Q3 2021 N-Able Inc Earnings Call
Trays forward together and leverage that sentiment to our MSP partners and enable employee base to deliver on our successful spinoff.
It's still hard to believe that the transaction was only a few months ago.
And with that milestone in our rearview mirror, everyone really has a renewed energy.
It has been rewarding to witness the ownership and drive to serve our MSP partners across the entire organization and it shows in our performance in the third quarter, what we're already seeing in the fourth quarter.
Our third our third quarter revenue of $88 4 million exceeded the high end of our outlook, representing approximately 16% year over year growth, which included approximately 2%.
Vantage points of FX benefit.
Our net retention rate remained consistent at 110% on a trailing 12 month basis.
Reflecting healthy expansion across our partner base, while leveraging customers.
For those that represent $50000 or more of <unk> on our platform now represent 46% of total IRR as of quarter end.
Yeah.
We believe enable is well positioned in a dynamic industry with increasing tailwind.
Businesses, both big and small around the world don't have the means to deal with ever growing complexity and cyber threats.
The digital evolution is accelerating with small and medium enterprises looking to differentiate their business and enable distributed workforces across a variety of environments and devices.
As a result.
<unk>, increasing increasingly rely on MSP for proactive and recurring services.
We believe Msp's are and will continue to be the essential workforce for Smes to serve mission critical it needs.
Needs.
Meanwhile.
MSP and more broadly it service providers of all types. These platforms aligned with the needs of their end customers.
We saw continued robust demand for security and data protection offerings in the quarter, which have been outpacing our overall revenue growth.
Cyber security is increasingly top of mind for service providers of all sizes.
As cyber criminals exploit vulnerabilities in the supply chain and ransomware and phishing attacks become more prevalent.
Partners are more intensely scrutinizing, both built in security mechanisms within vendor products and vendor security protocols.
Security is a core aspect of enables culture and we are committed to the share responsibility. We all have a technology companies within the MSP ecosystem the.
The increased investments, we have made an effective security management and our people.
<unk> and technology is a strength, we bring to our conversations with partners.
With that in mind I wanted to share some wins in the quarter that illustrate the power of enabled model and our ability to capitalize on key industry trends, including platform standardization.
MSP consolidation and heightened focus on cyber security.
First a U S based MSP with a dedicated security practice signed a multi product six figure.
Our deal.
Including our RMM.
<unk> <unk>.
Backup and risk intelligence, which displaced an incumbent competitor.
Our breadth of offerings.
Partner's success programs and security capabilities with the deciding factors in this win.
<unk>.
Another land based MSP that recently acquired for partners for Us.
To standardize on our RMM platform.
Also a six figure <unk> deal.
Due to our ease of use extensibility and our strong automation capabilities.
Third in a similar situation in existing U S. Based partner was acquired as part of a roll up strategy.
The acquirer was looking to standardize multiple RMM platforms onto one and after a competitive process.
Emily chose enable due to our scalability automation capabilities and partners success programs, which resulted in a large five figure <unk> deal.
These standardization plays reflect our leadership and RMM.
And indicate that our strategy product mix and approach the partner's success are resonating with market demand.
We matter the most whereas the messiest for our MSP and.
And tens of thousands of partners around the world prove that.
We also had some notable expansion deals in the quarter.
First our U S based partners that was using a competitive RMM vendor for a separate companies division.
Standardized on our RMM, while also adopt an edr.
Resulting in a six figure <unk> deal.
We were the preferred vendor due to our ability to drive efficiency via automation of key processes.
Belting and reduction of labor costs for the MSP.
Second we had a five figure <unk> Edr cross sell win too.
Two Canadian MSP that has been an RMM customer for over five years as they upgraded their endpoint security posture.
Third we had a large five figure IRR data protection cross sell deal.
So a UK based MSP.
Here, we displaced a competitor with our fully cloud based image recovery approach to backup that is fast comprehensive.
And highly complex highly cost.
Effective.
