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spk04: Thank you and welcome everyone to Enable's second quarter 2022 earnings call. With me today are John Paliuca, 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 of 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 last year. Additional information concerning these statements and the risks and uncertainties associated with them is noted 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 the financial measures, we will be referring to the non-GAAP financial measures. A reconciliation of the non-GAAP financial measures discussed on today's call to their GAAP equivalents is available in our earnings press release on our Investor Relations website. And now, I will turn the call over to John.
spk06: Thanks, Jeff. And thank you all for joining us today. Our financial performance in Q2 exceeded the high end of our outlook. with GAAP revenue growing year over year by 7% or 13% on a constant currency basis to $91.6 million, demonstrating success in our multi-product sales approach, with particularly strong growth in our security offerings and data protection as a service. We also exceeded our adjusted EBITDA forecast, coming in at $27.6 million, just over 30% EBITDA margin. During Q2, We made encouraging progress on multiple initiatives that we believe validate our strategy and made a few well-calculated bets in the market that appear to be playing out in our favor. I will go into more detail on that in a minute, but first, I wanted to talk about a major milestone we just hit, our one-year anniversary as an independent public company. From the outset, our business model was designed to allow us to grow as our MSP partners grow. And the spinoff we undertook last year was primarily about focus. Focus on empowering our MSP partners to serve their SME customers. A focus on delivering powerful and simple solutions for MSPs to scale their business. And a focus on our employees. We believe that we have proven the value of a spinoff for our partners, employees, and shareholders as we accelerate our product roadmap and continue to help MSPs achieve their goals. While we are mindful of the current macroeconomic dynamics, we will keep focus on what drives our business and we'll continue to invest with a focus on growth to maintain our momentum. It has been a landmark year for us. Our team has grown by almost 12% to more than 1400 people worldwide. We have hired across all functions and continue to build our team with industry leaders who have been key to driving our success. We have increased the pace of product launches and invested in strategic areas that matter to our partners. Our brand is resonating with our target audience, and we have been recognized across the industry for the great work we are doing. And we continue to rally behind the phrase, earn more fans, which is embedded in our product roadmaps, our go-to-market strategy, and our approach to partner success. The backdrop to all of this growth are the industry dynamics we have discussed in the past, which are only becoming more prominent over time. These include rapidly increasing IT complexity, labor scarcity, and rising cybersecurity threats. I've talked about them as tailwinds for us, which we believe they are long-term, durable tailwinds that we look to capitalize on by hiring, expanding, and investing in the future. Our products and solutions directly address these dynamics, which creates opportunities for us to deepen our relationships with our partners. You can see this in the product advances we've made, but it's also evident in some of the sales trends we're seeing. On the product front, we've made a number of advancements. For our partners and their customers, the cloud is no longer a talk track and presentations. It's an adoption speedway for IT professionals. We've always been cloud first company. cloud-first and backup with closed data protection as a service, cloud-first in many of our product offerings as we are a SaaS provider. And with our recent acquisition, we are now helping our partners optimize the value of their Microsoft Cloud products. There is strong demand in this area. And while a significant majority of our partners manage or resell Microsoft Cloud services, they face numerous challenges, including issues with automation, multi-tenant management, and complexity that restricts MSPs from leveraging the full breadth of capabilities. And this is why we acquired SpinPanel. And we intend to make this a core cloud offering for Enable. We have been speaking with the amazing team at SpinPanel for some time. And after looking across the entire landscape, we believe that the right decision was to acquire them. Not only because they're a strong fit with our cloud strategy, but culturally, They have a similar partner focus and a vision that aligns with ours. Now as part of Enable, we can invest in the resources to scale and integrate the products to ensure we are addressing the challenges our partners face in helping our MSPs to own the cloud. The spin panel solution is designed to help our MSP partners manage Microsoft Cloud in a way that allows them to reduce complexity, bring efficiency, and profitably scale their Microsoft business. The product is already in use by Microsoft partners around the world, and as soon as the acquisition was announced, we opened up a beta version to our partners, and the response to this offering has been