N-able, Inc.

Hello, everyone, and thank you for joining the Enable Third Quarter 2025 Earnings Call. My name is Lucy, and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. It is now my pleasure to hand over to your host, Griffin Gere of Investor Relations, to begin. Please go ahead.

Thanks, Operator, and welcome, everyone, to Enable's Third Quarter 2025 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 forward-looking statements, including those concerning our financial outlook, our market opportunities, 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 filings with the SEC. Copies are available from the SEC or on our Best of 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. reconciliation of certain gaps and 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. And thank you all for joining us today. We delivered strong third quarter results, reflecting robust demand for cybersecurity and the rising strategic relevance of Enable. Third quarter ARR was $528 million, up 14% year-over-year, and adjusted EBITDA margin was 31%. Quarterly gross and net retention both increased year-over-year and quarter-over-quarter, underscoring the momentum and traction we are seeing in the business. We also expanded our security capabilities and further scaled our channel-first go-to-market motion, key pillars of our long-term growth strategy. Another quarter of growth profitability, and superb execution. Our performance stands out in a fast-changing technology landscape. AI is intensifying the speed, sophistication, and scale of threats, and the adversary has never been more dangerous. Businesses need help adapting, and Enable is rising to the challenge. Leveraging proprietary data from our 11 million IT assets, we are embedding innovative AI capabilities across our platform. arming organizations with the cutting edge solutions they need to defend themselves in today's cyber battleground. Today, we will take a closer look at our recent progress and discuss how it enables positioning itself to lead in an evolving cybersecurity environment. The digital state of operations for small and mid-market businesses is rapidly changing. The accessibility of AI tools to both the knowledge worker and the threat actor alike has created a new digital normal for organizations of all sizes. Today's workforce operates across hybrid systems, multi-cloud environments, SaaS applications, and increasingly AI driven processes. At the same time as our digital infrastructure grows increasingly vital to business operations, AI powered threats are putting those systems under greater pressure. This is driving a paradigm shift in how businesses must think about cybersecurity. In this new environment, security isn't just a line item. its table stakes, and the foundation of business resilience. Enable's end-to-end cyber resilience platform is purpose-built for this new world. Delivering protection and performance, our platform spans three vectors, unified endpoint management, or UEM, security operations, and data protection. It enables visibility across every endpoint, intelligence to help stop threats before they strike, and data recovery at rapid speed. We deliver coverage across the entire ATT&CK lifecycle. We believe this breadth sets us apart from most cybersecurity competitors who take a siloed, incomplete approach. For small and mid-market businesses who often face enterprise-level threats without enterprise-level resources, our end-to-end value is paramount. Our platform is designed to keep their entire business resilient. Our recently published Enable 2025 Annual Threat Report comprehensively assesses the ever-changing threat landscape. One key takeaway, AI is helping fuel scalable low effort attacks that exploit common gaps in visibility and response. We identified a surge in detected threats against SMBs over the past year as they increasingly invest in the proper security tools to monitor their environments and mitigate risk. Broader industry data supports that AI is helping increase the scale of cyber attacks, with McKinsey reporting a 1200% increase in phishing attacks since 2022 and the rise of generative AI. AI is also increasing the potency of attacks. Cyber criminals are leveraging generative AI to better mimic real-world people and messages, making phishing and ransomware harder to detect and more believable. Further exacerbating the challenge, SMB economics make them a prime target. Ransom demands are often calibrated to just under the cyber insurance deductible, and the breach of a smaller firm is less likely to trigger a wider-scale investigation than an incident at a Fortune 500 company. Insurance and regulation are adapting to these changing paradigms and implementing tighter security standards for businesses. This is driving deal activity for Enable. One of our largest sales this quarter was to a prospective customer looking to supplement their on-premise backups with cloud-based data copies to stay in line with NIST 2 data redundancy standards. With quick deployment, compelling TCO, and easy scalability, our cloud-first data protection solution perfectly met their need. While AI is still in the early innings, the impact on cybersecurity is evident. Threats are turbocharged, IT is more complex, regulations are tightening, and data is increasingly important. For Enable, the implications are clear. We believe AI is making our mission more critical and our opportunity larger. As AI drives demand for cybersecurity, we are also embedding AI both in-house and across our platform. Data is gold in the AI era. And with the telemetry from over 11 million IT assets and a solution that spans the IT security stack, we have the critical data needed to create and deliver AI solutions. We believe this scale, breadth, and data ownership is a powerful mode. Let's look at how we are using AI today and building to use it even more effectively tomorrow. This quarter, we established an industry standard by sponsoring CAPNIP. a framework for shared AI language across organizations and vendors. This