This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Good day and welcome to Enable's fourth quarter 2021 earnings call. My name is Brika and I'll be today's event specialist. You will have the opportunity to ask a question today and if you wish to do so, please press star followed by one on your telephone keypad. I would like to hand the call over to Howard Marr, Senior Director of Investor Relations. So, Howard, please go ahead.
spk01: Thank you, Brika. And welcome, everyone, to Enable's fourth quarter and full year 2021 earnings call. With me today are John Pagliuca, Enable's president and CEO, and Tim O'Brien, EVP and CFO. 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. There 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 continued expectations following the spinoff of our business from SolarWinds in July 2021, 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 those related to the spinoff transaction completed in July. 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 IR 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 measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available on our earnings press release on our IR website. And now I will turn the call over to John. Thanks, Howard.
spk04: And thank you all for joining us today. About six weeks ago, we had our 2022 company-wide kickoff event. Our leadership team discussed the state of our industry, where Enable is on our journey, and why we feel confident about the future. I thought it would be useful to recap a few themes from our kickoff. In 2021, we rallied around the phrase forward together as we became a standalone company and laid the foundation for success in 2022. With our 2021 mission accomplished, we've turned our focus squarely to elevating and accelerating our business, and therefore, Our rally cry this year is earn more Enable fans. A fan is more than just a customer, what we call an MSP partner, or our growing employee base of Enableites. Fans also include prospects, strategic partners, industry analysts, media, investors, and more. Earning more fans has important implications, because in order to do so, we must execute on key objectives, such as helping our partners solve their problems, better connect our brand to the market, and enhance the overall experience for MSV partners and EnableLite employees alike. As we continue to execute, a growing fan base will be another indicator of success. Two months into the new year, the environment in 2022, in many ways, still looks a lot like 2021. With the world learning to cope with what may become an endemic phase of COVID, the new normal for work doesn't look like it's going away. As such, our industry tailwinds, which include increased IT complexity, labor scarcity, and rising cyber threats remain as strong as ever. I want to briefly double-click into each of these. First, IT complexity is best captured by the concept of hybrid everything. In a work-from-anywhere world, SMEs rely on MSPs to manage IT workloads, digital assets, and identities across the on-prem and public cloud environments. Second, labor scarcity limits SMEs from self-managing their own IT stacks and serves as a catalyst for outsourcing their IT management and security to MSPs. Increasingly, we are seeing large enterprises use MSPs to co-manage their IT assets. Not surprisingly, MSPs are struggling with labor scarcity too. They need to do more with less labor, and that's where we add a lot of value. Third, given the proliferation of security threats, Cyber threat management is now a core risk management function. Empowered by our security staff, MSPs have the wherewithal to secure their end customer environments. We entered 2021 on a high note, with new bookings in the fourth quarter at the highest level in 2021 and up year over year. Fourth quarter revenue grew 13% in constant currency and exceeded the high end of our outlook. Our data protection and security portfolios continue to deliver standout growth driven by continued robust demand for our enabled Microsoft 365 cloud-to-cloud backup and enabled EDR solutions. In fact, our EDR offering, which is built on SentinelOne's best-in-class technology and seamlessly integrated into our platform, now sits on over 1 million endpoints, while our Microsoft 365 backup offering protects over 25,000 end-customer domains and over 900,000 exchange mailboxes. During the fourth quarter, we appointed two new leaders to our data protection business. Chris Groot, an enabled veteran who was promoted to general manager of data protection, and the addition of Stefan Voss as VP of data protection product management. Stefan joined us most recently from Dell, where he was chief product owner of a portfolio of data protection products. As the market continues to shift toward cloud-native infrastructure, we're excited about how our cloud-native data protection as a service solution is positioned We provide complete protection for our customers across endpoint devices, servers, and Microsoft 365 via a unified console and a single pane of glass. Built on our proprietary TrueDelta technology, our backup and restore functionality allows for five times less storage for the same number of restore points compared to competing solutions, enabling a higher service level and lower cost. Data protection is a priority for us. And the up-leveling of leadership underscores our commitment to helping MSPs better protect both their businesses and those of their customers. Now, as I did in our last earnings call, I want to continue the practice of sharing notable customer wins. First, we won a six-figure ARR deal with a Belgium-based MSP that chose us for RMM, EDR, data protection, and password management. replacing a competitive RMM solution and two separate backup solutions from leading data protection vendors. Despite having invested in customizations built around their previous RMM vendor, this MSP ultimately chose Enable due to our tight integrations