strong, which we believe validates the need and the approach that we are taking. I am excited for you to learn more about it when we launch the product to the world. On the data protection front, we've been very pleased with the market response to our Cove data protection as a service, one of the truly cloud-first appliance-free enterprise-grade backup and disaster recovery solutions that allows MSPs to modernize their approach to data protection. As a measure of how widely used Cove is, we recently announced that Cove data protection has passed 1 million protected Microsoft 365 users. Cove overall is supporting over 12,000 partners and more than 142,000 end customers. We also just announced that a powerful new feature called Standby Image is now available. It enhances Cove by simplifying disaster recovery through the creation of standby copies on customer-owned infrastructure without the need to buy an expensive proprietary backup appliance. Cove data protection is ideal for recovery from a destructive cyber attack. With traditional approaches, simply restoring backup into production can be risky as it may reinfect the network. But with Cove and Standby Image, That risk is mitigated because the backup copies are removed from the network that the malware is targeting and customers have the flexibility to proactively restore a server image into a location that works for them. Our partners have really taken to Cove and data protection has become a product we can lead and we can lead with for potential new customers. Now turning to RMM. For decades, the Enable team has served MSPs regardless of size or stage. from highly specialized market-specific service providers to large global generalists who serve SMEs around the world, all the way down to startup MSPs serving their customers from the proverbial garage. To build on our mission, to meet our partners where they are in their journey, we recently announced a new offering called Insight, designed to help early growth MSPs jumpstart their business. We think of it as a way to level the playing field, as it is the same powerful, and scalable set of tools that seasoned MSPs use, but it is tailored and packaged to help those partners early in their growth trajectory to start up right and efficiently scale. It combines three major components of our platform, our cloud-based RMM, enabled take control for remote support, an MSP manager for professional service automation, plus our full suite of onboarding, support, and community resources to help them build their businesses. It's only been a few weeks, but already we are starting to see a pickup in response within this cohort. On the last call, we discussed our launch of Enhanced Services. Enhanced Services is designed to help MSPs unlock the full potential of our solutions and address market challenges like labor scarcity, growing cyber threats, and increasing IT complexity. Premium onboarding, support, and training allows MSPs to leverage our experience and expertise to optimize their teams and technician efficiency and accelerate time to value by delivering solutions to their customers faster. We see this as a critical part of our value proposition and is often the differentiator between us and a competitor. Now, for our notable customer wins, rather than divide them up as new wins and as expansions, as I've done in the past, I want to point out a few trends we are seeing in the market. The first is the opportunity we are finding with MSP consolidation. This type of activity has been accelerating this year, as many of you have noted. We believe we are uniquely positioned to assist these consolidators in optimizing their costs and resources when they standardize on our purpose-built, holistic suite of solutions. That, plus the technical and business support we give them on an ongoing basis, makes for what we hope are many years as an Enable partner. Let me give you a few examples. We want a large $250,000 plus ARR standardization deal with a worldwide MSP consolidator on Incentral. This partner is one of the largest MSPs in the world, and we will be replacing multiple competitors as they work over the next 12 to 24 months to integrate the companies they recently acquired. Right now, this is just for RMF, but we have begun conversations around security and code and believe there's a large potential there as well. Standardization deals like this involve a high degree of expertise in both the technical aspects as well as training and project management. And this is an area we believe that we excel in above our competition. Second, a large consolidator in Finland has pulled together 11 MSPs within their group, six of whom are currently using Enable products and five who are not. We were already working with one of the MSPs who did not have our solution in-house. We were the first vendor to approach the group with the idea of standardizing. Our professional service capabilities, including project management and scripting to automate their process as a value added service helped us to win the deal. We are now well over $200,000 of ARR with them. They are currently evaluating Cove as well across the growing base of 20,000 nodes. Third, another large consolidator based in the UK has a few of the recently acquired MSPs on Essential. And we've been encouraging them to standardize and enable tools across all of their holdings. We are now replacing a competitive RMM for more than a