Q2 2022 N-Able Inc Earnings Call
The risks and uncertainties associated with them as noted in today's earnings release and in our filings 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 the financial measures, we will be referring to.
The non-GAAP financial measures.
Reconciliation of the non-GAAP financial measures discussed on today's call to their GAAP equivalents is available in our earnings press release on our Investor Relations website, and now I will turn the call over to John .
Thanks, Jeff and.
And thank you all for joining us today.
Our financial performance in Q2 exceeded the high end of our outlook with GAAP revenue growing year over year by 7%.
Our 13% on a constant currency basis to $91 6 million.
Demonstrating success in our multi product sales approach.
Particularly strong growth in our security offerings and data protection as a service.
We also exceeded our adjusted EBITDA forecast coming in at $27 6 million just over 30% EBITDA margin.
During Q2.
We made encouraging progress on multiple initiatives that we believe validate our strategy.
And made a few well calculated thats in the market that appear to be playing out in our favor.
I will go into more detail on that in a minute, but first I wanted to talk about a major milestone we just hit.
Our one year anniversary as an independent public company.
From the outset are.
Our business model was designed to allow us to grow as our MSP partners grow in.
And the spinoff we undertook last year was primarily about focus.
Focus on empowering our MSP partners to serve their SME customers.
Our focus on delivering powerful and simple solutions for MSP to scale their business and our focus on our employees.
We believe that we have proven the value of the spin off for our partners employees and shareholders as we accelerate our product roadmap.
Continue to help msp's achieve their goals.
While we are mindful of the current macroeconomic dynamics we.
We will keep focus on what drives our business and we will continue to invest with a focus on growth to maintain our momentum.
It has been a landmark year for us.
Our team has grown by almost 12% to more than 1400 people worldwide.
We have hired across all functions and continue to build our team with industry leaders, who have been key to driving our success.
We have increased the pace of product launches and investing in strategic areas that matter to our partners.
Our brand is resonating with our target audience.
And we've been recognized across the industry for the great work we are doing.
And we continue to rally behind the phrase earned more fans, which.
Which is embedded in our product roadmaps.
Go to market strategy and our approach to partner success.
The backdrop to all of this growth of the industry dynamics, we have discussed in the past.
Which are only becoming more prominent overtime.
These include rapidly increasing complexity.
Labor scarcity and rising cyber security threats.
I've talked about them as tailwind for us, which we believe they are long term durable tailwind. So we look to capitalize on by hiring expanding and investing in the future.
Our products and solutions directly address these dynamics, which creates opportunities for us to deepen our relationships with our partners.
You can see this in the product advancements we've made but it is also evident in some of the sales trends we are seeing.
On the product front, we have made a number of advancements.
For our partners and their customers.
Cloud is no longer a talk track and presentations.
<unk> adoption speedway for IP professionals.
We've always been cloud first company.
Cloud first and backup.
If closed data protection as a service.
Cloud first and many of our product offerings as we are a SaaS provider.
And with our recent acquisition, we're now helping our partners optimize the value of their Microsoft cloud products.
There is strong demand in this area.
And while the significant majority of our partners manage a resell Microsoft cloud services.
Faced numerous challenges.
Issues with automation.
Multi tenant management.
And complexity that restricts msp's from leveraging the full breadth of capabilities.
And this is why we acquired spin panel and we intend to make this a core cloud offering for enable.
We have been speaking with the amazing team that's been panel for some time now.
And after looking across the entire landscape.
We believe that the right decision was to acquire them.
Not only because they are a strong fit with our cloud strategy, but culturally they have a similar partner focus and a vision that aligns with ours now as part of enable.
We can invest in the resources the scale and integrate the products to ensure we are addressing the challenges our partner space, helping our MSP.
One the cloud.
The spin panel solution is designed to help our MSP partners managed Microsoft cloud in a way that allows them to reduce complexity bring.
Bring efficiency and profitably scale their Microsoft business.