We are seeing success across several areas that reflect fundamental pillars of our go to market strategy.
From a technology perspective, we.
We win because of our platform scalability security and extensibility our.
Our partners need technology, that's powerful and easy to use which enables them to deliver high value to their end customers, while earning higher profit for themselves.
For instance.
Our edr solution powered by a native integration with Sentinel won is being leveraged by many MSP.
To increase both revenue within their existing customer base and to win new customers.
Our Edr allows partners to create advanced security packages containing behavior based direct detection.
And faster returned to operation times with rollback capabilities.
It makes it possible for partners to decrease risk to their customers.
While increasing their margins.
The expansion deals I highlighted are all around team effort and evidence that our partners success investments are paying off.
Everyday partner's success managers, where I can to help partners identify business challenges and leverage our proprietary resources such as the MSP Institute.
Head nerds and market builder solve those challenges.
They also help connects excess engineers and sales engineers with partners to resolve technical issues, while educating them on automation security features partner's success is a critical component of our customer centric culture.
Our focus on partner success allows us to listen and learn from our customers, which directly informs innovation with new products to bring to market and how to best meet customer needs.
Moving along I wanted to share some third quarter product highlights.
We were recognized in CRM 2021 annual report card as the best in class MSP platform.
Ranking first in three or four major categories scored including product innovation partnership and managed and cloud services.
Our mail assure E mail security solution.
Received virus bulletins verified spam plus rating with zero false positives.
Our Microsoft into an integration.
<unk> to provide value for customers looking to manage Microsoft devices.
We now have over 400 MSP using this capability.
And as we look ahead to Q4 on the product front.
Our DNS filtering offering is in preview in a limited number of customer live environment and the early feedback has been positive.
This not only marks an important addition to our security stack, but also illustrates our differentiated ecosystem approach.
By enabling our solution via a single pane of glass and natively integrating with third with leading third party technology providers are ecosystem framework powers of flexibility and extensibility that our partners' desire.
Additionally.
Power solutions fully support the recently released Microsoft Windows 11 operating system. This was a significant release.
And a major event for our partners to upgrade and migrate their customers.
Enable continues to work diligently to help ensure that partners and prospects experienced a smooth transition to the upgrade.
We will fully support Apple's new Mac OS Monterey.
By the end of this quarter.
Now I'll touch on the progress we've made through branding marketing and recruiting efforts before turning the call over to Tim.
While we officially rebranded in March.
It takes time for new brand to fully resonate about six months after the rebrand the number of monthly search queries for enable has multiplied nearly tenfold suppressant, surpassing but we were getting as solar winds MSP and.
In addition, the number of monthly qualified opportunities generated from brand queries has increased significantly in comparison to the same period a year ago before our name change.
We will continue to improve and refine the why enable story by demonstrating the differentiated value of our solutions relative to competitors.
Our website is a key vehicle for the story and we are evolving our online presence and positioning.
Demonstrate our value proposition prospects and existing partners.
<unk>, we plan to increase our marketing activities with more enable hosted events.
The patient and Tradeshows and engaging videos and Webinars.
And last but not least we.
We remain focused on hiring and retaining top talent to support our growth initiatives and.
In the third quarter, we launched what we call the way we work.
Which is a hybrid working model based on trust and flexibility that supports meaningful interactions for our colleagues.
We are committed to exploring innovative ways to support our growing base of more than 300 enabled lives around the world.
Thank you I will now turn the call over to Tim for a review of our Q3 financial results and outlook.
Thank you John and thanks to all of you for joining us on the call today.
I'll start out with a note that our third quarter financial results contain a 19 day stub period during which we still operated as a part of solar winds prior to the completion of our spinoff.
For those 19 days, our financials were calculated using carve out methodology.
Starting in the fourth quarter enable financial results will be presented on a completely standalone basis.
As John mentioned total.
Total revenue in the third quarter was $88 4 million, an increase of 16% year over year and included approximately two points of FX benefit.