hundred thousand dollars in ARR. We are also ripping and replacing the legacy antivirus with our integrated antivirus security solution. We are excited about the possibility of adding new business in this account, including standardizing on Cove and on-pass portal, EDR and DNS offerings in the near term. And fourth, A partner who was a top 50 MSP with a large and central deployment acquired a similar size MSP, which effectively doubled the number of endpoints managed. The acquisition was an opportunity for them to reconsider their vendor relationships. So they came to us for our EDR solution, adding more than $200,000 annually. They're now actively evaluating Cove as their standardized backup solution as well. We're also beginning to see positive results and our refreshed multi-product go-to-market strategy that leverages our unique capabilities. In many cases, we generally lead with our RMM solution within Central and Insight as our foot in the door with potential new partners. We've been quite successful there, even though RMM has relatively high switching costs. But now, as our product line has evolved and Cove has really come into its own as a market-leading product, Cloud-based backup and data protection are showing themselves to be the tip of the spear for many accounts. As we prove our value, both with our products, as well as our partner success resources, we're able to expand our footprint. And I'll give you one recent example of this. A large North American MSP that Enable has been hoping to work with for many years has been dissatisfied with the support and capabilities they were getting from their current backup vendor. They put Cove and our partner success team to the test. After rigorous review, in a process, they chose to implement code for over $50,000 of ARR. We are speaking with them about rolling out in Central to help them with their vast set of Mac and legacy Windows nodes that they manage, among other things. This is a symbolic win for us, and we are extremely excited to be working with them. As you can see, with each of these examples I just mentioned, our service and partner success teams were instrumental in helping partners, especially with the labor scarcity issue that is affecting the industry. Along those lines, a more notable win to highlight, a large nationwide dental partnership organization has recently decided to operate as their own MSP. And they came to us not only for Incentral's inherent capabilities, but also due to our reputation for service and support. We were able to help them rapidly migrate their nearly 7,000 endpoints with zero service interruptions and no downtime. As a result, They are now nearly a $250,000 USD ARR partner for us. We intend to continue to capitalize on these trends as we invest in the elements of our winning formula, our market-leading technology, our sales and marketing motions that raise our brand awareness, and our partner success resources which help to drive sales opportunities, including the ones I mentioned a minute ago. We believe that this is what differentiates us from our competition and will continue to drive our success over the long term. I'll let Tim take over the call now and discuss our financial results and outlook. And then I'll jump back on briefly to talk about our go-to-market motions in the back half of the year. Tim?
spk02: Thank you, John. And thanks to all of you for joining us on the call today. I want to review our second quarter financial results, then discuss our financial outlook for the remainder of 2022. As John mentioned, we finished the second quarter ahead of our outlook. with total revenue of $91.6 million, representing 7% year-over-year reported growth, or 13% on a constant currency basis. Description revenue was $89.4 million, representing approximately 8% 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 $2.3 million, down 10% year-over-year and consistent with prior quarters. We ended the quarter with 1,818 partners generating greater than $50,000 of annual recurring revenue, or ARR, a 10% year-over-year increase. Partners contributing over $50,000 of ARR now represent 50% of total ARR, up from 46% a year ago. We saw strength across our portfolio with EDR and Cove data protection, and in particular, with Microsoft 365 backup solutions, continuing to outpace total company revenue growth. Dollar-based net revenue retention calculated on a trailing 12-month basis was 106% on a reported basis. This result reflects approximately two points of negative FX impact. 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 the period prior to the effective spinoff date of July 19, 2021, included operating expenses that were prepared using carve-out allocation methodology while we were still part of SolarWinds. While the allocations and estimates in these carve-out financials are based on assumptions that we believe are reasonable, our standalone financials are not necessarily directly comparable to those prepared prior to the effective spinoff date. Second quarter gross margin was 85.5% compared to 86.4% in the second quarter of 2021. Second quarter adjusted EBITDA was $27.6 million, representing approximately 30% EBITDA margin. Unleveraged free cash flow was $25.1 million in the second quarter. CapEx was $3.9 million, or 4.3% of revenue. Non-GAAP earnings per share was $0.09 in the quarter based on 181 million weighted average diluted shares. We ended the quarter with