N-able, Inc.

Hello and welcome to the ENABLE Second Quarter Earnings Call. My name is Elliot and I'll be forward making your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. I'd like to hand over to Griffin Gere, Investor Relations. The floor is yours. Please go ahead.

Thanks, Operator, and welcome everyone to ENABLE Second Quarter 2023 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.enable.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 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 highlighted in today's earnings release, and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filing 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 non-GAAP financial measures. A reconciliation of certain gap to non-gap financial measures discussed on today's call is available in our earnings press release on our investor relations website. And now, I will turn the call over to John.

Thank you, Griffin. Welcome, everyone, and thank you for joining us today. From the moment we began discussing the Enable spin-off, we believed we had a winning formula, an offering tailored to address the sustainable and rapidly growing market opportunities A customer base looking for a trusted partner that understands their business and can help them grow. And a workforce driven by purpose and a passion to serve our customers, who we call partners. Our business model, we grow as our partners grow, capitalizes on this formula. And our MSP partners tell us they appreciate the mutually beneficial relationship we have built with them. And today, As we pass our second anniversary as an independent, publicly traded company, our record-breaking second quarter results further prove that our strategy is on the right track. Our revenue of $106 million exceeded the $100 million quarterly milestone for the first time in our company's history. And our year-over-year constant currency revenue growth of 17% was the strongest since we became a standalone company. Along with our strong bottom line results, with an adjusted EBITDA of approximately $35 million, representing an adjusted EBITDA margin of approximately 33%, we are executing our strategic initiative and fulfilling our original promise. I'll talk later about our execution and upcoming milestones, but I wanted to spend a minute on what we are seeing in the market. First, the demand environment is healthy. Our MSP partners serve over 500,000 small and medium enterprises worldwide across a variety of sectors, including healthcare, law, education, and finance. And the services these SMEs rely on, such as security, monitoring, data protection, help desk, and cloud migration, are mission critical to these modern day enterprises. Industry analysts also project the strength of the SME IT market. With Gartner forecasting earlier this year that software spending by organizations with fewer than 1,000 employees will show the fastest growth of any other segment through 2026. Second, we are seeing that MSPs are increasingly going upmarket, managing the IT department of larger organizations or acting as co-managed providers. Co-managed IT services allow organizations to use MSPs to fill in knowledge, skill set, or resource deficiencies. For example, 71% of IT professionals find patch management overly complex and time-consuming, with some reports stating that internal IT resources spend most of their time just managing patch on top of everything else on their to-do list. Overseeing patch management is one of the many great examples of how MSPs add value through a co-managed offering. MSPs are playing a trusted and vital role for these organizations, which in turn is powering demand or enable software. Our strategy to capture this market demand is simple. Empower our MSP partners with enterprise-grade technology to meet the needs of their SME customer base. Our multi-sensitivity platform, which integrates monitoring and management, data protection and security offerings in one dashboard, is purpose-built for this. And our R&D teams have been busy bringing new features and functionality across each of these categories. We continue to further the capability of our flagship RMM platforms, which have received best RMM honors by CRN for three years in a row. We launched Advanced Analytics, which provides powerful functionality that enhances MSP's ability to explore, visualize, and report the value they deliver to their customers in order to differentiate their offerings. For Apple Business Tools, we integrated device discovery, monitoring, and mobile device management. giving MSPs the ability to centrally manage Windows, Linux, and Apple devices in one dashboard. This reduces tool sprawl and increases their profitability. With macro trends pointing toward growth in Apple devices, we believe this helps us differentiate our value proposition. In addition, we are in a limited preview with Microsoft Azure Cloud Resource Management, which enables partners to discover and manage Azure resources, such as virtual machines and storage. As SMEs are moving IT assets out of server closets and into the cloud, we are now helping MSPs manage on-premise and cloud resources from a unified management experience. An example of our RMM solutions value proposition is a deal in the second quarter where we engaged a customer using a well-known RMM competitor. After demonstrating our powerful scripting and automation ability and the capability to support macOS, the customer signed a more than $100,000 ARR deal with us. IT technicians at MSPs are charged with managing the infrastructure of many different SMEs, which is a critical and often complicated task. We believe the depth of functionality within our RMM offering enables MSPs to provide these crucial IT management services efficiently and effectively. And that is why we are proud to