and easy-to-use interface, while our automation manager and NetPath network traffic analyzer were big pluses too. Second, We sold a near six-figure ARR deal with a Connecticut-based MSP that included RMM, EDR, and data protection, also replacing a competitive RMM vendor and two data protection vendors. In this case, our powerful and cost-effective data protection offering for endpoints, M365, and virtual machines led the win, while our seamless integration facilitated the multi-product land. Third, we landed a five-figure ARR standalone data protection deal with an Australian-based MSP, including both enabled backup for devices and M365 backup. We believe this deal speaks to the increasing recognition of our fully cloud-based data protection portfolio, as well as an international breadth. Finally, as a testament to the enterprise-grade quality of our solutions, in the quarter, we landed a 200K ARR direct deal with a Fortune 500 company, Now, to be clear, we don't focus on internal IT departments, but we nonetheless get inbound requests at times. And in this case, we were invited to bid in an RFP process. This company was looking to consolidate its unified endpoint management solution onto one vendor. Not only did our RMM exceed their patch management and remote control needs, but our other out-of-the-box features like network topography, asset and warranty tracking, automation manager, and report manager helped us secure this win. We also had some notable expansion deals in the quarter. First, a long-standing partner that already uses multiple enabled products added over 200K of EDR. This security-focused partner promotes four core pillars to its SME customers as part of an essential security hygiene. managed patch management, managed EDR, a differentiated managed backup solution, and a multi-factor authentication. In making their decision, this partner valued the power of our EDR solution, seamless integration with our platform and other products, and our differentiated partner success and support. Second, we had a significant cross-cell data protection, also over 200K of ARR, including enabled Microsoft 365 backup and recovery testing. This partner was using us only for a small number of RMM nodes prior to seeing our differentiated data protection portfolio. We believe this expansion deal was a real testament to both the technological prowess and value proposition of our data protection solutions. We also had several large additional EDR cross-sell deals as more of our existing partners acknowledged the need to upgrade to a best-in-class solution given the heightened risk environment. Our traction and expansion deals have been amplified by our continued investment in partner success resources, such as the MSP Institute, our Head Nerds program, market builder campaigns, and partner care and technical support teams. In 2021, Enable Head Nerds gave over 10,000 sessions of consultation to partners across boot camps and one-on-one trainings. We have our goals set to exceed over 15,000 consultations this year. Over the last several months, we've introduced more targeted efforts to increase partner engagement, including through quarterly strategic business reviews with partners, which lead to increased account retention and new opportunities. We continue to augment training for our PSMs so that they are best equipped to identify and address MSP pain points. And for MSPs who prefer a more hands-off approach, we will be introducing more self-guided onboarding and adoption programs throughout the course of this year. Now I want to turn to some fourth quarter product and go to market highlights. First, we started multiple private previews for products to be generally available in 2022. In most of 2021, we were focused on product security and platform hardening, causing a delay in new product introduction. Earlier this month, we GA'd DNS filtering, which is a cloud-based, AI-driven content filtering and threat protection service. Additionally, We continue to improve our data protection capabilities, including a 30% performance increase for virtual servers and M365 data stores. As I look to the rest of this year and beyond, we are extending our core strengths in monitoring to cloud and hybrid environments. We will continue to introduce key capabilities with our cloud-native data protection portfolio, and we are planning to introduce additional powerful yet easy-to-use security solutions. we are pleased to return to a more normal cadence of product launches this year and are targeting multiple new offerings per year going forward. As organizations continue to adopt new and diverse solutions, including Windows 11, new versions of the Apple operating system, and new cloud capabilities, Enable's portfolio will continue to expand with capabilities to ensure that MSPs can manage, monitor, and secure the broadest range of platforms. In addition, We will be enhancing our security and data protection offerings to ensure MSPs are able to provide the latest technologies and protection to SMEs across the globe. On the sales and marketing fronts, we improved the conversion rate on our website as we upgraded landing pages that better reflect the enabled brand value. And we are seeing good progress in our channel expansion efforts as we continue to support our distribution partners around the globe with dedicated salespeople. In these situations, our salespeople bring a deeper level of knowledge on our products, while the distribution partner is primarily responsible for the account management and customer care. In fact, overall sales productivity has improved sequentially each year in 2021. And finally, we generated a 15% quarter-over-quarter increase in our total sales pipeline, which we believe is primarily attributable to more targeted customer acquisition efforts. I will circle back at the end with some closing thoughts, but now I'll turn over the call to Tim to discuss our financial results and outlook.