The product is already in use by Microsoft partners around the world.
And as soon as the acquisition was announced we opened up a beta version to our partners.
And the response to this offering has been strong.
Which we believe validates the need and the approach that we're taking.
I am excited for you to learn more about when about it when we launched the product in the world.
On the data protection front.
Been very pleased with the market response to our Cove data protection as a service.
One of the truly cloud first appliance free enterprise grade backup and disaster recovery solutions that allows msp's to modernize their approach to data protection.
Okay.
As a measure of how widely used COVID-19.
We recently announced that code data protection has passed 1 million protected Microsoft 365 users.
<unk> overall supporting over the over 12000 partners and more than 142000 and customers.
We also just announced that a powerful new feature called standby image is now available.
It enhances cove by simplifying disaster recovery is the creation of standby copies on customer owned infrastructure without the need to buy an expensive proprietary backup appliance.
Cove data protection is ideal for recovery from a destructive cyber attack.
With traditional approaches.
Starting backup into production can be risky.
It may reinfect, the network, but with Cove and standby image that risk is mitigated because the backup copies are removed from the network that the malware is targeting and customers have the flexibility to proactively restore a server image to a location that works for them.
Our partners have really taken to Cove and data protection has become a product we can lead and we can meet with potential new customers.
Now turning to RMM.
For decades, the enable team observed msp's, regardless of size or stage.
From highly specialized market specific service providers.
A large global generalists, who serve SME is around the world all the way down to startup msp's, serving their customers from the proverbial garage too.
To build on our mission to meet our partners, where they are in their journey, we recently announced a new offering called and site design.
Designed to help early growth Msp's jumpstart their business.
We think of it as a way to level the playing field.
As it is the same powerful and scalable set of tools the seasoned msp's use but it is tailored and packaged those partners early in their growth trajectory to startup right and efficiently scale.
It combines three major components of our platform.
Our cloud based RMM in.
Enable take control for remote support.
An MSP manager for professional service automation, plus our full suite of Onboarding support and community resources to help them build their businesses.
It's only been a few weeks, but already we're starting to see a pickup in response within this cohort.
On the last call we discussed our launch of enhanced services.
And services designed to help msp's unlock the full potential of our solutions and address market challenges like labor scarcity growing cyber threats and increasing complexity.
Premium Onboarding support and training of MSP is to leverage our experience and expertise to optimize their teams and the technician efficiency and accelerate time to value by delivering solutions to their customers faster.
We see this as a critical part of our value proposition and is often the differentiator between us and our competitor.
Yeah.
Now for a notable customer wins.
Rather than divide them up as new wins and expansions as I've done in the past I want to point out a few trends we're seeing in the market.
The first is the.
Opportunity, we are finding with MSP consolidations.
This type of activity has been accelerating this year as many of you have noted.
We believe we are uniquely positioned to assist these consolidators and optimizing their cost and resources when they standardized on our purpose built holistic suite of solutions.
That plus the technical and business support we give them on an ongoing basis makes for what we hope for many years as it enabled partner.
Let me give you a few examples.
First we won a large $250000 plus IRR standardization deal with a worldwide MSP consolidator on in central.
This partner is one of the largest MSP in the world.
And we will be replacing multiple competitors as they work over the next 12 to 24 months.
To integrate the companies they recently acquired.
Right now this is just for RMS.
We have begun conversations around security and Coke and believe there is a large potential there as well.
Standardization deals like this involve a high degree of expertise in both the technical aspects as well as training and project management.
And this is an area, we believe that we excel at and above our competitive or competition.
Second a large consolidator in Finland has pulled together 11 MSP within their group.
In June our triangle using enabled products and five were not.
We were already working with one of the MSP, who did not have our solution in house, we were the first vendor to approach the group with the idea of standardizing.
Our professional service capabilities, including project management and scripting to automate their process as a value added service helped us to win the deal.
We are now well over $200000 of IRR with them there.
Currently evaluating cove as well across a growing base of 20000 nodes.