Subscription revenue was $86 1 million, an increase of approximately 17% year over year.
Other revenue was $2 $3 million down.
Down 11% year over year, and primarily represents maintenance revenue from our legacy license model that we discontinued in the first quarter of 2020.
Quarterly performance continued to be driven by our security and data protection solutions revenue from our enable edr and SaaS cloud to cloud backup solutions outpaced overall revenue growth.
From a geographic perspective revenue outside of North America represented 49% of the total.
Dollar based net revenue retention, which is calculated on a trailing 12 month basis was 110%.
Our healthy expansion rates have been driven by our partner enabled growth model.
Where we grow by acquiring new partners when existing partners acquired new end customers and when they manage more devices and deliver incremental services powered by the enabled platform.
We ended the quarter with $1 662 partners.
That represents $50 or more of IRR with us a 25% year over year increase.
Partners with over $50000 of IRR now represent 46% of our total IRR up from 40% a year ago.
Turning to profit and margin note that unless otherwise stated all references to profit measure than expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release.
Third quarter gross margin was 87, 7% compared to 87, 4% in the third quarter of 2020.
Adjusted EBITDA was $29 $7 million, representing an adjusted EBITDA margin of 33, 6%.
Unlevered free cash flow was approximately $1 3 million in the quarter and contained to one time items.
The first was a $20 million outflow, representing a net repayment of solar wins related to intercompany trade payables, which occurred prior to the spin off and our cash tag a $50 million at the time of the spinoff.
The second was $3 $4 million related to the transfer of assets in our Philippines office from solar wind to us that is recognized in the Capex line.
This transfer was cash neutral.
Excluding these two items unlevered free cash flow would have been $24 8 million in the quarter.
Capex was $7 $3 million or approximately 8% of revenue capex contain that $3 $4 million of asset transfers related to our Philippines office that I just mentioned.
<unk> that capex would have been approximately $4 million or four 5% of revenue.
Non-GAAP earnings per share in the quarter was 10 <unk>.
Based on $175 8 million weighted average diluted shares.
We ended the third quarter with approximately $62 million of cash up from approximately $50 million at the end of the second quarter.
Our outstanding loan principal balance was $350 million, representing net leverage of approximately two five times.
Now I'll provide our financial outlook for the fourth quarter and full year.
For the fourth quarter, we expect total revenue of $88 5 million to $89 million.
Representing approximately 11% year over year growth.
Based on current rates, we expect FX to have a neutral impact on our reported revenue in the fourth quarter.
Note that the fourth quarter has a tougher year ago year ago comparison relative to the third quarter.
In the fourth quarter of 2020, we started to see improvements in both new IRR and expansion rates following COVID-19 impact on the second and third quarters of 2020.
This was followed by a challenging start to 2021 due to slowdown in demand generation after the sun versus cyber incident, and rebranding efforts, which had flow through impact on the first three quarters of the year.
We expect fourth quarter, adjusted EBITDA of 27, 5% to $28 million representing.
Approximately 31% margin at the midpoint.
For the full year of 2021, we are raising total revenue expectations to 345, 5% to $346 million representing.
Representing 14% year over year growth.
We expect approximately three percentage points of FX benefit for the full year 2021.
We are raising our adjusted EBIT outlook for 2021 to a range of $113, one to $113 6 million or.
Or 32, 8% margin at the midpoint.
We expect elevated capex in the fourth quarter in the range of 12% to $14 million, primarily due to timing of Spinout related office build outs.
We expect Capex to return to approximately 4% of revenue starting in 2022.
We expect total weighted average diluted shares outstanding of approximately $181 million in the fourth quarter and approximately $169 million for the full year.
We expect our non-GAAP tax rate to be approximately 25% in both the fourth quarter and the full year.
Now I will turn it over to John for closing remarks.
Thanks, Tim.
Q3 was our first almost full quarter as a standalone company.
While we are focused on execution, it's important to remind ourselves of our recent achievements, including rebranding.