is a market-first initiative that establishes consistent vocabulary for use across MSP and IT ecosystems to help drive seamless AI automation and MC server behavior, enabling customers to harness AI effectively for enhanced cyber resilience. We are empowering AI agents to interpret and act on commands with precision across multiple different systems. This addresses one of the biggest challenges in IT management. fragmented, and inconsistent terminology across businesses. By introducing these standards, Enable isn't just participating in the AI evolution. We are taking a role in building the field and writing the playbook for how AI operates for our customers. In UEM, we are making meaningful strides through the power of AI to automate key workflows. Our developer portal acts as a customer's AI assistant, helping users leverage AI to operate more effectively and efficiently. We are seeing particular success driving automated script generation and API integrations, cutting hours of manual work to minutes. Building on our momentum, we are pushing to extend our capabilities further. We are developing AI agents that IT and security teams will be able to use across their operations. This supports our larger vision of delivering near autonomous IT. The opportunity is significant. IT and security teams everywhere are awash in complexity and often burdened by tedious, repetitive work. Managing endpoints, resolving tickets, implementing policies, maintaining compliance, securing data, and more. We're aiming to transform this paradigm. Our vision is resonating, underscored by the fact that our largest deal this quarter was driven by our UEM solution, representing an ARR win of nearly a half a million dollars. and our UEM leadership continues to be recognized in industry media and press. We are delighted to win the MSP RMM Platform Reward for CRN's 2025 Annual Report Card, a recognition based directly on feedback from our customers. Our security operations solution is also at the forefront of AI and innovation. It starts with our vendor-agnostic technology that ingests data from the endpoint, network, cloud, identity layer, and SaaS applications. This delivers the necessary bird's eye view of customers' IT environments. Our AI-powered technology stack then serves as the orchestration layer, transforming raw data into actionable insights for security teams and automating threat response. These orchestration capabilities position Enable as an active threat neutralizer and real-time decision maker. And our approach is working. Our AI-powered SOC is analyzing billions of security events a month, adding hundreds of businesses a month, and driving meaningful ARR growth for Enable. We're solving a major market pain point. Operating even a small SOC team can cost millions annually. Enable is democratizing security by delivering advanced AI SOC capabilities at a fraction of the cost. And we're not stopping here. The next frontier is near autonomous cyber defense, and Enable is building toward that reality today. We're also utilizing AI in our data protection solution. Our recovery testing capability uses AI to provide proof of recoverability without requiring customers to fully initiate a backup test, saving them significant time and reducing operational burden. This supports our broader value proposition to ensure data is always protected and recoverable. Looking ahead, we plan to introduce AI-based scanning of backup data that will continuously monitor data flows and flag unusual patterns, further enhancing our ability to detect threats before they cause harm. While data is gold, it is not sufficient for AI leadership. Trust and distribution are also key, and both are areas where Enable has strong advantages. As it relates to trust, cybersecurity is not an area where we believe businesses will experiment with self-created or non-specialized options. The cost of a single mistake is simply too painful to trust a homegrown model or a company that only does security part-time. We are a trusted security provider. Distribution is also important. Our base of over half a million businesses allows us to efficiently test and ultimately deliver AI solutions. And with healthy cash flow margins, we have a sustainable business model that allows us to invest in our business to compete in the dynamically changing AI world. These are all big advantages over competitors still searching for product market fit and sustainable, profitable business models. Embedding AI into our platform unlocks meaningful value. From automating technician workflows to detecting and preventing more threats to enabling new services, AI raises the ceiling for the value we can deliver to customers. We are leaning into the opportunity as we see a clear path to how developing AI-powered solutions allows us to competitively differentiate and take share in a vast and growing cybersecurity market. Our channel-led approach is also key to our strategy to capitalize in the AI world. Businesses face challenges managing cybersecurity and IT themselves. According to the September CompTIA report, tech unemployment is at just 3%. And with the skill sets needed to stay ahead rapidly evolving, keeping pace is a challenge. That's why businesses turn to the channel for help with cybersecurity and IT. Whether fully outsourcing to a managed service provider or working with a value-added reseller to guide vendor selection, the channel provides expertise, and scale to SMB and mid-market businesses. We see the arrival of AI as an accelerant to the businesses using the channel. With deep roots in the MSP community and growing investment in VARs, we believe our go-to-market strategy is aligned with the market opportunity created by AI and cybersecurity trends. We've talked a lot about AI today. I'll leave you with this. AI expands the scope of software and what it able can do for our customers. It elevates the need for cybersecurity and expands our opportunity. There has never been a more exciting time for Enable, and we are creating that future