Third.
Another large consolidator based in the U K as.
A few of the recently acquired Msp's unearth central.
And we've been encouraging them to standardize on enables tools across all of their holdings.
We are now replacing competitive RMM for more than $100000 in IRR.
We're also ripping and replacing the legacy anti virus with our integrated anti bio security solution.
We are excited about the possibility of adding new business in this account, including standardizing on <unk> and on past portal Edr and DNS offerings in the near term.
And fourth.
A part of it was a top 50, MSP with a large and central deployment acquired a similar sized MSP, which effectively doubled the number of endpoints managed.
The acquisition was an opportunity for them to reconsider their vendor relationships. So they came to us for our edr solution, adding more than $200000 annually.
They are now actively evaluating cove as their standardized backup solution as well.
We're also beginning to see positive results in our refreshed multi product go to market strategy that leverages our unique capabilities.
In many cases, we generally lead with our <unk> solution.
Within central and insight as our foot in the door with potential new partners and we've been quite successful there even though are on them is relatively high switching costs.
But now as our product line has evolved.
And Cove has really come into its own as a market leading product.
Cloud based backup and data protection are showing themselves to be the tip of the spear for many accounts as we prove our value both with our products as well as our partners success resources, we're able to expand our footprint now.
And I'll give you one recent example of this.
A large north American MSP that enable has been hoping to work with for many years.
Dissatisfied with the support and capabilities they were getting from their current backup vendor.
They put cove and our partner's success team to the test after a rigorous review.
And in the process they chose to implement coke for over $50000 of IRR.
We are speaking with them about rolling on in central to help them with their vast set of Mac and legacy windows nodes that they manage among other things.
This is a symbolic win for us and we are extremely excited to be working with them.
As you can see.
With each of these examples I just mentioned our service and partner success teams were instrumental in helping partners, especially with the labor scarcity issue that is affecting the industry.
Along those lines.
More notable wins to highlight.
A large nation.
Nationwide dental partnership organization as we can.
When we decided to operate their own MSP.
And they came to us not only through incentives inherent capabilities.
But also due to our reputation for service and support.
We were able to help them rapidly migrate to nearly 7000 endpoints with zero service interruptions and no downtime.
As a result, they are now nearly a 250000 USD ALR partner for us.
We intend to continue to capitalize on these trends as we invest in the elements of our winning formula.
Our market, leading technology, our sales and marketing motions that raise our brand awareness and our partner's success resources, which helped to drive sales opportunities, including the ones I mentioned a minute ago.
We believe that this is what differentiates us from our competition.
And we will continue to drive our success.
Over the long term.
I'll, let Tim take over the call now and discuss our financial results and outlook and then I'll jump back on briefly talk about our go to market motions in the back half of the year Tim.
Thank you John and thanks to all of you for joining us on the call today.
I want to review our second quarter financial results, then discuss our financial outlook for the remainder of 2022.
As John mentioned, we finished the second quarter ahead of our outlook with total revenue of $91 $6 million representing.
Representing 7% year over year reported growth or 13% on a constant currency basis.
Subscription revenue was $89 $4 million, representing approximately 8% year over year growth or 14% on a constant currency basis.
Other revenue, which primarily.
<unk> represents maintenance revenue from our discontinued legacy license model was $2 $3 million down.
Down 10% year over year and consistent with prior quarters.
We ended the quarter with 1818 partners generating greater than $50000 of annual recurring revenue or IRR, a 10% year over year increase.
Partners contributing over $50000 of IRR now represent 50% of total IRR up from 46% a year ago.
We saw strength across our portfolio with Edr and curve data protection and in particular with Microsoft Microsoft 365 backup solutions continuing to outpace total company revenue growth.
Dollar based net revenue retention calculated on a 12 trailing 12 month basis was 106% on a reported basis.
This result reflects approximately two points of negative FX impact.
Turning to profit and margins note that unless otherwise stated all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliation provided in today's press release.