Successfully separating from solar winds building.
Building out a new executive team and continuing to hire top talent on top of this foundation.
And we did all of this while weathering the pandemic.
We've entered a period of time, where businesses of all sizes are ramping up not just to differentiate for the post pandemic new economy.
For a new type of worker.
We will use to a hybrid working model and.
In this environment.
MSP as Theyre looking to us to help them ensure that their service offerings, a robust scalable and secure.
We are proud that we are an integral part of our MSP <unk> ability to land expand and retain their customers.
We grow as they grow.
And above and beyond our soft software platform. It has the support and guidance, we provide them with our award winning training education and marketing resources that is one of the keys to their success.
As we focus on acceleration in 2022.
Does the teamwork of our people and the support of our partners that sets us up for a bright future for the company.
As we look ahead, we will continue to invest in our go to market motions partner's success initiatives and innovation to ensure we deliver and remain top of mind for our partners going forward.
With that operator, we are ready to take questions.
Thank you as a reminder, if you do have any questions for today's call eight star followed by one <unk>.
We also asked can you ensure that your line is not mute ACO April to ask your question to management and our first question today comes from Matt Hedberg from RBC capital market.
Hey, great guys. Thanks for taking my questions good morning.
John.
So growth in large customers was really impressive this quarter.
Noted a lot of overall momentum in the business and even just said.
Focused on accelerating in 2022.
Can you put a finer point, though on specifically why you are having success in some of these larger customers is it sort of an evolution of the business as a product I assume there's a lot of things.
Really stood out to me was the growth there.
Hey, Matt Good morning, and I appreciate Youre harping on and thanks for the question.
It's a couple of things first on the macro level were seeing.
The market mature right at some some in the industry kind of refer to the MSP era that we're in right now is kind of a golden era for the MSP and we're seeing MSP is starting to consolidate we're seeing some smart money come into the space, where really MSP is a more of a maturing and theyre beginning Matt.
To get into larger opportunities not just the SMA, but also the mid market and so as they grow frankly, our platform RMM platform place to that strength right, we handle complex environments that MSP and our bumping into.
Number one and number two the breadth and depth of our security offerings, just really lend itself to these bigger more mature MSP. So.
As the market matures has begun this piece continue to.
To grow in both size and maturity our platform and frankly, our strategy I think positioned ourselves to continue to win in that area. So it's a combination of what's going on in the macro and it plays really well into our strategy. This concept of being able to give them a piece the ability to manage more and complex environment.
The breadth and depth of our security offerings, that's kind of a one two punch that these mlps are looking for and then you couple that in with what I would call more bespoke partner success.
Then helping them even with their biz Dev and so on I think it is the right combination for these larger MSP.
No.
It looks like it's resonating.
And then Kim.
One for you.
Comments on why Q4 growth is going to be a little bit different in Q3 currency and compare in.
In particular.
But I'm wondering as we start to think about next year 2022 can you help us with a remind us about the seasonality of your business, obviously you've been.
Carve out now from solar wind, but I just want to make sure that we're kind of thinking about the seasonality next year.
Opiate Lee in terms of like your demand demand cycles.
Yes sure Matt.
Thanks for the question.
Yes in terms of seasonality, we don't have much seasonality in the business I would say, it's fairly linear we don't have any hockey stick periods or anything like that.
The model out in terms of how we look to 2022.
Got it thanks, a lot guys.
Thank you. Our next question comes from Mike <unk> of Needham.
Needham with Needham <unk> company.
Hey, guys. Thanks for taking the questions here. Another one if I could just on this growth outlook for <unk> and as we're thinking about calendar 'twenty two.
I guess one of the things I'm trying to.
Put together, if we're thinking about currency and maybe even more difficult comp in <unk> of calendar 'twenty and then the <unk>.
Pause button that you guys had hit earlier in the year.
Legion activities could you help help us think about that I understand we're looking at for Q here, but early in calendar 'twenty two now or those is the pause in lead Gen activity expected to still have an impact there or should we be mostly through it as we exit Q4.