spk02: Thank you, John. And thanks to all of you for joining us on the call today. I want to start off by recognizing the significant contributions made by our team in 2021, whether it be building out of our financial and GNA functions, increased investment in systems and security, and rebranding to enable. I'm proud of what we have accomplished in 2021 and how the foundation we have laid sets us up well for success in 2022. Now I will review our full year and fourth quarter financial results and then discuss our financial outlook for 2022. We finished 2021 just ahead of our outlook with total revenue of $346.5 million representing 14% year-over-year growth on a reported basis and 12% on a constant currency basis. Subscription revenue was $336.8 million, representing 97% of total revenue and grew one percentage point faster than total revenue on both a reported and constant currency basis. Total revenue in the fourth quarter was $89.5 million, representing 12% year over year reported growth or 13% on a constant currency basis. FX turned out to be roughly a percentage point of headwind versus roughly neutral when we gave our guidance in November. Subscription revenue was $87.3 million, representing approximately 13% year over year growth. or 14% on a constant currency basis. Other revenue, which primarily represents maintenance revenue from our discontinued legacy license model was $2.2 million down 11% year over year and consistent with prior quarters. We ended the quarter with 1,678 partners that represent $50,000 or more of ARR, a 14% year over year increase Partners with over $50,000 of ARR represent 47% of our total ARR, up from 42% a year ago. Our quarterly performance continued to be driven by our security and data protection solutions, and in particular, our Enable EDR and Enable Microsoft 365 cloud-to-cloud backup solutions. As John mentioned, new bookings in the fourth quarter were our best bookings quarter in the year. While we don't comment on bookings every quarter, it's noteworthy this time. Our bookings in Q4 surpassed those of Q4 the previous year, which was prior to both the SolarWinds cyber incident and the rebrand to enable. Two events that hurt new customer acquisition for most of 2021. This is an encouraging sign and gives us confidence as we move into 2022. Dollar based net revenue retention, which is calculated on a trailing 12 month basis was 110%. Our net revenue retention has been driven by a balanced mix of both cross-sell of additional services and device expansion, as well as consistent gross retention rates in the 86 to 87% range. Turning to profit and margins, 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. Also note that historical financials for all of 2020 and the period of 2021 prior to the effective spinoff date of July 19 included operating expenses that were prepared using carve-out allocation methodology while we were still a part of SolarWinds. Therefore, our standalone financials are not directly comparable to those prepared prior to the effective spinoff date. Full year 2021 gross margin was 86.8% compared to 87.4% in 2020. Fourth quarter gross margin was 86.6% compared to 87.1% in the fourth quarter of 2020. Full year 2021 adjusted EBITDA was $113.3 million, which is at the midpoint of our financial outlook range. and represents an adjusted EBITDA margin of 32.7%. Fourth quarter adjusted EBITDA was $27.8 million, representing a 31% EBITDA margin, and reflects investments to drive revenue growth acceleration in 2022 and beyond. Unlevered free cash flow was approximately $43.5 million in the full year and $10.1 million in the fourth quarter. Unlevered free cash flow contained some non-recurring items, including elevated capex for office build-outs to support standalone operations and a couple of cash-neutral transfers between Enable and SolarWinds. Excluding these items, unlevered free cash flow in 2021 would have been over $70 million, representing approximately a 62% conversion from adjusted EBITDA. CapEx was $34.8 million, or 10% of revenue for the full year, and $12.5 million, or 14% of revenue in the fourth quarter. Excluding the one-time office build-out that I just mentioned, CapEx would have been approximately 8% of revenue for the full year. Non-GAAP earnings per share was $0.35 for the full year based on 169 million weighted average diluted shares and $0.07 in the fourth quarter based on 180 million weighted average diluted shares. We ended the year with approximately $67 million of cash and have an outstanding loan principal balance of $349 million, representing net leverage of approximately 2.5 times. Now I will provide our financial outlook for the first quarter and full year. For the first quarter of 2022, we expect total