now. Let's now talk more about our progress this quarter. Our growth strategy rests on three key elements. First, driving security success. Second, scaling our go-to-market. And third, boosting customer expansion. We saw progress across all three. We will first look at our efforts to drive security success. The market need is clear. Our efforts align with a significant opportunity and our broader ambition to set a new standard in cyber resilience for small and mid-market businesses. In data protection, we advanced our powerful solution with the launch of anomaly detection as a service. These new capabilities are designed to detect unauthorized access with backup environments and proactively flag indicators of compromise. Unlike traditional backup solutions that focus solely on restoration, our approach helps prevent data loss before it occurs This marks a strategic shift from reactive defense to proactive resilience. We believe we are ahead of the competition in this regard, and we are excited about the impact for our customers. More broadly, we deliver the simplicity, power, and affordability our customers crave, and our data protection vision is resonating. In fact, a customer recently shared that they went from spending 60 hours a week managing backups to just one hour a week after adopting our solution. The numbers reflect what our customers are telling us. Our data protection solution once again led our net new ARR growth in the quarter. In security operations in UEM, we continued our strong pace of innovation with new threat detection capabilities and powerful integration. Our latest enhancements strengthen endpoint visibility and accelerate incident response, helping customers reduce dwell time and improve overall security posture. Let's now turn to our go-to-market progress. Enable is scaling with purpose, anchored in a channel-first model that continues to prove its strength. Nearly all of our businesses flow through the channel, and we're investing to deepen those relationships and expand our reach with a strong focus on further engaging the reseller channel. This reseller motion is building momentum. We initiated it with a geo-specific approach, starting in the UK and plan to expand in other regions. We're already well-established in North America via the Adlumen acquisition, and this deliberate expansion strategy is designed to maximize impact and efficiency. One powerful proof point, we now have active relationships with a sizable number of the top 25 UK partners per CRN 2025 listing, up from virtually no presence at the beginning of the year. We believe this traction underscores the strength of our model and the effectiveness of our targeted approach. We continue to see strength upmarket. A standard example this quarter was a 70,000 device win firmly validating our investments in mid-market expansion and ability to win large deals. We saw another proof point with the reseller-driven UEM mid-market win, where we displaced and consolidated three separate competitors across multiple categories, including remote access, endpoint management, and privileged access. Our ability to meet complex requirements, including on-premise deployment and a roadmap to CMMC readiness and FedRAMP compliance, was key to winning this business. We're elevating our message to match this momentum and showcase the full strength of our platform. We just posted our first annual Cyber Resilience Summit, where we brought together hundreds of industry leaders and practitioners and discussed the hard problems facing our customers. One clear takeaway, cyber resilience is business resilience. Cybersecurity is no longer just an IT concern. It's a business imperative. Speaking clearly about business resilience isn't just marketing and messaging. We're helping partners translate cyber resilience into tangible business outcomes. A great example is our new executive summary report feature. This highly requested capability enables customers to clearly communicate protection outcomes to internal and external stakeholders, delivering transparency, accountability, and peace of mind. The final pillar of our growth strategy is customer expansion, deepening relationships by delivering more value across our platform. A powerful example this quarter came from a longstanding customer a respected regional MSP in the southwest of the United States that utilizes our UEM, EDR, and data protection solutions. Just days before a major tax deadline, a large CPA client of theirs experienced a targeted cyber attack at 2 a.m., exploiting a vulnerability in their environment. While the attack caused damage, it was quickly contained. Thanks to the lay of defense provided by Enable, including our data protection solution, they were back up and running by lunchtime. What could have been a multi-week outage and potential extension event for their business was resolved in hours, demonstrating the real-world impact of our cyber resilience platform. These are the moments of truth in what Enable is all about. In the aftermath, our customer reinforced its defenses by making our MDR a standard non-negotiable service for its clients, closing the loop on true end-to-end cyber business resilience. This type of outcome is driving stronger customer loyalty and deeper adoption. In fact, 43% of new UEM lands this quarter included an additional solution, demonstrating that our end-to-end cyber resilience platform is resonating. Further, the largest deal this quarter, which I mentioned earlier, was a cross-sell to a security operations mid-market customer, validating our cross-sell success. And we're seeing the results in our metrics. Both gross and net retention improved year over year and quarter over quarter, underscoring the value customers seeing and expanding with Enable. As we continue to deliver outcomes like these, we're confident in our ability to grow with our customers, helping them stay protected, resilient, and ready for whatever comes next. With that, I'll turn it over to Tim and then circle back with closing remarks.