N-able, Inc.

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.

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.

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.