revenue in the range of $90.1 to $90.6 million, representing approximately 9% year-over-year growth or approximately 11% growth on a constant currency basis. The expected deceleration in revenue growth in the first quarter is due primarily to a slowdown in new customer acquisition for most of 2021. following the disruptive impact of the SolarWinds cyber incident and rebrand to enable, as well as delays in new product introductions in 2021. Accordingly, we expect adjusted EBITDA in the range of $26.5 to $27 million, representing approximately 30% margin at the midpoint. For the full year 2022, we expect total revenue of $384 to $388 million, representing 11 to 12% year-over-year growth on a reported basis, or 13 to 14% growth on a constant currency basis. We expect full-year adjusted EBITDA in the range of $118 to $122 million, or approximately 31% margin at the midpoint. Given that nearly half of our revenue is generated outside of North America, I want to provide some guidelines around the impacts of FX movements. For both the first quarter and full year, we are assuming exchange rates of 1.13 for the Euro and 1.35 for the British pound. As a proxy, every cent of Euro is about $900,000 of revenue impact, while every cent of the pound is about $300,000 of revenue impact for full year 2022. So, for example, given that the dollar has been appreciating, if we had used FX rates at the time we gave fourth quarter guidance in November, our full year revenue outlook would have been approximately $4 million higher. As implied in our full-year outlook on the currency basis, we expect year-over-year revenue growth to accelerate throughout the year. With respect to expenses and profits, while our revenue mix is approximately 50% international, our expenses are more heavily indexed to the U.S. Therefore, the FX impact to revenue is not perfectly offset by the FX impact to expenses. So based on current rates, we will experience a modest net headwind to adjusted EBITDA in 2022, primarily driven by the euro. In addition, our first quarter adjusted EBITDA margin outlook reflects hiring we made ahead of returns on go-to-market and product investments that we expect to realize in the back half of the year. Our first quarter and full year margin guidance implies that adjusted EBITDA margin will improve in the second half of the year. Cash flow normalized this year into the range of 4% to 5% of total revenue. We expect adjusted EBITDA conversion to unlevered free cash flow to be approximately 70% in 2022. We expect total weighted average diluted shares outstanding of approximately $180 million for the first quarter and approximately $181 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 25% in both the first quarter and the full year. Now I will turn it over to John for closing remarks.
spk04: Thank you, Tim. I want to remind everyone of our three key investment areas going into 2022. Bolstering our partner success resources, expanding our multi-pronged go-to-market approach, and bringing powerful and secure products to market faster. While each of these investments have different return horizons, we are realizing progress on all fronts. As a result, we're seeing steady improvement in sales productivity. Our partner success managers have been uncovering new opportunities And we're happy to reinstitute a regular cadence of product launches with expected multiple new offerings per year going forward. I don't think we're alone in noting that the last couple of years have been difficult across the board for a variety of reasons. But from where I sit, I can honestly say I'm overwhelmed by the energy, excitement, and resilience of my fellow Enableites and the optimism and confidence of our MSP partners as we head into 2022. The industry tailwinds we are seeing indicate strength for MSPs across the globe. We are excited to continue to execute and execute well for our partners and earn more fans in 2022. With that, operator, we are ready to take questions.
spk05: Thank you. If you wish to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind at any time, please press star 2 to remove the question. As a reminder, it is staff followed by one to ask any questions today. The first question we have from the phone line comes from Jason Adair of William Blair. So, Jason, I've opened your line. Please go ahead.
spk00: Yes, thank you. Good morning, guys. So, just two quick ones. First, just on the macro, does it feel like we're back to pre-COVID levels of demand and then Secondly, as you think about the top line outlook for this year and beyond, what really gets you guys back to kind of a, let's call it a mid to high teens type of top line growth? What are the kind of one or two key catalysts that get you there?
