpful. Thanks. I'll see the floor and hop back in queue.
spk03: Great.
spk07: Our next question comes from Matt Hedberg from RBC Capital Markets. Matt, your line is open. Please go ahead.
spk02: Oh, great. Thanks, guys. Thanks for taking my questions. John, I just wanted to drill in a little bit on the health of your end markets. What are some of the signs that you're seeing in your business that could point to an acceleration here? And And I guess, importantly, how do you think about SMEs increasingly leveraging technology that you offer in a post-COVID world where everybody's really going through these digital transformations? It's not just the large enterprises.
spk03: Yeah, thanks, Matt, and nice to hear from you again. Look, I actually refer to the digital transformation as the digital evolution because, you know, for me, it is not a beginning and an end. It's a continuation. What COVID did really, it didn't change our thesis. I don't think it actually even changed us. the thesis of the SME, what it did is it effectively accelerated elements of the need for the SME. You know, the difference a couple years ago to today, an SME, you know, needs to embrace technology on all fronts. I often say, people ask me, oh, is there a focus in the verticals for MSPs? I say, well, yeah, if the SME has a customer they need IT. And if you don't have a customer, you're really not in business, right? So whether it be protecting your own, if you're the SME, if you're protecting your own data, protecting your customers' data, helping with the productivity of your staff, of your teams, corresponding with your customers, it is the bloodline. It went from a differentiator in the SME market to to absolutely table stakes in any vertical. I can't think of a vertical that doesn't require IT. So with that as a backdrop, we're seeing the SMEs adopting SaaS applications, pushing more to the cloud, and we're there helping the MSPs with this evolution. And that's our job, right? Our mission is to empower these MSPs. Our vision is to enable the digital evolution for the SME. And as more and more of these SMEs are adopting SaaS applications, pushing their workloads to the cloud, pushing more and more of their data to the cloud, we're there to make sure the MSPs are there to be able to do so efficiently and to make sure that all this data is being able to be protected and secured. So, you know, we're seeing the SME embracing this on all fronts. I think most notably in the short term, we're seeing an uptick, as I mentioned with the last call, in security. We're also seeing it in collaboration in a bunch of different areas.
spk02: Got it. That's super helpful. Thanks, John. And then maybe one for Tim. You guys grew 16% in the quarter, and this being your first, I guess, post-spin call, you guided Q3 and the full year to 13% to 14% growth. I just wanted to get sort of an idea of what the assumptions that you had and embedded in that guide coming off of really a strong quarter, just kind of trying to understand what's embedded in that kind of full-year guide or
spk01: Yeah, looking back into 2020 from a year-over-year compare standpoint for Q2, Q2 was the most impacted quarter last year from the COVID pandemic. which is driving, I would say, a more favorable year-over-year compare. And the other piece of the equation is that any FX tailwinds is most pronounced in Q2 from a year-over-year perspective as well, more so in the first half of 2021 versus the second half.
spk02: Got it. Thanks a lot, guys.
spk06: Thanks, Matt.
spk07: Before our next question, I would just like to remind everyone that if they would like to register a question, please press star followed by one on your telephone keypad. Our next question comes from Keith Bachman from the Bank of Montreal. Keith, your line is open. Please go ahead.
spk06: Thank you. This is Adamant for Keith. So maybe for John, as everyone gets ramped up on the story, I was wondering if you can describe the main differences between Enable and competitors, including Datto. And what do you guys have that helps set you apart from those competitors?
