Q2 2024 N-able Inc Earnings Call

August 8, 2024

N-Able's President and CEO , and Tim OBrien, EVP and CFO .

Operator: Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously a webcast on our Investor Relations website and investors.enable.com. There you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call.

Speaker Change: Following our prepared remarks, we will open the line for a question and answer session.

Operator: Following our prepared remarks, we will open the line for a question and answer session. This call is being simultaneously a webcast on our investor relations website and investors.enable.com. There you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call.

Speaker Change: this call is being simultaneously webcast on our investor relations to website and investors on enable do com

There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call.

Operator: Certain statements made during this call are 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 their filings with the SEC. Additional information concerning these statements and their risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC.

certain statements made during this call are forward-looking statements including those concerning our financial outlook our market opportunities and the impact of the global economic environment on our business

Speaker: Certain statements made during this call are four 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 is required by law. These statements are also subject to a number of risk and uncertainties, including those highlighted in today's earnings release, their filings with the SEC.

these statements are based on currently available information and assumptions when we undertake no duty to update this information except as required by law

Operator: 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. Copies are available from the SEC or on our investor relations website. Now, I will turn the call over to John.

Unnamed Speaker: 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 included 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 financial measures, we will be referring to non-GAAP financial measures, or Reconciliation of Certain Gap to Non-Gap Financial Measures discussed on today's call is available on our earnings press release on our Investor Relations website. Now, I will turn the call over to John.

Speaker Change: These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings for the SEC.

Speaker Change: 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.

Speaker: Additional information concerning these statements and their risk 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 investor relations website.

Operator: Copies are available from the SEC or on our Investor Relations website.

Copies are available from the SEC or on our Investor Relations website.

Operator: 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. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available on our earnings press release and our Investor Relations website.

furthermore we will discuss various non-gaap financial measures on today's call

Speaker: Furthermore, we will discuss various non-gap financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-gap financial measures. A reconciliation of certain gap to non-gap financial measures discussed on today's call is available on our earnings press release and our investor relations website.

unless otherwise specified when we refer to financial measures we will be referring to non-gaap financial measures

A reconciliation of certain GAAP and non-GAAP financial measures discussed on today's call is available on our earnings press release on our investor relations website.

Griffin Gyr: Now, I will turn the call over to John.

John Pagliuca: Thank you, Griffin, and welcome to everyone joining us on the call. Today, I will discuss our second quarter results. Our progress on top business objectives and share an update on the market environment and other strategic initiatives. Let's start with our results, where we exceeded the high end of our top- and bottom-line guidance. Revenue was $119.4 million, growing approximately 13% year-over-year, unreported, and on a constant currency basis. An adjusted EBITDA was $46.8 million, representing an adjusted EBITDA margin of 39%. This marks our seventh consecutive quarter operating north of the rule of 45 on a constant currency revenue growth and adjusted EBITDA basis.

Speaker Change: Now, I will turn the call over to John .

Griffin Gyr: Now, I will turn the call over to John.

John Pagliuca: and welcome to everyone joining us on the call. Revenue was $119.4 million, and Ajit Siddipata with $46.8 million.

John: and welcome to everyone joining us on the call. Today, I will discuss our second quarter results. We will discuss our progress on our top business objectives and share an update on the market environment and other strategic initiatives. Let's start with our results, where we exceeded the high end of our top and bottom line guidance. Revenue was $119.4 million, growing approximately 13% year-over-year on a reported and constant currency basis, and Adriss Adipata with $46.8 million, representing an adjusted EBITDA margin of 39%.

John: Thank you, Griffin.

John: and welcome to everyone joining us on the call

John: today i will discuss our second quarter results our progress on top business objectives

John: and share an update on the market environment and other strategic initiatives.

John: Let's start with our results, where we exceeded the high end of our top and bottom line guidance.

John Pagliuca: Let's start with our results, where we exceeded the high end of our top and bottom-line guidance. Revenue was $119.4 million, growing approximately 13% year-over-year, unreported, and on a constant currency basis. An adjusted EBITDA was $46.8 million, representing an adjusted EBITDA margin of 39%. This marks our seventh consecutive quarter operating north of the rule of 45 on a constant currency revenue growth and adjusted EBITDA basis.

John: Revenue was $119.4 million, growing approximately 13% year-over-year on a reported and on a constant currency basis.

John: And Adjusted Epita with $46.8 million dollars, representing an Adjusted Epita margin of 39%.

Unnamed Speaker: This marks our seventh consecutive quarter operating north of the Rule of 45 on a constant currency revenue growth and adjusted EBITDA basis. Security was a stand-up theme in the quarter. Small and medium-sized businesses are feeling acute pressure to protect their operations. According to the U.S. Chamber of Commerce Small Business Index Report, Sixty percent of surveyed companies cite cybersecurity as a top concern, and our extensive security portfolio of advanced endpoint detection and response.