Anything there would be incremental.
Hey, Mike.
<unk>.
Yes.
Give some color so yes, if we look back at a year ago.
We saw the business accelerating coming out of Covid.
And like we said in the prepared remarks in Q1, we had a slowdown in demand Gen due to the.
The rebrand and the cyber incident.
And our business, sometimes it takes a quarter or two.
For some of that impact to matriculate into into the result.
And I think we are seeing things.
Come back from where they were in the first half of the year now, which we would expect to matriculate into the business as we grow over some of those challenges.
As we get into 2022.
Yes, and Mike just to add in.
Some of the things that this is Jon but I mentioned it.
Where we're seeing better performance with the website, we're seeing better performance of the demand and we're seeing better performance with our with our search.
And the optimizing there part of that was the rebrand.
And as we continue to build.
Starting to see some strong momentum as we are even going into into Q4.
That's great Thanks, and I guess for the follow up.
Could you remind us I know, there's three big things that we're looking at for you guys like International investment partners et cetera, our investments and it's really the research innovation on the platform and I guess it <unk>.
On all three of those the last one would really be.
The one I'm driving at because I know you guys had spoken of security and data protection. This robust demand environment, you're seeing now to back to back quarters.
How sustainable do you feel like this because it really feels like the market is coming to you in that sense and that's that's one of the things I'm trying to get a better feel for when we got him looking further down the road for you.
Sure, Yes, youre right in.
<unk> you framing our growth initiatives and what you did with perfect. So.
Isn't.
Investing in <unk>.
National with sales and marketing.
Number one we are starting to see green shoots already we've been investing really throughout 2021, we're starting to see green shoots there. The partner's success initiatives in the prepared remarks, a lot of those are examples of our expand.
There were opportunities that came from our partner's success, having the right business conversations with these MSP seeing what their problems are really listening and then bringing them a solution, which goes to your last question a lot of the times of solution.
Not necessarily a technological solution, but it's also like a business solution right. So when we look at MSP as we help them with their growth strategy. We're finding msp's looking at ways to grow wallet share at their small medium enterprise and mid market enterprise and small medium enterprise really are mindful that they need this layered security approach. So we're giving.
MSP the tools the collateral the framework to have that conversation with these companies with the Ceos will be small and medium companies with these business owners and giving them. This layered security approach, that's why Edr and data protection is so successful they are having the right conversations with these EMS excuse me with these Smes the SME is saying.
Security posture.
And it's what used to be more of an inconvenience. If you had a cyber incident before is now an extinction event for the small medium enterprises that are aware, they're willing to invest that's a tremendous opportunity for both enable but also the MSP to get closer to the customers to add there.
Book of business to add additional security layers. So.
You asked about sustainability I believe we are in the early innings here as far as where we are on one data protection on Edr on data.
On endpoint protection and then remember unfortunately.
There is no one magic pill that makes us all secure and as the bad guys continue to evolve their strategies, we need to continue to evolve and put the right security solutions in the hands of these MSP and these smes to help keep them secure and if there is an incident to get back going as fast as they can and that's why we are continuing to.
To invest on a continuity story that's why we're we're in this preview with our DNS filtering, we're going to continue to invest in different security and data protection offerings. Because it is early innings and they need a complete layered approach to making sure that their businesses are not interrupted our worst extinct.
That's awesome. Thank you for the explanation there.
Thank you. Our next question today comes from Edward <unk> of.
I am back.
Okay.
Thanks, taking my question congrats on another strong quarter.
As noted in a few of these key wins and project expansions that you're automation capabilities for one of the key reasons for the win.
Can you dig a little deeper into the automation capabilities of your offerings just to give a little better understanding of what you mean, when we use the term automation here.
Yes, it's a great question.
And it's a buzzword that I feel sometimes.
Folks throw around a little bit too loosely so.
We have in both in both of our RM platforms.