spk04: Sure. Thanks, Jason. Nice to hear from you again. We intentionally, in our prepared remarks, talked a little bit about bookings. For us, and we also gave a reference point that it predates the cyber incident, the rebrand, and a couple of other things. For me, it's a good leading indicator across our geos and our product portfolio that the demand is back and that the MSP community is thriving and growing. So across the entire portfolio of ANGEO, we do see a strong level of demand, and I think that's indicative of what we did from our bookings in Q4. To your second question, we always think about the business and the business model from a point of view of land expand-retain. and and for us to get back to those high teams and even beyond that level uh it's it's imperative that we we continue to execute and progress as we have along those three dimensions right and so um we've done a good amount on the retain part we've invested in customer success we're seeing gross retention and better opportunities from that part of it so that's been a steady progress i think the two key things that we're seeing now is that that returned back to new product introduction. for a couple of different reasons we didn't have a new product introduction last year right and so the fact that we're out of the gate as early as we are with already a new product introduction it brings uh an additional uh offering for our msps to sell to keep their end customers secure gives another opportunity for our partner success folks to have a conversation and our sales teams to to sell another important skew in the layered security bit and we believe we'll continue to introduce new products throughout the year, which will help with that expansion story, which will help with that net retention story, which will help push us to that higher growth level. That, coupled with that better view of that demand, should get our new customer motion continuing to go up and to the right. And the coupling of all three of those things gives us, you know, that belief. And I think you can see that as we, you know, in our guide as well.
spk00: And then where do you see NRR goings?
spk04: Sorry, Jason, can you repeat that?
spk00: Yeah, where do you see net retention rates going?
spk04: Sorry, I didn't know. Yeah, so, you know, we've held steady, and, you know, net retention is comprised of the expand part and the retain part. So I think the retention part will hold steady, and we should see some slight improvement there. And really, when we're introducing these new products, that's when we expect the net retention numbers to be better than where they were this year.
spk00: Thank you.
spk05: Thank you. We now have our next question on the line from Sterling Artie of JP Morgan. So Sterling, please go ahead.
spk04: Yeah, thanks. Hi, guys. So thank you for the comments around the deceleration expected in the first quarter, but I want to dig a little deeper on that.
spk03: You know, plenty of commentary about the strength in booking, strength in demand in the fourth quarter.
spk04: And what I'm wondering is how long does it take for that strength to translate or how much consistency in that strength do you need to really turn the quarter and reaccelerate? Because I think you talked through, hey, the lower customer ads throughout 21, but you finished strong. So is this a multi-quarter transition? phenomenon that needs to happen before we get the real bang for the buck in terms of revenue growth.
spk02: Thanks, Sterling. Thanks for the question. I'm happy to get some more color. Yeah, in the nature of the business model, and we kind of hit on the drivers of the B-style, but the nature of the business model does cater to it taking a couple of quarters for that strong performance that we talked to on Q4, looking to permeate into the business as a lot of the deals are set to kind of ramp up. over a three or four month period. So I think if you look at Q1 guidance compared to full year guidance, you kind of see that permeating through the implied acceleration on the top line when you just look at Q1 versus full year guide. And part of that is also the No MPIs, no new products released in 2021. And we do have a new one that's just come out in Q1 here as well. That's going to be part of the story as well as we accelerate through the year.
spk04: Got it. And then one other follow-up question. I didn't catch in your commentary, the gross margins were down more than I would have expected and more than what we've seen seasonally. What in particular in the fourth quarter weighed on the gross margins?
spk02: Yeah, primarily just data center costs, and those will fluctuate from time to time, but we expect margins to hold very steady from a gross margin standpoint as we go forward.
spk04: Got it. Thank you.
spk05: Thank you. We now have another question on the line from Matt Hedberg of RBC Capital Markets. So please go ahead when you're ready, Matt.