Also note that historical financials for the period prior to the effective spinoff date of July 19th 2021.
Included operating expenses that were prepared using carve out allocation methodology, while we were still part of solar ones.
While the allocations and estimate in these carve out financials are based on assumptions that we believe are reasonable are standalone financials are not necessarily directly comparable to those prepared prior to the effective spin off date.
Okay.
Second quarter gross margin was 85, 5% compared to 86, 4% in the second quarter of 2021.
Second quarter, adjusted EBITDA was $27 $6 million.
Representing approximately 30% EBITDA margin.
Unlevered free cash flow was $25 $1 million in the second quarter.
Capex was $3 9 million or four 3% of revenue.
non-GAAP earnings per share was <unk> <unk> in the quarter based on 181 million weighted average diluted shares.
We ended the quarter with approximately $86 $6 million of cash and an outstanding loan principal balance of $347 $4 million.
Presenting net leverage of approximately two three times.
Approximately.
The 45% of our revenue was outside of the U S and Canada.
I wanted to take a minute to expand on something John discussed.
A year ago, when we spun off our business one of the principal objective was to focus our attention and financial resources on activating our growth strategy.
One key aspect of that is capital allocation and our ability to make targeted investments in a manner that is appropriate for our strategic priorities.
As you saw with the spin panel acquisition. This was a buy build partner consideration. We made one that we believe aligns with our cloud first positioning and creates value for our MSP partners and shareholders.
Through our relatively small transaction.
It was strategically important to us in order to accelerate the advancement of our cloud strategy.
Our partners are looking to us to drive innovation and stay in front of customer demand customer demand for services.
And we are executing on that by delivering a steady pace of product launches for new enterprise grade solutions.
We intend to continue to make capital allocation decisions that we believe will allow us to accelerate our growth expand our platform and achieve our optimal rule of 50 metrics.
Yeah.
Before I discuss our financial outlook for the third quarter and full year I want to reiterate that aside from the global economy. In fact, the situation in Ukraine, Russia, and Belarus has not to date at any material impact on our operations financial results or business consistent with what we saw in the first quarter.
<unk>.
We continue to believe we have adequate resources and non impacted regions to support our products, including our newly established office in Warsaw Poland.
As the situation continues to evolve we will take action as needed to.
To mitigate any potential impact as we deem appropriate.
Now I'll provide our financial outlook for the third quarter and full year.
There have been changes to the foreign exchange environment since our last outlook and we are updating our guidance to reflect the impact of these changes.
I want to start by reconciling our prior 2022 outlook based on current FX rates.
As stated in our previous call, we assumed FX rates for the Euro and pound of 1.05 in 123, respectively.
We also stated that every point on the euro equated to approximately $900000 of annual revenue and every point on the pound equated to approximately $300000 of annual revenue.
Using updated FX rates of 1.00 on the Euro and $1 one nine on the pound as well as changes in other currencies.
Our prior 2022 revenue guidance of $376 million to $379 million translates to $373 million to $376 million.
Being approximately $3 million of additional FX impact for the second half of the year.
As it relates to our prior 2022, adjusted EBITDA outlook of $112 five to $115 5 million user.
Using these updated FX rates, our adjusted EBITDA outlook translates to $110 five to $113 $5 million, reflecting approximately $2 million of additional FX impact for the second half of the year.
While the global macro environment remains uncertain and FX rates may continue to fluctuate.
Based on our current FX assumptions, we expect our third quarter of 2022 total revenue in the range of $92 $5 million to $93 million, representing approximately 5% year over year growth or approximately 11% to 12% on a constant currency basis.
For the full year 2022, we have slightly moderated our constant currency growth expectations, primarily to account for what we expect to see from a macroeconomic impact on device expansion for Smes.
We believe uncertainty in the macro environment may cause SME is to add devices at a lower rate than we expected earlier this year.
And as a result, we are tempering our forecast slightly for the back half of the year.
