N-able, Inc.

Good morning and a warm welcome to the Enable third quarter 2022 earnings call. My name is Candice and I will be your moderator for today's call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press start followed by one on your telephone keypad. I would now like to pass the conference over to our host, Jeff McGillner with Enable. Please go ahead.

Thank you, Candice, and welcome everyone to Enable's third quarter 2022 earnings call. With me today are John Palyuka, 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 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 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 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.

Thanks, Jeff, and welcome everyone to our third quarter earnings call. Once again, our Q3 results exceeded the high end of our outlook with revenue of $93.5 million, growing year over year by 13%, on a constant currency basis. We believe this demonstrates the success of our purpose-built, mission-critical platforms and the leverage of our multi-product sales approach as we generated particularly strong growth in our security offerings and data protection as a service. We also exceeded the high end of our adjusted EBITDA forecast, coming in at $28.9 million, representing a 31% EBITDA margin. We entered this year proudly declaring our rally cry of earn more fans. And during the third quarter, we made exciting progress on a number of fronts. To start, we welcomed more than 450 partners and 35 sponsors to our Empower Partner Conference in Las Vegas at the beginning of October. This is the first time we were able to host this event in person in over two years. And it was truly inspiring to bring together many of our elite and super elite customers, as well as some of the top industry leaders to discuss and debate industry trends, best practices, and opportunities with this highly engaged global audience. We entitled the event Own the Cloud and spent time in over 80 workshops, demonstrations, and presentations with partners exploring the MSP's role in monitoring, managing, and securing cloud workloads and SaaS applications. Cloud-based IT spend by small and medium enterprises is expected to grow from $600 billion in 2022 to a trillion dollars by 2027, which we believe represents a significant macro tailwind. However, while our partners want to master the cloud, they need help, and Empower gave them the chance to seek guidance both from us and from each other. From Azure resource management to Microsoft 365 user management and protection, we facilitated conversations to help them not just own but monetize the cloud opportunity. And as I said on stage in Las Vegas, the answer is in the room. Managed service providers today are assisting SMEs in transitioning from the wiring closet to the cloud. decommissioning exchange servers, file servers, and other server-based applications in favor of cloud-based collaboration suites. We believe that while MSPs are capable of shepherding this transition and have evolved their businesses to become cloud solution providers, many struggle to do so efficiently and profitably. And this is why we acquired SpinPanel in July of this year. SpinPanel is a multi-tenant Microsoft 365 management and automation platform built for Microsoft Cloud solution providers and allows users to automate the management and security of all Microsoft tenants, users, and licenses. This is accessible within a single consolidated hub to reduce complexity, bring efficiency, and help enable MSP partners profitably scale their Microsoft business. I'm pleased to report that on August 16th, we announced Cloud User Hub, which leverages the spin panel technology, allowing MSPs to better monetize, scale, and own the strategic slice of the cloud. While still in beta, within 72 hours of announcing this offering, we received over 300 hand raises from partners and prospects looking to trial the product. We believe the combination of Cloud User Hub and our Cove M365 backup offering, which has now surpassed 1.2 million mailboxes protected, will allow MSPs to better provision, monitor, and protect their customers' M365 environments. In 2023, we expect to further expand our integrated cloud offerings to enable MSPs to better monitor, manage, and backup Azure workloads and other SaaS and cloud applications and environments in one place It is a hybrid multi-cloud world that MSPs are charged with managing and protecting, and we plan to give them a unified and multi-tenant approach to manage their customers on-prem and multi-cloud environments. During my keynote at the Empower Conference, we discussed cloud adoption and how MSPs must lean into the curve, helping their customers better leverage the cloud and ensure that they do so efficiently and securely. I also discussed the two other tailwinds that continue to propel the industry. As CEOs and business owners turn to MSPs to assist with compliance, business continuity, and cyber insurance elements of their businesses, layered security continues to allow MSPs an opportunity to be the trusted security advisor for the companies they serve. In their effort to mitigate risk and serve their customers, The software