spk03: Well, thanks for the questions. John, I guess going back to the strength in new bookings in 4Q, which is great to hear, it's probably hard for you to decipher how much of that is enabled specific versus improving MSP trends. But But, you know, I guess I'll ask the question. I mean, how much of it do you think is specific to what you guys have done sort of building up close to the spin versus just, you know, we're getting back to maybe some more sort of pre-COVID MSP demand trends?
spk04: Hey, Matt, thanks. So, look, you know, also we had some – Headwinds that were specific to Enable as well, right? And so we had the SolarWinds breach. We had the rebrand. So we had what I'd call some like micro or brand-specific, company-specific headwinds last year. And so as those dissipate and as we continue to build our brand, as we continue to prove to the MSP community the strength and our security of our offering, that relationship with the MSP community, we're seeing that performance pick up and those kind of, I'd say, say, micro or unique headwinds to dissipate. So that's definitely a part of it. I do believe the advancements we've made in our product, the security hardening, the continuing development of our offerings, in particular with our data protection offering our integration that we have with Microsoft, the improvements we've made across our portfolio on an automation level. We're continuing to see conversion, Matt, increase, right? So we talked about sales productivity. The double click into there is conversions also getting better. We're winning more. In particular, we're winning more at the higher end of the market. As the MSPs get more and more complex, As they're larger, that's where we really shine in particular, and our win rates there are actually even better than our average win rates, which for me is a testament to the strength of our platform, the breadth and depth, and the development efforts that we've done. And so the market there in particular, the demand there on the high end is pretty strong. Why? We're continuing to see market consolidation. We're continuing to see what often people refer to as smart money into the space. And MSPs are getting a little bit more sophisticated. They're rolling up companies. They're acquiring one another. And when they do that, that's the right time to do a tech stack check. And when they're doing that tech stack check, they're looking for a platform that's robust enough and scalable enough, and we really shine in that capacity. So on that end of the market in particular, we're seeing strong demand and strong conversion rates.
spk03: Got it. That's helpful. And then maybe one for Tim. You talked about maybe some of the components that are pressuring your 22 EBITDA guide versus the street. It sounds like some of it's FX, but some of it also is front-end loaded hiring. I'm wondering if you can give a bit more color on where that spend is focused. Is it RD? Is it sales and marketing? A little bit more color there would be helpful.
spk02: Yeah, sure, Matt. A little bit of color there. It's on both fronts. On the sales front, it's really driving, expanding our go-to-market approach, more so from a channel-led motion in some regions where we traditionally had only sold in a direct fashion. So there's some bigger investments in sales there that investments are going to kind of lead to. prior to the return. And then on the R&D front, on the product side of things, to drive, which John touched on, you know, multiple new product offerings per year, which, you know, we have one come out here in Q1 and others slated for the rest of the year. So those are the key areas of investment that are driving margin a little bit lower in the first half of the year compared to what we expect to see in the second half of the year. Got it. Thanks, Lucas.
spk05: Thank you. We now have Mike Secos of Neham and Company. So, Mike, please go ahead when you're ready.
spk02: Hey, guys. Thanks for taking the questions here. I wanted to ask about the, I guess, this deceleration we've spoken to in Q1. And I would have thought it's understandable with the solar winds and the pause on demand gen and the rebrand, but I would have thought we're moving away from that. So can you help us think about how much of an overhang or when that should dissipate as we're walking through calendar 22. And then the follow-up questions for Tim, but do you have constant currency growth rates by quarter for calendar 21, just to help us level set expectations? Are you willing to reiterate the 15 to 17% median term revenue growth rates that you guys articulated for the calendar 23, 24 timeframe?
spk04: Hey, Tim, I'll start maybe, and then you can add a little bit more color if that's okay. Sure. Mike, just to help reconcile, because it's probably two statements that probably need some reconciliation, right? In one hand, we're saying, hey, look, bookings in Q4 were strong and the best in quite some time. And then on the other hand, we're saying that the impact for the new customer business is creating a little bit of a headwind in the revenue growth. The reality is, right, so our booking number that happens in Q4 doesn't really manifest itself in much revenue in the quarter. I often refer to our business as a snowball business and those bookings begin to manifest themselves and then they themselves grow into that cohort. And so really what the revenue growth here that you see in Q4 is really a manifestation of those lower bookings numbers, that lower new customer acquisition performance in that Q1 and even really in some sense that Q2 period from last year. And as we build beyond that and add better cohorts from that, you'll see the impact dissipate and that acceleration begin to kick in. And also, as we bring on these customers, they present, obviously, a great opportunity now to go cross-sell that breadth and depth of the offering that we have, which would help also on the expand front. Tim, sorry, I didn't mean to cut you off, but you can add, and then you can answer Mike's second question.