To be clear, we believe there is strength across other parts of our growth algorithm, including market share growth for Cove and enable edr.
The cross sell opportunity for our cloud products and.
And our steady velocity in terms of close rates overall.
We now expect total revenue of $370 million to $372 million.
Representing approximately 7% year over year growth on a reported basis or 12% to 13% growth on a constant currency basis.
For EBITDA, we expect third quarter adjusted EBITDA in the range of $26 $5 million to $27 million.
Renting approximately 29% margin at the midpoint.
For the full year, our expense management remains disciplined.
And we are maintaining the level of investment in our strategic plan in order to take advantage of what we see as unique market and competitive opportunities.
Therefore, given the factors I mentioned, including the FX driven revenue reduction some expected headwinds due to macro environment uncertainty.
And the expense impact of the spin panel acquisition, we are now expecting full year adjusted EBITDA in the range of $107 million to $109 million equating.
Equating to approximately 29% margin at the midpoint.
Capex is expected to be approximately 5% of total revenue for the full year.
We also expect adjusted EBITDA conversion to Unlevered free cash flow to be approximately 70% for the full year.
We expect total weighted average diluted shares outstanding of approximately $181 million for the third quarter and the full year.
Finally, we expect our non-GAAP tax rate to be approximately 28% in the third quarter and 26% for the full year.
Now I'll turn it over to John for closing remarks.
Thank you Tim.
As we head into the back half of the year. Our team is focused on executing on our launch of Cove data protection now that the standby image features available.
We will especially be leaning in on the unique segment segmentation opportunity. We believe that we have with our two packaged RMM offerings.
And central aimed at season's larger MSP and.
<unk> insight as I mentioned in the earlier growth Msp's.
For insight, we expect to drive even more new RMM customer land as well as improve adoption of the other tools on our platform.
Namely take control and MSP manager.
And for <unk> central.
We are planning to launch a global campaign by the end of the third quarter to better position. This product in the marketplace and incentivize mature MSP that the move to enable is worth to switch and.
And finally as I mentioned, we will be launching a new enabled cloud solution.
I start will enable iceni are fired up by the potential of our platform and the offerings that we're bringing to market.
As well as the opportunity that we are seeing to empower a base of service providers that are becoming an increasingly essential part of the infrastructure for small and medium businesses around the world.
As we manage through this current macro environment. We believe the long term drivers of our business remains strong and that we have a winning business model that increases in value over time and create sticky relationships with our partners to help them based on mounting challenges in security resources availability and increasing complexity.
At the beginning of October .
For the first time in over two years.
We will welcome our partners to our empower conference in Las Vegas.
And in person events.
And we are really excited to bring together industry leaders to discuss the current state and future direction of the industry.
With that we look forward to talking with you on our next call in November .
Operator, we're now ready to open the line for questions.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press Star then one on your telephone keypad. If you wish to withdraw your question. Please press star followed by number two when preparing to ask a question. Please ensure your line is on mute locally.
Our first question comes from Matt Hedberg from RBC capital markets, Matt Your line is open.
Great. Thanks for taking my questions, Hey, John I'll, just start with you.
For a long time and a lot of different economic cycles.
But you are taking about a point out of your constant currency growth before lower.
SME device adds but can you talk about sort of the durability of your end markets being exposed more to the MSP side of it to the direct customers and maybe how that buffers you a bit from perhaps a bigger downturn in SME customers.
Sure.
Good morning, Matt Thanks for helping on and thanks for the question.
In.
Yes, so a couple of things right.
The first thing our solutions are absolutely mission critical to the MSP space and I think that's evident.
In our Q2 results actually like the fact that we were able to beat the topline and the Bottomline is a strong indicator both to us internally and externally that our solutions are mission critical because they allow.
Msp's to monitor manage and secure the assets of the SME.
Customers right. So it's extremely mission critical.
And so therefore, our platform is in high demand not just for our MSP partners, but also to the SME customers that are depending on them to make sure that they can run their businesses.
And what we saw.