approximately $86.6 million of cash and an outstanding loan principal balance of $347.4 million, representing net leverage of approximately 2.3 times. Approximately 45% of our revenue was outside of the US and Canada. I want to take a minute to expand on something John discussed. A year ago, when we spun off our business, one of the principal objectives was to focus our attention and financial resources on activating our growth strategy. One key aspect of that is capital allocation and our ability to make targeted investments in a manner that is appropriate for our strategic priorities. As you saw with the spin panel acquisition, this was a buy-build-partner consideration we made one that we believe aligns with our cloud-first positioning and creates value for our MSP partners and shareholders. Though a relatively small transaction, it was strategically important to us in order to accelerate the advancement of our cloud strategy. Our partners are looking to us to drive innovation and stay in front of customer demand for services, and we are executing on that by delivering a steady pace of product launches for new enterprise-grade solutions. We intend to continue to make capital allocation decisions that we believe will allow us to accelerate our growth, expand our platform, and achieve our optimal Rule of 50 metrics. Before I discuss our financial outlook for the third quarter and full year, I want to reiterate that aside from the global economy impact, the situation in Ukraine, Russia, and Belarus has not to date had any material impact on our operations, financial results, or business consistent with what we saw in the first quarter. We continue to believe we have adequate resources in non-impacted regions to support our products, including a newly established office in Warsaw, Poland. As the situation continues to evolve, we will take action as needed to mitigate any potential impact as we deem appropriate. Now I will provide our financial outlook for the third quarter and full year. There have been changes to the foreign exchange environment since our last outlook, and we are updating our guidance to reflect the impact of these changes. I want to start by reconciling our prior 2022 outlook based on current FX rates. As stated in our previous call, we assumed FX rates for the Euro and Pound of 1.05 and 1.23 respectively. We also stated that every point on the Euro equated to approximately $900,000 of annual revenue and every point on the Pound equated to approximately $300,000 of annual revenue. Using updated FX rates of 1.00 on the Euro and 1.19 on the Pound, as well as changes in other currencies, our prior 2022 revenue guidance of 376 to $379 million translates to $373 to $376 million, reflecting approximately $3 million of additional FX impact for the second half of the year. As it relates to our prior 2022 adjusted EBITDA outlook of $112.5 to $115.5 million, using these updated FX rates, our adjusted EBITDA outlook translates to $110.5 to $113.5 million, reflecting approximately $2 million of additional FX impact for the second half of the year. While the global macro environment remains uncertain and FX rates may continue to fluctuate, based on our current FX assumptions, we expect our third quarter of 2022 total revenue in the range of $92.5 to $93 million, representing approximately 5% year-over-year growth, or approximately 11% to 12% on a constant currency basis. For the full year 2022, we have slightly moderated our constant currency growth expectations, primarily to account for what we expect to see from a macroeconomic impact on device expansion for SMEs. We believe uncertainty in the macro environment may cause SMEs to add devices at a lower rate than we expected earlier this year. And as a result, we are tempering our forecast slightly for the back half of the year. To be clear, we believe there is strength across other parts of our growth algorithm, including market share growth for code and enable EDR, the cross-sell opportunity for our cloud products, and our steady velocity in terms of close rates overall. We now expect total revenue of $370 to $372 million, representing approximately 7% year-over-year growth on a reported basis, or 12% to 13% growth on a constant currency basis. For EBITDA, we expect third quarter adjusted EBITDA in the range of $26.5 to $27 million, representing approximately 29% margin at the midpoint. For the full year, our expense management remains disciplined and we are maintaining the level of investment in our strategic plan in order to take advantage of what we see as unique market and competitive opportunities. Therefore, given the factors I mentioned, including the FX driven revenue reduction, some expected headwinds due to macro environment uncertainty and the expense impact of the spin panel acquisition, We are now expecting full year adjusted EBITDA in the range of $107 to $109 million, equating to approximately 29% margin at the midpoint. CapEx is expected to be approximately 5% of total revenue for the full year. We also expect adjusted EBITDA conversion to unlevered free cash flow to be approximately 70% for the full year. We expect total weighted average saluted shares outstanding of approximately 181 million for the third quarter and the full year. Finally, we expect our non-GAAP tax rate to be approximately 28% in the third quarter and 26% for the full year. Now I will turn it over to John for closing remarks.