RM platform Thats little bit more geared towards the low end of the market and one that is geared more toward the high end of the market in both platforms. We have an automation platform that allows msp's to leveraged scripts. So a lot of times you do like powershell scripts.
And it comes in two forms it comes in two forms that we have we'll have a whole host of lifestyle library of scripts, but in MSP can leverage and plug in and or we give them effectively think of it like a workbench are applied.
Platform that they can actually craft their own scripts and what this allows them to do whether it be the library that they pull off from from our library or whether it be a script that they write themselves. It allows them to mundane tasks that they are doing so at their check that theyre doing with their update that they need to do they can register.
<unk> and what that does the number one cost for an MSP is the labor right and so if we can take an MSP and help them manage more with less.
Unless people less man hours less less time staring at the screen and have it run more to an automation of our script where.
They can set it and forget it and run that script to decreasing there.
Their dependency on human intervention lowering their labor overhang and ultimately driving them to be more profitable that also result in better utilization for the technician. They don't want to be stuck doing mundane tasks. So if we can get them. They read his script once now that can carry it across their customer for the next month or the next quarter or whatever the circumstances.
<unk> himself or even better.
Prescribed that scripts are that automation lever across their entire estate. That's the power of our platform is now they can go deploy that script to that policy across their estate driving down their labor increasing their profitability does that help.
Great Great color there, thanks, a lot for that and perhaps another product vision focused question.
That mill assure security received the top result, an independent test.
Can you expand upon sophistication E mail threats for SME, and MSP and the importance of nail assure security software <unk>.
Thanks.
Yeah, Great question so.
The right now.
We're all seeing it it doesn't matter a fair to small enterprise or mid market or a large company phishing attacks.
And spam.
As one of the more prevalent ways that the bad guys trying to get in to these environments and by adding an additional layer that's filtering out the spam and we have.
An enormous database with millions of mailboxes.
And the way that our solution works is that the machine learning, where its learning all of the behaviors and aggregating taking the collective intelligence across all these different mailboxes of course, what's getting what's getting.
Marked as spam.
And so we have a small medium enterprise.
That is.
Marketing something in Australia as spam, we're aggregating that relatively close to real time, putting that into that if someone sees a similar type of behavior or similar type of domain coming across now, let's say in North America hours later, that's now being blocked so.
Now, it's a scale game right in and the reason why our algorithm or are filtering is at where it is because of the scale that we have and it's this kind of collective intelligence that allows us to continue to be one of the more highly rated filtering solutions out there. So the more that you can filter the smart <unk>.
Engine gets the bigger your mailbox is a bigger ecosystem the sharper the algorithm and the better the performance and this is all really to help Sps and Theyre Smes block out some of these fishing and spam attacks. So that's kind of the name of the game there and we're quite proud of what the team has accomplished with our mill.
So our offering and it's a key component on this layered security for MSP.
And Patrick Thanks for the color there and congrats on that.
Achieving that that's helpful. I appreciate it.
Thank you our next question.
Yes. Thank you good morning.
Okay.
Yes.
My My two questions first is just on the MLR trajectory.
110%.
It seems pretty pretty steady what are the puts and takes there as you look out for the next couple of years.
Do you feel like there's room to improve that NR and then I know, it's a trailing 12 months can you give us any color on.
Kind of a trend line right now.
Thanks, Jason Hey, this is Tim.
Happy to give some more color there yes.
Yes.
When I think about.
Breaking down our dollar based net retention.
I really think about.
How we think about our growth algorithm.
And there is there's really a few components to it one is just gross retention on the existing base and then it's the partner led expansion.
That we.
That we really focus on between our partner's success motion and our sales motions.
We have opportunity for improvement on.
All three of those fronts, we've seen improvement on gross retention.
We are seeing part of the focus of the <unk>.
Our partner success managers is to help our partners sell in market to new Smes. So thats part of that expansion story on our partner enabled growth and then the other part of it.