Couple of weeks.
Okay.
Okay.
And our team.
Thanks.
Sps is that there.
They're seeing they're taking a little bit more of a cautious approach and they're seeing that they are growing their business in achieving their goals.
By increasing wallet share of their end customers.
And why well.
<unk>.
Having a little bit more of a difficulty adding additional resources on their side, thereby thereby creating a little bit more of a challenge, where they're saying hey, I can achieve my goals.
Bye bye growing wallet share with my existing customer base.
And it's a prudent approach that a lot of the MSP is are taking and.
And as a result.
Taking that cautious approach as well and.
And pulling back a little bit on what we what we believe to be as device growth in the second half of the year.
Got it that makes a lot of sense and then on the new products that you guys have a lot of stuff coming out in addition to spin panel.
Can you talk like if you were to sort of.
Globally.
It's hard to pick a favorite but like what do you think out of the newer products could have.
A more immediate.
Tailwind to growth.
Sure and you're right we have.
We're excited about what the second half roadmap has I'm really excited about with Mike <unk> and the technology.
<unk> product group has delivered thus far in 2022.
And we are delivering on all different aspects of this multi product approach that we're bringing.
The core data protection.
<unk> offering in our standby image will help us and we believe will allow us.
To help with both new customer acquisition, but also with better cross sell within our customer base. So that one Matt as we as we begin to really expand into disaster recovery as a service and data protection as a service that one will probably have the most immediate or short term impact.
But longer term I am equally as excited about the acquisition that we just did in the spin with the spin panel technology really this allows our MSP is to really own the cloud and better provide a managed service around Microsoft stack right. We all know more and more workloads are going to the cloud we all know that.
The MSP or they are reselling, the Microsoft technology, but they are struggling to do so in a scalable efficient and profitable way and that's the hallmark of the solutions that we bring to market and the spin panel technology will allow a tremendous amount of automation for MSP. So they can onboard they can provision and they can better.
Managed securely.
The SaaS applications in particular out of the gate Microsoft there. So those are probably the two that I'm I'm keen to see how they how they grow in the second half of this year internally I often refer to the different product lines.
Cohorts, a snowball and those are some of the to the snowball. So we'll be watching keenly over the next couple of quarters.
Thanks, so much.
Okay.
Thank you. Our next question comes from Jason Ader from William Blair, Jason Your line is open.
Yeah.
Yes. Thank you.
Good morning, guys I guess, one question I had on the net retention rate of 108% constant currency.
Where do you see this going over time.
And then what are the kind of levers to get you I'm, assuming you want to get higher but where do you see it going let's say over the next two to three years.
Just broadly without a specific number but do you see it going higher.
The same and then how do you how do you how do you think about the puts and takes.
Hey, Jason This is Tim Thanks for the question.
Yeah, as we look at that retention you hit on it it's about 108% in constant currency as.
As we look out over the next couple of years.
No.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yeah.
Sales and marketing.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
And some of the shifts from a focus standpoint that we're looking at is opportunities to drive wallet share mlps are looking at that opportunity with.
With their SME customers, we're looking at that opportunity with our MSP partners as well.
Looking across the spectrum of products and the cross sell opportunity that fits within our base of customers. We believe is a long tail.
And then we'll be pointing some of our strategy and.
Shifting some of our resources and focus towards capitalizing on that as we move forward.
Over the next 12 24 36 months.
Looking out over that two to three year spectrum you spoke to.
Combine that with bringing the new product we brought to market. Thus far this year the new products that are lined up in the in the roadmap as well, we'll continue to open up that wallet share opportunity for us as we go forward. So.
Again, I'll reiterate that we believe that to be the biggest lever from a growth acceleration standpoint in our model and we believe the best we've been making and the investments we've put in place.
To date, our strategically set up to deliver there as we go forward.
Excellent. Thanks, and then just a quick follow up for you Tim on the <unk> panel acquisition did you guys talk about the impact on revenues and EBITDA from that acquisition this year.