spk06: Thank you, Tim. As we head into the back half of the year, Our team is focused on executing on our launch of Cove data protection now that the standby image feature is available. We will especially be leaning in on the unique segmentation opportunity we believe that we have with our two packaged RMM offerings. In Central, aimed at seasoned, larger MSPs, and Insight, as I mentioned, aimed at earlier growth MSPs. For Insight, we expect to drive even more new RMM customer land as well as improve improve adoption of the other tools in our platform, namely Take Control and MSP Manager. And for Incentral, we are planning to launch a global campaign by the end of the third quarter to better position this product in the marketplace and incentivize mature MSPs that the move to Enable is worth the switch. And finally, as I mentioned, we will be launching a new Enable cloud solution. My fellow Enablites and I are fired up by the potential of our platform and the offerings we are bringing to market, as well as the opportunity that we are seeing to empower a base of IT service providers that are becoming an increasingly essential part of the infrastructure for small and medium businesses around the world. As we manage through this current macro environment, we believe the long-term drivers of our business remain strong and that we have a winning business model that increases in value over time and creates sticky relationships with our partners to help them face the mounting challenges in security, resources availability, and increasing IT complexity. At the beginning of October, and for the first time in over two years, we will welcome our partners to our Empower Conference in Las Vegas. This will be an in-person event, and we are really excited to bring together industry leaders to discuss the current state and future direction of the industry. With that, we look forward to talking with you on our next call in November. Operator, we are now ready to open the line for questions.
spk00: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star then one on your telephone keypad. If you wish to withdraw your question, please press star followed by number two. When preparing to ask a question, please ensure your line is unmuted locally. Our first question comes from Matt Hedberg from RBC Capital Markets. Matt, your line is open.
spk05: Great. Thanks for taking my questions. Hey, John, I'm gonna start with you. For a long time, a lot of different economic cycles, you know, you're taking about a point out of your constant currency growth for lower SME device ads. But can you talk about, you know, sort of like the durability of your own markets being exposed more to the MSP side, to the direct customers and maybe how that buffers you a bit from, you know, perhaps a bigger downturn in SME customers?
spk06: Sure. And good morning, Matt. Thanks for hopping on and thanks for the question. And yeah, so a couple of things, right? So the first thing, our solutions are absolutely mission critical to the MSPs, right? And I think that's evident in our Q2 results actually, right? The fact that we were able to beat the top line and the bottom line is a strong indicator, both to us internally and externally, that our solutions are mission critical because they allow MSPs to monitor manage and secure the it assets of the sme you know their customers right so it's extremely mission critical uh and the so therefore our platform is is in high demand not just for our msp partners but also to the sme customers that are depending on them to make sure that they can run their businesses And what we saw really, Matt, in the last couple of weeks, I was recently at an industry event talking to MSPs. My management team and our team are in constant contact with MSPs. They're taking a little bit more of a cautious approach, and they're seeing that they're growing their business and achieving their goals by increasing wallet share of their end customers. And why? Well, our MSPs are having a little bit more of a difficulty adding additional resources on their side, thereby creating a little bit more of a challenge where they're saying, hey, I can achieve my goals by growing wallet share of my existing customer base. And it's a prudent approach that a lot of the MSPs are taking. And as a result, we're taking that cautious approach as well and pulling back a little bit on what we, what we believe to be is device growth in the second half of the year.