say we matter the most where it's the messiest for our MSPs. Demand for our security offerings remains strong as well, with growth in revenue from our security business outpacing total company revenue growth. Our managed EDR offering, which debuted in the first quarter, is gaining traction, and we see a long runway for this advanced offering. Meanwhile, growth in our EDR solution, which we launched in 2019, remains robust. Also, our password management solution, PaaS Portal, and our mail security product, Mail Assure, are steady contributors to our security business. Underlying this demand is the evolving compliance and regulatory landscape. We recently conducted a poll in which more than 2,000 MSPs said that the top reason their customers are adopting managed security services is compliance. Our teams are hearing this in their daily partner engagements as well. For example, we spent two days discussing how compliance shapes the industry at our highly rated Business of Security event. attended by 65-plus elite partners, and we heard the same thing directly from some of our largest customers. Data protection is once again a bright spot in our product suite, also outpacing total company revenue growth. New customers on code, our powerful data protection as a service product, are up 28% year-over-year in Q2. The macro outlook for disaster recovery as a service category is strong. with IDC projecting a CAGR of 18% through 2026. With favorable market tailwinds at our back, we intend to continue to build codes into a trusted protector of one of enterprises' most critical assets, data. And we do this through one word, innovation. And we have been delivering. We recently introduced on-demand restore and standby image to Azure, giving MSPs the flexibility to spin up disaster recovery resources on-demand in a much more cost-effective manner than legacy backup vendors. We release functionality that accelerates incremental backups for Microsoft OneDrive by as much as 10 times. And we continue to extend our capabilities in the Microsoft ecosystem with Teams now in external preview. Gov now covers the Microsoft 365 suite, including Teams, Exchange, OneDrive, and SharePoint Online. Our go-to-market teams Our focus on ensuring all this innovation reaches the eyes and ears of our partners. We are now live for the disaster recovery of the service marketing campaign, including an online total cost of ownership calculator on our website to help partners understand the value proposition of Cove. This newly released TCO tool shows savings of up to 60% for customers that use Cove versus other options, which validates Cove's value proposition. Cove is a powerful product and a durable market that delivers superior outcomes for our customers. We are excited about the potential for future Cove growth. And while our overriding market focus is on MSP partners, our solutions also appeal to internal IT departments. And sales to these customers are an opportunistic area where we believe Cove is taking market share. Our mission is to provide tools for MSPs that enable them to deliver IT services efficiently and effectively. and our teams are delivering. Along these lines, I want to speak about our approach to harnessing new technologies within our products, particularly the opportunity we are seeing with Center of AI. We are a technology company. Innovation is part of our DNA. We strive to deliver enterprise-grade technology to the SME market. And in this pursuit, AI technology is employed in our offerings today. For example, Our monitoring and management solution leverages AI to automate tasks, and our advanced EDR and mail solutions use AI to identify and block threats. This technology has a tangible benefit for our customers. Automated scripting, troubleshooting, and patching save technician time. And AI threat detection stops more bad actors. Looking forward, we see generative AI as another rung on the ladder of technological progress and we are working on integrating further innovations and our product strategies deliver even greater customer value. Use cases, including productizing the latest developments in AI and machine learning to increase technician efficiency and our ARM offerings, elevate the capability of our security solutions, and enhance the effectiveness of our data protection offerings to name but a few. As we innovate, We believe we have a competitive advantage in the unique insights gained from our approximately 25,000 MSPs that will allow us to train more effective algorithmic models and create monetizable solutions to meet our customers' needs. As always, we are mindful of using technology in an ethical and socially responsible manner while mitigating risk. And finally, all of this is a result of the efforts of my fellow enableites across the globe given by our productive and positive work culture, which has earned external recognition. We have outlined those awards in our press releases throughout the first half of the year, but I want to call out that we received four Stevies at the 2023 American Business Awards for our product, internal teams, community efforts, and our high-achieving people. We also received rewards from Comparably for Best Company Global Culture and Best Company Career Growth. A couple of months ago, I was honored to sign the CEO Action for Diversity and Inclusion Pledge. This is the largest CEO-driven business commitment to advancing diversity and inclusion in the workplace with over 2,400 signatories. At Enable, we have always prioritized diversity, equality, and belonging. And this was another great step in our journey to reinforce our commitment to this focus area. With that, I would like to turn the call over to Tim to discuss our financial results and outlook. And then I'll circle back to some closing remarks. Tim?