We did not but I can give you a little bit of color. This is more of a technology buy so virtually no revenue.
Contribution from existing partners that they had will be looking to launch that product.
<unk> here.
<unk>.
In the next few months and Starcross cross selling that into the base, but impact on 2022 from a revenue standpoint is pretty much immaterial from an expense standpoint, it's about a half a point of impact.
On the second half of the year.
Just kind of give you some color on the.
The contribution on EBITDA, Mark half a point impact on EBITDA margin, Yes, Thats correct. Okay.
Great. Thank you and then John for you.
A question on the impact that Youre seeing in the market from the <unk> merger.
Yes, there is.
Good morning, Jason There is there's a good amount of noise in the industry.
We followed the noise, but really.
The message I told my team is to focus on a rally cry and thats around earning more fans and we believe that if we continue to drive the right products to market and deliver the right level of partner success that we will have a positive impact on our customers that ultimately will help us gain market share and so we've been focused.
Hang on our knitting here at enable.
On a rally cry to earn more enable fans and those are both exist.
Existing MSP partners and end customers and partners Theyre not.
Referrals, yet so we're focused there and hoping to drive good results there.
But more specifically have you seen any.
Examples of.
<unk> customers from those other partners from all those other vendors that may.
Maybe it's getting a little bit looser is getting a little bit easier to get to get.
Calls returned and opportunities, maybe maybe a little more ripe to kind of displace or take share.
I think like all things, where there's a great level of uncertainty.
And there's a great level of change, there's a great level of potential disruption and so with those two organizations still need to rationalize their teams will need to rationalize their products will need to rationalize their customer service and partner success teams and through that rationalization is going to be inevitably a level of change and disruption and so when you have.
That.
Youre going to Youre going to have bumps and hiccups in that for that organization to really.
Shift through and work through and.
Have I seen it.
There is some anecdotes and I'm sure you can you can help on Reddit and other exchanges and forums and look to yourselves, but again, we're really focused on if they're if they're partners out there in the community that are looking to grow looking to future proof their business looking to to maybe go through a consolidation or a technology that.
We have the broadest and wireless and deepest.
We hope, we're hoping that they are looking and coming and talking to us here at enable.
Great. So maybe not the top tailwind for you, but could be a tailwind over the next.
18 to 24 months.
Okay, that's fair.
Okay Alright, Thank you guys. Good luck.
Thanks, Jason.
Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad. If you wish to withdraw your question. Please press star followed by number two when preparing to ask your question. Please and your phone is on mute locally.
The next question comes from Mike <unk> from Needham Mike Your line is open.
Hey, guys. Thanks, Thanks for getting me on here I appreciate the time today and I apologize if I am wrong.
We're seeing something that you guys went through earlier with the prepared remarks, I'm just tuning in a little bit late juggling a couple of different earnings calls on my side.
But just wanted to first ask about pipeline creation that you guys are working through if I'm looking at <unk>. As an example, I know that you guys had commented that you generated a sequential increase in total sales pipeline.
March had actually been the largest month for that region. If you look over the last two years.
Can you just help us think through what you guys saw on the pipeline creation with respect to the cadence throughout <unk> and how that trended.
Mike Good morning, and thanks for joining I know, you're kind of you're juggling a bunch of things and this is John sure in the prepared remarks, Tim touched on the fact that we have multiple different levers a dimension to our growth algorithm right and the one that we're seeing or what we're being cautious about is the one that's probably at least in our control.
And that's around the consumption of <unk>.
MSP and partner enabled growth.
Things that are more in our control is more along the lines. What you were asking for and pipeline and we often measure and discuss internally use around bookings.
Q2 actually was better than our Q1 in terms of bookings and we talked bookings, Mike we're talking both new customer acquisition and new Skus. So both a mix of.
New customers and existing customers buying brand new offerings. So that combined bookings was better quarter over quarter. It was better year over year and at the same point in Q2, so from that point of view.