spk03: Sure. Thanks, Keith. Look, a lot of the difference is in our origins, right? We were born as this remote monitoring and management industry. platform, and we cover the entire industry. We cover the low end in the MSP market. We cover the high end of the MSP market. And that's important because even on the low end, as they grow, we grow. So number one, we cover the entire market. Number two, the fact that we're born in RMM, we really focus on where it's the messiest for the MSP. A lot of the competitors talk about a single pane of glass. And that's important because of efficiency. Where we believe that efficiency needs to play in is being able to integrate all these different operating systems, all these different environments for the SME. The challenge for the MSP is that they're managing 10, 12, 200, 500 different small-medium enterprises with a proliferation of different devices and different network configurations and SaaS applications. So the challenge there is how you pull this all in. And that's one of the parts of our secret sauce with our integrations with Microsoft via Intune, the work that we do with Apple and the Cisco, excuse me, the Apple ability to monitor and manage Apple devices, our partnership with Cisco, giving them the ability to effectively and efficiently manage Cisco types of devices. It allows our MSPs to aggregate all of this in one single screen so they can monitor and manage this stuff efficiently. And that's where our focus has been. That coupled with We believe we have the broadest set of security offerings in the market that are integrated with the platform. Again, there's that integrated and platform word again. Why that's important, again, is that an MSP can deploy endpoint protection, can deploy our backup disaster recovery via this one powerful console, and so it becomes effectively that central nervous system for them. So that's where we're focused, is how to make it efficient for these MSPs. And when I think about the landscape and how this world is going to continue to evolve and get more and more complicated, it's in that area. What's going on with cloud, how the environment continues to get more and more proliferated, these networks get more and more challenging, the verticals get a little bit more different. Our job is to help simplify for the MSP. make sure that they can do so securely and efficiently, and that's where our focus is in. And so that's where I believe, you know, we stack up and are, you know, head and shoulders above our competitors from Matthew in the ability to integrate and blend in all these different technologies and, you know, networks and devices.
spk06: Okay, got it. Very helpful. Thank you.
spk07: We have a follow-up question from Edward Magee from Berenberg. Edward, your line is open. Please go ahead.
spk04: Thanks. I appreciate it. In the prepared remarks, you made note of the strength in Apple, and you also just made it in the last question as well. We've seen great strength from players in this market this past quarter. Can you just expand on how we can think about Enable's future as you look to tap into this growing Apple device market?
spk03: Yeah, it's multi-pronged is what I would say, Edward, right? And so when we think about the future and where we're pushing and where we believe the growth is for our MSP partners and the challenges for the SMEs, it's along a couple of different lines. One, it's really focusing a lot on cloud monitoring and management, right? More and more workloads are going to the cloud. We need to make sure that we're right there and enabling these MSPs to to help monitor. Right now, today, we have tens of thousands of Azure instances that we're helping MSPs monitor and manage today. And that's a new challenge for them. It's a new challenge for monitoring and management. It's also a new challenge for security. And so we're pushing and focusing our investment area around cloud monitoring and management, number one. Number two, we'll continue to look at security solutions. I mentioned DNF filtering. The bad news about security is there's not one magic pill or solution that makes you secure. You need to employ a layered security approach. And as we think about the future environment, as more and more workloads push to the cloud, we're taking a look at different ways that we can help MSPs understand the risk and manage the risk, whether it be vulnerability scanning and vulnerability management. in different types of different security tools and offerings along that environment. So that's really a lot of our focus area. As it relates to Apple, yeah, this is one of our differentiators. It's not a homogenous network. My guess is you have an Apple device and a Microsoft laptop you're working on now. That presents a unique problem for the MSPs. And one of the things that sets us apart is our ability to allow these MSPs to manage a Windows device, a Google device, an Apple device. And I believe the investment that we're making with our Mac team and what they're able to do to allow MSPs not only just to monitor and manage Mac devices, Apple devices, but also to enable them to secure and, if necessary, back up some of these devices. So we're going to continue to push there to get closer because it's very much a hybrid world and a bunch of different fronts. And for the MSP, the small-medium enterprise is looking for the MSP to manage all of it, right? They're the single neck to choke, so to speak. for these small-medium enterprises. It doesn't matter if it's an Apple device, a Windows device, a Linux box. Their job is to monitor it, manage it, and secure it, and that's where we stand, and that's where we'll continue to invest on all the different operating systems to make sure that we can be there to help them in this kind of hybrid, proliferated world.
spk04: Great. Thanks. It's helpful. You're right on with the Apple phone and Microsoft power laptop. Nothing further on that. I appreciate you taking the question. Thanks, Ed.
spk07: We have no further questions. So thank you, everyone, for joining. You may now disconnect your lines and have a lovely day.
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