spk02: Yeah, I would just add that if you think about when the impact started, it takes a full four quarters to kind of grow over some of that impact. And that's kind of what we're seeing here in Q1, where we expect to kind of bottom out from a growth perspective in the year, where we really felt the impact of the cyber and the rebrand. a little bit in the very back half of the first quarter of 2021, but more so in Q2, Q3, and Q4. And, you know, as we grow over that four-quarter period, you know, in Q2 and the rest of the year is where we expect to see, you know, that acceleration off of kind of this Q1 metric on that new customer acquisition impact. And then on the constant currency front, last quarter we gained 14% growth. Q4 was 13% growth. And the full year was 12% constant currency growth. So the first half was closer to about a 10% constant currency growth rate. That's great. Thank you. And then I know you've also spoken about this return towards more normal growth. new product introductions, which is great to hear. Can you give us a flavor, given last year was a little bit – stale is probably the wrong word, but I know that you guys highlighted the platform hardening, right? So what is a more typical cadence for new product introductions on your part, anything that would be incremental? Thank you.
spk04: Sure. Sure. So first, let's talk about the areas, right? And then we'll talk about the cadence, because I think it's important. So we continue to reference these three macro trends and these tailwinds. You know, the labor scarcity, the digital transformation, the increased risk around cyber. And when you take in those, those are the tailwinds. Those are also the demands of our MSP partners in the community and those SMEs, right? So we take the needs, we take the demands from our MSPs, but also their customers, and we build our roadmap accordingly. So you'll see us bring to market customers. offerings that help in all of those areas, right? So in particular, we referenced in the prepared remarks, solutions that help MSPs with cloud management and the management of the infrastructure and also SaaS part of the cloud. So we expect to bring those along. We continue to expect to bring easy to use but powerful, and that's an important combination, security offerings for these MSPs for them to deploy at a scalable and repeatable way across their customer base. And we will continue to help MSPs manage everything in an automated way to help drive their efficiency up so they can do more with less in this labor kind of scarce world that we're living in. And so those are the areas. As far as cadence, Mike, it depends on the level of complexity of what we're bringing to market. I expect there to be a few. We also need to be mindful. A lot of the offerings that we have are in a sell-through capacity. What do I mean? We bring things to market. We actually help the MSPs with the marketing, the education, the collateral, the packaging for them to go sell on to their end customers. So we need to be mindful not to overwhelm the MSP community because they need to process, digest, and sell this as well. So it's a couple, right? I think depending on the year, depending on the demand, depending on the appetite, I expect there to be about two to four offerings per year.
spk01: Very helpful.
spk04: Thank you, guys.
spk05: Thank you. We now have our final question on the line from Edward Maggie of Barenberg Asset Management. So, Edward, please go ahead when you're ready.
spk02: Thanks for taking my questions, and congrats on a strong cap to 2021. First question here, some notable wins included MSPs based in foreign countries. A large portion of your total revenue comes from outside the U.S. today. Can you go a little deeper into the national strategy, why it's working, and why we could view it as a key strength for Enable moving forward? Thanks.
spk04: Morning, Ed. Good morning. Sure. You know, Wright really built in our original DNA when we really kicked the company off. We've had a strong presence in Europe via our both combination of our local teams in the U.K. and the Netherlands. but also with these distribution partners. So we have an intimate relationship with some key distributors and geos that really have a strong MSP presence. And that's been our history. What we've done in the last, really, let's say 12 to 18 months, and we're continuing to lean in, is have what we somewhat refer to as a hybrid or multi-pronged approach where we're now coupling our own sales teams with these distribution partners to go deeper into their base and to do two things. One, to win bigger accounts, larger MSPs with a little bit maybe more of a complex sale. Why? Because my earlier question, we do better, we win when the MSPs are looking for a more complex bet. So we're helping the distributors win those larger accounts and more strategic accounts. number one number two as always the data protection and security we're bringing that expertise our security expertise our data protection expertise to the distributor because that end customer really wants to talk to that expert who actually understands solution a little bit more intimately and that's been that winning combination where our distributors are helping us with the customer care and the management, in particular in languages that we might not cover personally. And then we're coming in with that expertise and that know-how to give that MSP that perfect combination that they're looking for, that global expert with that local touch. And it's that combination that really, I believe, has us leading internationally in the markets.