Sales conversion pipeline build has been better than last quarter and better than year end and that gives us a lot of <unk>.
Strong signals that again the products that we're offering are mission critical the industry tailwind are strong and why we continue to invest in areas of growth and continue to do acquisitions and invest in R&D, because we believe that the strong tailwind that not only enable.
<unk> is enjoying but also the MSP industry. So overall.
Q2 bookings were like I said stronger than last quarter and stronger than a year ago. This time of year.
Thanks, Thanks for the color that's very helpful and if I could just tack on one more.
Again, a little bit of a comparison versus Q1, but I know last quarter. You had discussed how let's say dedicated coronary success reps, we're driving among the highest close rates among the opportunities enabled with <unk> just wanted to get a temperature test here, but is that still the case and how is that initiative tracking versus.
Your internal expectations.
So just for just for maybe for the rest of the audience with not as good of a memory.
So the yes. So we've invested heavily the last couple of years and our partner's success organization that coupled with our MSP partners and talk them through technical challenges, but also business challenges and that's different than our business model than maybe other other software companies again, our partners success folks and our growth strategy.
Are helping our partners with some of the technical challenges and their business challenges as a result of those rich conversations that we have with most of our partners quarterly.
A tremendous amount of.
Value value and opportunity comes out of those those opportunities in those conversations.
Refer to them as more of our <unk> with our partners continue to drive the highest conversion rates of opportunities within our company right. So that hasnt changed and were quite pleased with the success that the partner's success organization has touched on when Tim talks about earlier net retention being our biggest lever that's a combination.
And our investments and partner success.
And in our R&D teams to deliver roadmap products and offerings. So that our MSP can leverage this technology to better serve their businesses to grow both the topline and the bottomline, but that partner success organization is there.
<unk> are a guide if you will to help them not just instrument. The technology then apply it to their business package that up so that they can have an offering and grow their wallet share for their SME. So that continues to be a strong point in the business model, we continue to invest and partner success and Thats one of the big reasons, why we believe our net retention number will continue to.
Due to progress in a number that Tim as Tim mentioned earlier, that's north of 110%.
Okay, that's great to hear and if I could just put a finer point on it just just where I'm coming from just to make sure I'm not mischaracterizing it.
With those quarter success resources that you guys have been pleased to drive those conversations around whether it's the technical and business challenges I'm guessing that there is also a bit of a.
Virtuous feedback loop, where those conversations are in fact, helping benefit you guys as far as guiding your internal product roadmap and the demand that the market is making up of enable is that fair.
Yes, that's exactly right. So the conversations it's not just us projecting our opinions or recommendations from the customers. It is very much a relationship and very much a partnership where we're actually.
Farming effectively feedback not just on the roadmap and how we can improve our products, but we should go next.
By the way that's a good example, as to why whether you can drive some of our M&A.
The number one challenge as we see managed service providers struggled with is the ability to scale and monitor SaaS applications. That's feedback directly that we're getting from the partners that better informs us and helps us to take a better view as to what we should build what we should partner and what we should buy and as one of the number one challenge is that these managed service providers.
Facing us is how can I own the cloud, how do I better monetize and rapid service around the SaaS applications and cloud infrastructure as a service to these SME small medium enterprises and spin panel was a perfect add add for that so you're exactly right Mike.
It's a it's a bidirectional conversation, where we're sitting down with our MSP is not just our PSM.
And my leadership team spent a lot of time.
At industry events, having one on ones with with customers and their offices trying to understand their pain points. So we can better service them and achieve their goals.
Terrific. Thank you again, guys I really do appreciate it.
Thanks, Mike Thanks, Mike.
Thank you currently we have no further questions. Therefore, I would like to hand back to John <unk> CEO of the company for any closing remarks, John . Please go ahead.
Thank you all and I appreciate your time and investment and investment in enable today and look forward to talking to you all sometime in November have a great day.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for being with US today have a lovely day ahead you may disconnect your lines now.
Yeah.
Yes.