N-ABLE(NABL)2023-08-10 18:09Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $106.1 million, representing approximately 16% year-over-year growth or approximately 17% on a constant currency basis [59] - Adjusted EBITDA was approximately $34.9 million, up approximately 26% year-over-year, representing an adjusted EBITDA margin of approximately 33% [34][62] - The company ended the quarter with approximately $109 million in cash and an outstanding loan principal balance of approximately $344 million, representing net leverage of approximately 1.8x [60] Business Line Data and Key Metrics Changes - Subscription revenue was $103.4 million, representing approximately 16% year-over-year growth or approximately 17% on a constant currency basis [59] - Revenue from the security business outpaced total company revenue growth, with strong demand for managed EDR offerings and other security solutions [52][30] - New customers on Cove, the data protection as a service product, were up 28% year-over-year in Q2 [30] Market Data and Key Metrics Changes - The company ended the quarter with 2,162 partners contributing $50,000 or more of ARR, up approximately 19% year-over-year [18] - Approximately 45% of revenue was generated outside of North America [60] - The macro outlook for disaster recovery as a service is strong, with IDC projecting a CAGR of 18% through 2026 [13] Company Strategy and Development Direction - The company aims to empower MSP partners with enterprise-grade technology to meet the needs of their SME customer base [8] - The strategy includes innovation in product offerings, such as the integration of AI technology to enhance efficiency and effectiveness [15][56] - The company is focused on maintaining a balanced path toward its sustained Rule of 50 operating goal [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term secular growth of SME IT spending and the trend of outsourcing IT services [40] - The demand environment is healthy, with MSPs increasingly managing IT departments of larger organizations [6][7] - Management noted that compliance is becoming a critical focus for MSPs as customers seek to meet regulatory requirements [86] Other Important Information - The company raised its full-year revenue outlook to $419.5 million to $421 million, representing approximately 13% year-over-year growth [62] - The company received four Stevies at the 2023 American Business Awards for various achievements [16] Q&A Session Summary Question: Can you help us think through the impact of pricing changes on Q3 guidance? - Management indicated that the majority of pricing changes are felt at the time of the increase rather than over a 12-month period, which affects Q3 guidance [68][102] Question: What is driving MSPs to move upmarket? - Management noted that MSPs are now servicing larger enterprises due to their maturity and the demand for more comprehensive IT services [94][95] Question: How is the macro environment impacting new projects and customers? - Management observed that while Europe has been softer, demand remains strong across other regions, particularly for data protection and security offerings [80] Question: How does the company approach portfolio diversification? - The company employs a three-pronged approach of building IP, partnering with enterprise-grade companies, and pursuing M&A to enhance its offerings [107][108]