spk05: Got it. Uh, that, that makes a lot of sense. And then on the new products, you guys have a lot of stuff coming out in addition to spin panel and metal, you know, can you talk like if you were to sort of, I'm sure you probably like, like, uh, you know, it's hard to pick a favorite, but like, what do you think out of the newer products could have a more immediate, uh, hell wind to grow?
spk06: Sure. And you're right. We have, uh we're we're excited about what the second half roadmap has i'm really excited about what what uh mike adler and the technology and product group has delivered thus far in 2022 uh and we're delivering on on all different aspects of this multi-product approach that we're bringing uh the the cove data protection uh offering and our standby image will help us and we believe will allow us uh to help with both new customer acquisition but also with better cross-sell within our customer base. So that one, Matt, as we begin to really expand into disaster recovery as a service and data protection as a service, that one will probably have the most immediate or short-term impact. But longer term, I'm equally as excited about the acquisition that we just did with the spin panel technology. Really, this allows our MSPs to really own the cloud and better provide a managed service around Microsoft Stack, right? We all know more and more workloads that go into the cloud. We all know that the MSPs are there reselling the Microsoft technology, but they're struggling to do so in a scalable, efficient, and profitable way. And that's the hallmark of the solutions that we bring to market. And the spin panel technology will allow a tremendous amount of automation for MSPs so they can onboard, they can provision, and they can better manage securely the SaaS applications in particular out of the gate, the Microsoft bit. So those are probably the two that I'm keen to see how they grow in the second half of this year. Internally, I often refer to the different product lines in our cohort as snowballs, and those are some of the two of the snowballs that we'll be watching keenly over the next couple of quarters. Thanks so much.
spk00: Thank you. Our next question comes from Jason Ader from William Blair. Jason, your line is open.
spk01: Yeah, thank you. Morning, guys. I guess one question I had on the net retention rate, 108%, constant currency. Where do you see this going over time? And then what are the kind of levers to get you, I'm assuming you want to get higher returns but where do you see it going, let's say, over the next two to three years, just broadly without a specific number, but do you see it going higher, about the same, and then how do you think about the puts and takes?
spk02: Hey, Jason, this is Tim. Thanks for the question. Yeah, as you look at net retention, you hit on it, it's about 108% in constant currency. As we look out over the next couple of years, we believe Net retention is our biggest lever in the model from a growth acceleration standpoint. And the investments we've been making across both R&G and product and the technology group combined with the investments in sales marketing and PSM are really leading to driving that number, I would say, north of 110 as we go forward. And John touched on it and kind of where some of the MSPs are focusing is now and some of the shifts from a focus standpoint that we're looking at is, you know, opportunities to drive wallet share. MSPs are looking at that opportunity with their SME customers. We're looking at that opportunity with our MSP partners as well. You know, looking across the spectrum of products and the cross-sell opportunity that sits within our base of customers, we believe has a long tail. And we'll be pointing, you know, some of our strategy and shifting some of our resources and focus towards capitalizing on that as we move forward over the next 12 to 24 or 36 months, looking out over that two to three year spectrum you spoke to. So combine that with bringing the new products we brought to market thus far this year, the new products that are lined up in the roadmap as well. We'll continue to open up that wallet share opportunity for us as we go forward. So Again, I'll reiterate that we believe that to be the biggest lever from a growth acceleration standpoint in the model, and we believe the best we've been making and the investments we've put in place to date are strategically set up to deliver there as we go forward.
spk01: Excellent. Thanks. And then just a quick follow-up for you, Tim, on the SIN panel acquisition. Did you guys talk about the impact on revenues in EBITDA from that acquisition this year?