MSPs deploy to identify, protect, detect, respond, and recover allows them to increase wallet share and revenue per customer. When it comes to security, we encourage MSPs to tell rather than sell with a comprehensive layered security philosophy to ensure the best level of protection for both themselves and their customers. We grow as our partners grow. and our best-in-class data protection security offerings give our partners additional services to drive revenue expansion. Whether it's our mail security protecting approximately 2.2 million mailboxes, or EDR technology protecting around 1.2 million endpoints, or our Passportal offering that provides password and credential protection, we give MSPs an integrated, layered security approach that allows them to grow wallet share. Security and efficiency are the name of the game in the managed services industry, because not unlike the rest of the world, MSPs struggle to attract and retain technical talent. This is why MSPs turn to Enable, to help them increase their profitability by automating elements of their workforce and standardizing their tech stack. And while a challenge on the staffing side, labor scarcity remains another powerful tailwind in the industry, as small, medium, and large enterprises are looking to outsource all or part of their IT needs to MSPs. More and more, we are seeing MSPs providing a co-managed service for companies looking to fill labor gaps and do more with a tighter operational budget, such as augmenting the staff of larger multinational companies or performing help desks and security hygiene services. Our tiered multi-tenant platform is perfectly suited for these situations to allow MSPs and internal IT departments to effectively share the management and provisioning of tasks, and has effectively raised the end customer ceiling, allowing MSPs to service multinational Fortune 1000 companies. Now, while these tailwinds are exciting, I also discussed with our partners during Empower the uncertainty around the macroeconomic environment. MSPs provide services that are business critical to their customers. And while most of our partners who attended the event have not felt a material slowdown in their cross-sell business, some acknowledge that their sales cycle is elongating, depending on the vertical they serve. Along with most MSPs, we believe we are in an era where the industry dynamics are strongly in our favor. No business is recession proof, but we believe ours is well positioned to be recession resilient. Those industry dynamics we talk about, labor scarcity, cybersecurity issues, and raising IT complexity in the race to the cloud that are challenges for most companies are tailwinds for Enable. Why? Because we are mission critical to our partners, and we solve the problems that would otherwise be risks. The momentum we have coming out of Empower is driving a lot of energy for us and our partners. And that momentum was achieved by the hard work of my fellow Enablites to propel our offerings forward and increase our stickiness and value. In Q2, I announced the promotion of Chris Groot to General Manager of our Cove data protection business. Cove is our cloud-first, enterprise-grade backup and disaster recovery solution. and continues to demonstrate its clear competitive differentiation from others that are local first with a bolted on cloud architecture. Through his leadership, Cove continues to outpace the overall growth of the business and is our second leading solution area behind our monitoring and management platforms. The key for Cove is an innovation we call True Delta, which allows us to move up to 60 times less data than traditional solutions. We have said, Cove is the best kept secret in data protection, but the word is getting out, awareness is on the rise, and we're having greater success replacing traditional incumbent backup vendors. For example, a unique large MSP aggregator based in Canada has been bringing in a variety of inherited disaster recovery platforms rather than following a unified strategy. Three of the subsidiary MSPs, evaluated Cove, and their techs loved it, but they were still skeptical that it could live up to the promise. Over the course of a couple of weeks, we helped them roll out Cove to hundreds of servers and thousands of endpoints, and the results far exceeded their expectations. In fact, the president said to us, I can't believe there was finally a technology that we implemented that delivered on all of its promises, and the transition was painless. In the 20 years in the business, I've never seen that. The economics here were impressive as well. Since storage is included with Cove, not only are their direct margins better from a licensing perspective, but they were able to get rid of fixed hardware costs plus indirect labor costs due to drastically reduced administration time. And just in licensing costs alone, they told us they were going to save more than $250,000 a year This deal for Enable was an additional $100,000 of ARR. We're also beginning to make some headway in internal corporate IT space, and we are very pleased with the reception and trajectory we are seeing for Cove in the market. An example during Q3, there