N-ABLE(NABL)2024-11-09 14:38Financial Data and Key Metrics Changes - Total revenue for Q3 2024 was 44.8 million, representing a 39% adjusted EBITDA margin, with a year-over-year increase of approximately 23% [41] - Subscription revenue reached $115 million, indicating a 9% year-over-year growth on a reported basis and 8% on a constant currency basis [37] - Gross margin for Q3 was 83.7%, down from 84.6% in the same period in 2023 [41] - Dollar-based net revenue retention was approximately 105%, or 104% on a constant currency basis [39] Business Line Data and Key Metrics Changes - Cove Data Protection emerged as the fastest-growing product solution and now represents the largest recurring revenue product group [11] - Demand for data protection solutions was highlighted as a significant growth driver, with businesses increasingly relying on protected data and functioning IT systems [10] - The security suite also saw steady demand, with offerings including EDR, endpoint antivirus, and managed detection and response services [12][13] Market Data and Key Metrics Changes - Approximately 47% of revenue was generated outside of North America during the quarter [42] - The managed service provider (MSP) market is projected to grow by at least 12% in 2024, indicating a favorable market environment for N-able [22] Company Strategy and Development Direction - The company is focused on empowering MSPs with leading security solutions as part of its fiscal year '24 transformative strategic pillars [16] - N-able aims to transform customer relationships by offering long-term contracts, with over 50% of monthly recurring revenue now under such contracts [17][18] - The company is investing in its Ecoverse initiative, which aims to create a next-generation open ecosystem IT management platform [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of the MSP channel, with a majority planning to grow in the coming year [52][53] - The company anticipates that headwinds from pricing and estate optimization will persist through the first half of 2025 [80] - Management noted that the shift towards cloud offerings is a positive trend, as more customers are moving away from on-premise solutions [72][75] Other Important Information - The company implemented strategic refinements to enhance its go-to-market strategy, maintaining adjusted EBITDA margins of over 30% [31] - N-able achieved SOC2 audit certification, ensuring compliance for service providers in regulated environments [29] Q&A Session Summary Question: What is the macro perspective on smaller MSPs? - Management reported that the majority of MSPs are planning to grow, with increased demand for security and disaster recovery solutions [52][53] Question: How sustainable is the cost rationalization in sales and marketing? - Management indicated that G&A spend is sustainable, while sales and marketing costs may fluctuate as new products are introduced [54][55] Question: Can you clarify the updated guidance regarding long-term contracts? - The guidance reflects a higher mix of customers opting for hosted and SaaS offerings, impacting revenue recognition [60] Question: What is the current mix between on-prem and SaaS? - On-premise revenue constitutes about 15% of the overall business, which is expected to trend downward as more customers shift to SaaS [66] Question: Are the pricing and estate optimization headwinds expected to continue into 2025? - Management expects these headwinds to persist through the first half of 2025, with a gradual improvement anticipated thereafter [80]