spk02: We did not, but I can give you a little bit of color. This is more of a technology buy, so virtually no revenue contribution from existing partners that they had. We'll be looking to launch that product here. you know, in the next few months and start cross-selling that into the base. But impact on 2022 from a revenue standpoint is pretty much immaterial. From an expense standpoint, it's about a half a point of impact on the second half of the year. Just to kind of give you some color on the contribution on both of them.
spk01: Half a point impact on EBITDA margins.
spk02: Yep.
spk01: Correct. Okay. Great. Thank you. And then, John, for you – A question on the impact that you're seeing in the market from the Datto Kaseya merger?
spk06: Yeah, there's a good amount of noise in the industry, and we follow the noise. But really, the message I told my team is to focus on our rally cry, and that's around earning more fans. And we believe that. that if we continue to drive the right products to market and deliver the right level of partner success, that we'll have a positive impact on our customers that ultimately will help us gain market share. And so we've been focusing on our knitting here at Enable and on our rally cry to earn more Enable fans, and those are both existing. MSP partners and customers and partners that are not in our fold yet. So we're focused there and hoping to drive good results there.
spk01: But more specifically, have you seen any examples of customers from those other vendors that maybe it's getting a little bit looser, it's getting a little bit easier to get customers
spk06: um calls returned and and you know opportunities um maybe maybe a little more ripe to uh kind of displace or take share i think like in all things where there's a great level of uncertainty uh and there's a great level of change there's a great level of potential disruption uh and so with for those two organizations they'll need to rationalize their teams they'll need to rationalize their products they'll need to rationalize uh their customer service and partner success teams And through that rationalization, there's going to be inevitably a level of change and disruption. And so when you have that, you know, you're going to have bumps and hiccups. And that's for that organization to really sift through and work through. And, you know, have I seen it? There's some anecdotes, and I'm sure you can hop on Reddit and other exchanges and forums and look for yourself. But, again, we're really focused on if there are partners out there in the community that are looking to grow, looking to future-proof their business, looking to maybe go through a consolidation or have a technology that really is the broadest and widest and deepest. We're hoping that they're looking and coming and talking to us here at Enable.
spk01: Great. So maybe not the top tailwind for you, but could be a tailwind over the next 18 to 24 months.
spk06: I think that's fair, yeah.
spk01: All right. Thank you, guys. Good luck.
spk06: Thanks, Jason.
spk00: Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star, then 1 on your telephone keypad. If you wish to withdraw your question, please press star, followed by number 2. When preparing to ask your question, please ensure your phone is unmuted locally. The next question comes from Mike Sykes from Needham. Mike, your line is open.
spk03: You guys, thanks for getting me on here. I appreciate the time today, and I apologize if I'm rehearsing something that you guys went through earlier with the prepared remorse. I'm just tuning in a little bit late, juggling a couple different earnings calls on my side. But just wanted to first ask about pipeline creation that you guys are working through. If I'm looking at 1Q as an example, I know that you guys had commented that you generated a sequential increase in total sales pipeline. where March had actually been the largest month for that creation, if you look over the last two years. Can you just help us think through what you guys saw on the pipeline creation with respect to the cadence throughout 2Q and how that trended?
spk06: Mike, good morning, and thanks for joining. I know you're juggling a bunch of things. This is John. Sure. In the prepared remarks, Tim touched on the fact that we have multiple different levers of dimension to our growth algorithm, right? And the one that we're seeing or that we're being cautious about is the one that's probably least in our control, and that's around the consumption of our MSPs and partner-enabled growth. The things that are more in our control is more along the lines of what you were asking for and pipeline and what we often measure and discuss internally is around bookings. Q2 actually was better than our Q1 in terms of bookings. And when we talk bookings, Mike, we're talking both new customer acquisition and new SKUs. So both a mix of new customers and existing customers buying brand new offerings. So that combined bookings was better quarter over quarter. It was better year over year in the same point in Q2. So from that point of view, sale conversion pipeline build has been better than last quarter and better than year. And that gives us a lot of strong signals that, again, the products that we're offering are mission critical, that industry tailwinds are strong, and why we continue to invest in areas of growth and continue to do acquisitions and invest in R&D because we believe in strong tailwinds. that not only Enable is enjoying, but also the MSP industry. So overall, Q2 bookings were, like I said, stronger than the last quarter and stronger than a year ago this time of year.