Is where we've added color on success that we've seen with our Edr and cloud to cloud backup solutions is cross selling new offerings.
To the Smes.
And working with and partnering with the MSP is to bring those those new services to market, which generate new strong revenue streams for them.
Going.
Forward.
Got you so it sounds like from a trajectory.
Standpoint, though it's moving in the right direction because of the gross retention improvement is that fair.
Okay.
That's been a driver but.
I think by Michael Ludwig.
But there is opportunity I feel or we feel on kind of all three of those fronts on the.
The SMB expansion.
The selling of additional services and approved gross retention.
Great and then.
John for you just wanted to get.
He kind of MFS and market right now.
Okay.
As we're hopefully seeing some improvements in the macro environment.
And and vaccination rates et cetera.
As you think about last year.
Year and a half.
Did it feel to you like there was some kind of darwinian situation with MSP is where kind of the strong.
Surviving and is that one of the reasons why you're seeing the strength with the larger MSP.
<unk>.
Some of the smaller msp's are becoming less relevant.
No I don't think I don't think the smaller msp's during Covid Msp's did the right thing and what do I mean by that they had to quickly focus on.
Our existing book of business right. So.
Part of it.
For the growth algorithm for the MSP is just like any other companies to land new customers well during Covid MSP is really we're not out there landing new customers. They had to go help mobilize their customers' base rate customers now have to deal with the hybrid work work for us had to deal with using.
Personal computer has created a huge surface area of problems in the security point of view Msp's went from talking to your customers, maybe once a month or once a quarter to every day and so the focus for the MSP has shifted from landing new customers to really helping stand up their existing book of business and Thats, what I believe the best MSP did so what does that mean, we saw there.
Them growing their book of business by adding services and getting closer to their retention rates went up but there are new part of the equation, adding new.
<unk>.
Load a little bit.
What we're seeing more from a consolidation point of view from a macro point of view and I'll talk about the low end of the second because youll see the kind of the relevance.
On the on the on the consolidation front, we're seeing MSP because of the labor scarcity and legacy SMA is hitting larger companies, we're seeing MSP the doors of the opportunities for the MSP theyre getting larger and larger into larger shops to help augment where there is labor shortage for these into a trend we're seeing MSP.
Being part of an internal it department.
Of the internal it department why because it.
Is it labor scarcity issue, so what does that doing.
Our midsize and large MSP, they're stepping up into larger opportunities.
Creating.
An opportunity for these lower msp's to land, what we would call more of the traditional Smes are the <unk> and.
And the market overall.
I'm quite bullish that the health of the MSP industry is strong we're seeing it's strong in the high end, we're seeing a lot of consolidation, but I'm also seeing a good number of smaller shops thriving and doing well in leveraging our automation to become profitable how can they do more with less they leverage our automation.
Okay.
Great and then one quick final one just on the only on this labor shortage.
Macro issue I mean, how does this not result in acceleration in your business.
In 2022, I mean, it just seems like.
It's probably not going to get a lot better anytime soon.
The complexity of the security I mean, it's just getting worse.
Now.
How do you how do you help us understand.
The impact of that labor shortage on your business in particular how.
How you are equipping these msp's to health care.
You are right to consider that a tailwind I considered a tailwind and we look at.
We look at that as an opportunity to help our MSP and a couple of different areas, we talked about automation a good amount on this call, but also just the breadth and depth of our monitoring right. We give MSP is the ability to monitor apple devices windows devices.
The integration we've done with Microsoft we've allowed them again, the concept of doing more with less Jason is one of them one of our big themes and we believe were the vendor or the partner that MSP is look at it is giving them the ability to do more with less.
That will that will win the long game and.
That's what our strategy is and that's where our investment is and Thats why by the way it's equal parts technology platform and also partner success because we.
We need to give them a little bit more of the tools and leveraging our collective intelligence that we see across our 25000 MSP to help them sharpen up their business and the good news is we're seeing msp's increased their EBITDA, we're seeing which is overall healthy for the ecosystem, we're seeing msp's leveraging the automation expanding their book of business with their end customers goes.