spk02: Really helpful. And just one more from me. You've demonstrated many times the strength of the partnership with SentinelOne, which has stuck out in some key cross-sell cases. Can you quickly walk us through the approach you take to evaluating product introductions and maybe how you weigh new partnerships versus acquiring companies that develop the technologies themselves?
spk04: Thanks. Great question. We start with that demand that I mentioned in Mike's question earlier, right? And then we take a look at what is the best way to service the MSP. That is our North Star. And we have three avenues there, Ed, right? We obviously build a lot of the technology ourselves, and whether that be our complete data protection suite, our patch management suite, our email security suite, our password management suite, these are all our own proprietary technology, and we build that ourselves. And then if we believe that we can build it ourselves, that's what we'll do. We'll also look across and see if we should partner. And in the case of SentinelOne, we know that we believe them to be a leading partner providing the best solution for our MSPs that are both powerful and easy to use. And we took their powerful stack. brought it into our platform, made it more MSP-friendly, did a tight integration with a tremendous amount of work to make it a little bit easier for MSPs to deploy and manage and navigate through. And that's where we would go through more of the OEM path, where we believe there's a technology out there that it's better to partner with the industry leader. and if it's an area where we believe we want to keep our flexibility and options open if the technology evolves. We have the flexibility now to go with another vendor. And then lastly, and you brought this up, we are always looking at potential ways to bring in new offerings through inorganic means. This is a muscle that we did not flex in 2021. But now that we have the spin behind us, now that we're squarely focused on elevating and accelerating our business, I expect us to leverage that muscle as we go into 2022.
spk02: Very helpful with the spin behind you. Very excited to see what's in store for 2022. That's it for me. Thanks, guys.
spk05: Thank you for that, Edward. We now have another question on the line from Mike Sikos of Needham and Company. So please go ahead. I've opened your line.
spk02: Hey, guys. Thank you for getting me on real quick for this follow-up. I know earlier I had asked a pretty long-winded question, so I apologize up front for the word vomit. I've got to work on that. But one of the things I did want to highlight from the earlier question, you guys – at the time of this being discussed, a 15% to 17% revenue target over the median term to calendar 23 and 24. Are you willing to reiterate that? And I know I'd asked it earlier, but I wanted to make sure that we had that all out there in the open for everyone on the earnings call. Thank you. Yeah. Hey, Mike. It just looks easier. Yes. That's what I think.
spk01: Yeah.
spk02: Nothing that I didn't avoid on purpose. Nothing has changed on that front. I think if you go back to kind of some of the points we've hit on, on kind of getting a new customer acquisition normalized, getting our new product introduction back into the normal cadence of bringing a couple of those to market per year, continuing to invest in our partner success team in that motion and that strategy to drive higher retention rates. you know, we still feel confident in that kind of midterm range that you mentioned, that 15, 17% number for the medium term.
spk04: Yeah, and Mike, just to add. Yes. As we look at the performance of the last quarter where we are now, for me and the team, frankly, we're right on course. We've accomplished what we wanted to accomplish. We're quite pleased with what we've accomplished, and we feel we're in the exact position we thought we would be in to move this business and begin to accelerate. Great.
spk02: Thank you again, guys. I do appreciate it. No, I appreciate the follow-up. Apologies again, Mike.
spk05: Thank you. As we have no further questions registered, I'd like to hand it back to John for some closing remarks.
spk04: Thank you, Operator, and thank you all for attending this conference and looking forward to talking to you all again in 90 days.
spk05: Thank you. That does conclude today's call. Thank you again for joining. You may now disconnect your line.
Disclaimer