was a large MSP based in the Netherlands that was looking to roll out Cove to a large retail chain customer. They committed to their customer that it would be a seamless implementation without the need for techs to visit each of their customer sites. The data and processes we developed from a trial with a few sites gave them the confidence they needed to conduct the rollout on a flexible timeline, and they were delighted with the outcome. The value of this deal for Enable was around $80,000 of ARR. With focus comes acceleration, and with success comes duplication. I was so pleased with the acceleration of Cove that we replicated the GM model in our RMM business. In the third quarter, we announced Mike Cullen as the general manager of our remote monitoring and management business. Mike has been with us for a long time and has been instrumental in building Enable to what we are today. And as he takes the reins, there are a number of strategic initiatives to discuss. Last call, we talked about the unique segmentation opportunity that we have in tiering our two-packaged RMM offerings. In Central, aimed at seasoned larger MSPs, and Insight recently launched, which is an all-in-one offering aimed at early growth MSPs. The reception at this early stage for Insight has been excellent. We have seen over 30% year-over-year increase in new logo lands for MSPs in the lower end of the market. We are also seeing momentum with mature MSPs to make the switch to Encentral. We use the term orchestrated scale which represents the power of Incentral to help MSPs to take on large workloads, to manage devices, users, and assets with a minimal amount of labor. A great example of this is actually an update from a deal we mentioned on last quarter's call. A large North American MSP that we had been pursuing was dissatisfied with the support and capabilities they were getting from their current backup vendor. We established the beachhead with the successful implementation of Cove And from there, we continued our conversations about Incentral. During Q3, we ousted a well-established competitor for RMM, growing this $50,000 ARR partner by more than 50% so far, and is a good proof point of our multi-pronged sales approach. Our RMM strategy continues to resonate strongly in the market, and we were honored to be voted as the number one RMM platform for the second year in a row and the CRN 2022 Annual Report Card. We ranked first in the categories of Managed and Cloud Services, Product Innovation, and Partnership, placing us first overall. While we're always honored to receive recognition for the hard work we are doing, this one is awarded based on feedback from our partners and tells us that our commitment to helping them work smarter, not harder, is having a real impact. We will continue to invest in both our technology and our partner success programs to keep our flagship RMM platforms ahead of the industry. On the sales front in the third quarter, we continue to see strong new customer and new SKU bookings, in particular with our data protection and security solutions. Last quarter, we talked about how we believe we are uniquely positioned to MSP aggregators in optimizing their costs and resources through standardization automation, integration, and by having one vendor for service, support, and billings. PE firms and large aggregators around the globe note that working with us satisfies an easily provable ROI that helps them in growing their business more than any other vendor they work with. In many ways, we view these aggregators as a channel, a way we can focus our sales effort to reach multiple MSPs at once. To illustrate the leverage we get through peer-to-peer selling, there is a large and growing MSP aggregator that we began talking to earlier this year about Cove. They are a decentralized, PE-backed entity who buys strong, standalone MSPs and allows for independent operation except for a few shared services. Once we convince the executives of our value proposition, which centers around standardization, single pane of glass integration, advanced features, and high-quality service, they opened the doors to their MSPs. Since April, we sold Co-op to three of their 18 MSPs, which is an additional $150,000 of ARR to an already vibrant account, and we'd love to continue to increase our adoption within this aggregator. M&A in the MSP market continues, and we believe we found a winning formula to take advantage of the opportunity. It starts with showing companies the economic value of standardization than opening the door with our purpose-built technology, keeping them growing through our partner success resources and enhanced services. Our discussions at Empower gave us further confirmation that providing a holistic tool set, we can find entry points with MSPs in many different product areas. But it is the fact that we are truly a partner to them, invested in their success, that keeps propelling us forward. We believe that is what differentiates us from competition and will continue to drive our success over the long term. I'll let Tim take over the call to discuss our financial results and outlook. Then I'll jump back briefly with some closing remarks. Tim.