And for larger accounts and in turn that's creating a more profitable customer base for us, which obviously from an ecosystem point of view is a good thing.
I agree with you I guess is the way I would leave it I believe that it is a tailwind for both enable and also the Msp's who are servicing these companies that are dealing with labor scarcity.
Thanks, and good luck.
Thank you.
Thank you. We have also received a question from Keith Bachman.
Bank of Montreal. Your line is open. Please go ahead.
Yes. Thank you I had a clarification question.
Vacation could you talk about what FX rates had gone on your dollar based net retention both quite a bit of help in the Jan quarter, perhaps a bit less.
Just trying to normalize the dollar base.
Paul.
The larger question Big picture.
On the backup market I was hoping you could talk about.
Your churn expectations, how we should be thinking about the backup market.
Breaking down into a.
Competition was the pure play vendors on their technology platform versus others that are out there and then b.
How we should be thinking about perhaps some of the capabilities.
Microsoft Citrix somewhat tomorrow or.
And how you're positioned.
So work with Baidu.
Some of the areas.
Thanks very much.
Sure. Thanks, Keith why don't we why don't we answer the second one first and then and then we'll go from there so back up so our backup and data protection.
Offering is one of our larger and faster growing offerings in the portfolio.
We both land new MSP as an internal it departments.
Our backup offering and protection offering into the MSP that are leveraging either of the RMM platforms and frankly any other tool. So it's a tremendous.
Offering that we have.
That sounds great success in our cross sell motion.
And our continued success in our new customer acquisition.
Hi.
Really it's the technology right.
Completely cloud based.
Third to some of our competitors that are still dependent on piece of hardware and appliance.
And the algorithm in which we elected to do.
To our backup in our restore just allows us to be faster more efficient more efficient to the MSP more efficient to the SME more efficient on the bandwidth and we are more cost effective solution. So.
We believe we have an offering that not only competes but wins.
As it relates to a lot of the offerings that are out there that are kind of based on more of an older Tech.
And the fact that we're not image based I think also gives us an advantage. So it's it's.
<unk>.
A market Thats critical for the MSP, it's one of the pillars that every MSP.
Offering to the MSP, that's a key part of the NIST framework, the ability to backup and restore and now that's evolving right now is more and more workloads are pushing to the cloud more and more folks are using office 365 that need hasnt changed its just moves so we're seeing a tremendous uptick in our office 365 data protection offering.
<unk> that which allows small medium enterprises the ability to backup their office 365 backup there their sharepoint backup.
Going forward their teams environments.
A pretty low cost point is it effectively a belt and suspenders approach.
Not because.
Because really the ability to restore and our ability to restore I would say puts us head and shoulders above what a lot of folks who are doing so that's so it's a tailwind to our business I think it's a strong add for our MSP and.
I think that the way our technology is built the fact that it's inside of our platform. It's more it's more efficient play.
We allow MSP to backup and protect workstations servers virtual machines. So.
Is that or in the cloud, obviously 65 instances so in one platform, we give them the whole spectrum and I'm not sure anyone else.
Has that breadth.
From a one platform view.
Okay got it thank you.
Hey, Keith and just to add some color on.
Yes, yes, yes, just add some color on the FX, if I look back over the trailing 12 months.
There's a little bit of a tailwind as it relates to net retention in probably in the range of a point or two.
I can't I can't predict the future I don't know where FX FX FX rates will go over the next 12 months, but if I just look at where they are now compared to where they were over the course of most of or at least the first half of 2021. It would it would lead to a bit of a headwind as we as we go forward.
Okay. Okay, alright, thank you.
Yes.
Thank you at this time, we have no further questions I'll hand back over to management for any final remarks.
That's all from our side, we appreciate everyone, calling in and showing their interest in enable thank you.
We thank you for joining today's call. The call has now concluded and you may now disconnect your lines.
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