spk03: Thanks for the call. That's very helpful. And if I could just tack on one more, again, a little bit of a comparison versus Q1, but I know last quarter you had discussed how, let's say, dedicated partner success reps we're driving among the highest close rates among the opportunities Enable will see. Just wanted to get a temperature test here, but is that still the case? And how is that initiative tracking versus your internal expectations?
spk06: So just maybe for the rest of the audience, but not as good of a memory as you, Mike. So we've invested heavily the last couple of years in a partner success organization that couples with our MSP partners and talks them through technical challenges, but also business challenges. And that's different in our business model than maybe other software companies. Again, our partner success folks and our growth strategists are helping our partners with some of their technical challenges and their business challenges. As a result of those rich conversations that we have with most of our partners quarterly, a tremendous amount of value and opportunity comes out of those. Those opportunities and those conversations, we refer to them as more of our QBRs with our partners continue to drive the highest conversion rates for opportunities within our company, right?
spk01: So that hasn't changed.
spk06: And we're quite pleased with the success that the partner success organization has touched on. When Tim talks about earlier net retention being our biggest lever, that's a combination of us and our investments in partner success, and in our R&D teams to deliver roadmap products and offerings so that our MSPs can leverage this technology to better serve their businesses, to grow both their top line and their bottom line. But that partner success organization is there as a shepherd or a guide, if you will, to help them not just instrument the technology, but then apply it to their business, package that up so that they can have an offering and grow their wallet share for their SMEs. So that continues to be a strong point in the business model. We continue to invest in partner success And that's one of the big reasons why we believe our net retention number will continue to progress and hit a number that, as Tim mentioned earlier, that's north of 110%.
spk03: That's great to hear. And if I could just put a finer point on it, just where I'm coming from, just to make sure I'm not mischaracterizing it, but with those partner success resources that you guys have in place to drive those conversations around whether it's the technical or the business challenges, I'm guessing that there is also a bit of a a virtuous feedback loop where those conversations are in fact helping benefit you guys as far as guiding your internal product roadmap and the demands that the market is making of Enable. Is that fair?
spk06: That's exactly right. So the conversations, it's not just us projecting our opinions or recommendations to the customers. It's very much a relationship and very much a partnership where we're actually farming effectively feedback, not just on the roadmap and how we can improve our products, but where we should go next. By the way, that's a good example as to why it would even drive some of our M&A. One of the number one challenges we see managed service providers struggle with is the ability to scale and monitor SaaS applications. That's feedback directly that we're getting from the partners. That better informs us and helps us take a better view as to what we should build, what we should partner, and what we should buy. And as one of the number one challenges that these managed service providers are facing is, is how can I own the cloud? How do I better monetize and wrap a service around these SaaS applications, cloud infrastructure as a service to these SMEs, these small medium enterprises. And SpinPanel was a perfect ad for that. So you're exactly right, Mike. It's a bidirectional conversation where we're sitting down with our MSPs, not just our PSMs, me and my leadership team spend a lot of time at industry events, having one-on-ones with customers in their offices, trying to understand their pain points so we can better service them and achieve their goals.
spk03: Terrific. Thank you again, guys. I really do appreciate it.
spk06: Thanks, Mike.
spk03: Thanks, Mike.
spk00: Thank you. Currently, we have no further questions. Therefore, I would like to hand back to John Paliuca, CEO of the company, for any closing remarks. John, please go ahead.
spk06: Thank you all, and I appreciate your time and investment in ABLE today, and look forward to talking to you all sometime in November. Have a great day.
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