John: this marks our seventh consecutive quarter operating north of the rule of forty-five on a constant currency revenue growth and adjusted ebitda basis

John Pagliuca: Security was a standout theme in the quarter. Small and medium-sized businesses are feeling acute pressure to protect their operations. According to the US Chamber of Commerce, small business index report, 60% of surveyed companies cite cybersecurity as a top concern. Our extensive security portfolio of advanced endpoint detection and response, managed detection response, password management, and email protection offers the critical protection they deserve. As one testament to our success in delivering enterprise-grade protection to the SMB, we now protect approximately 1.8 million endpoints with our EDR solution. Powerful capabilities and a frictionless buying experience are key to the success.

John: Security was a stand-up theme in the quarter.

John Pagliuca: Security was a standout theme in the quarter. Small and medium-sized businesses are feeling acute pressure to protect their operations. According to the US Chamber of Commerce, small business index report, 60% of surveyed companies cite cybersecurity as a top concern. Our extensive security portfolio of advanced endpoint detection and response, managed detection response, password management, and email protection, offers the critical protection they deserve. As one testament to our success in delivering enterprise-grade protection to the SMB, we now protect approximately 1.8 million endpoint with our EDR solution.

Speaker Change: small and medium siz businesses are feeling aacute pressure to protect their operation

Speaker Change: According to the U.S. Chamber of Commerce Small Business Index Report,

Speaker Change: Sixty percent of surveyed companies cite cybersecurity as a top concern.

John: Our extensive security portfolio of Advanced Endpoint Detection and Response, Managed Detection and Response, Password Management, and Email Protection offers the critical protection they deserve.

Unnamed Speaker: Managed Detection and Response, Password Management, and Email Protection, offers the critical protection they deserve is one testament to our success in delivering enterprise-grade protection to the SMB. We now protect approximately 1.8 million endpoints with our EDR solution.

John Pagliuca: Managed Detection and Response, Password Management, and Email Protection, offers the critical protection they deserve. Enabling one-minute deployment, self-provisioning, and easy configuration across the MSP's multi-tenant environment helps this robust security solution seamlessly protect SMBs while saving our MSPs time and money. Our newly launched MDR solution is also responding. This democratizes MSP's ability to add human interpretation to security alerts and incidents.

Speaker Change: As one testament to our success in delivering enterprise-grade protection to the SMB, we now protect approximately 1.8 million endpoints with our EDR solution.

Unnamed Speaker: Powerful capabilities and a frictionless buying experience are key to the success. Enabling one-minute deployment, self-provisioning, and easy configuration across the MSP's multi-tenant environment help this robust security solution seamlessly protect SMBs while saving our MSPs time and money. Our newly launched MDR solution is also responding. While still in the early innings, MDR's tracking is one of our fastest growing skews at this stage of its life cycle, and with a considerable bright spot in the quarter. N-Able MDR Augment MSP Operations. Empowering them to provide human eyes on glass without burdening themselves with increased internal staff, this democratizes MSP's ability to add human interpretation to security alerts and incidents. A true game-changer.

Speaker Change: Powerful capabilities and a frictionless buying experience are key to the success.

John Pagliuca: Powerful capabilities and a frictionless buying experience are key to the success. Enabling one-minute deployment, self-provisioning, and easy configuration across the MSP's multi-tenant environment, help this robust security solution seamlessly protect SMBs while saving our MSP's time and money.

John Pagliuca: Enabling one-minute deployment, self-provisioning, and easy configuration across the MSP's multi-tenant environment, help this robust security solution seamlessly protect SMBs while saving our MSP's time and money.

Speaker Change: Enabling one-minute deployment, self-provisioning, and easy configuration across the MSP's multi-tenant environment help this robust security solution seamlessly protect SMBs while saving our MSP's time and money.

John Pagliuca: Dean. Our newly launched MDR solution is also resonating. While still in the early innings, MDR is tracking as one of our fastest growing spews at this stage of its life cycle, and with a considerable bright spot in the quarter, enable MDR, augment MSP operations, and powering them to provide human eyes on glass without burdening themselves with increased internal staff. This democratizes MSP's ability to add human interpretation to security alerts and incidents. A true game changer. We are confident that we are well positioned to continue penetrating this fast growing multi-billion dollar MDR market.

John: Our newly launched MDR solution is also resonating.

Speaker Change: while stillll in the early innings and thers tracking is one of our fastest growing cues at this stage of a life cycle and with a considerable rightes bottom the quarter

John: N-Able MDR, Augment MSP Operations.

John: Empowering them to provide human eyes on glass without burdening themselves with increased internal staff.

John: this democratizes mmsp' ability to add human interpretation to securure alerts and incidents

Unnamed Speaker: We are confident that we are well positioned to continue penetrating this fast-growing, multi-billion dollar MDR market. Stopping an attack is paramount, but businesses must also ensure that they have software systems in place to recover data due to a successful cyber attack, natural disaster, unexpected outage, or any event that could cause data loss. Cove, our data protection solution, does just that.

John: A true game-changer.

John: We are confident that we are well positioned to continue penetrating this fast-growing multi-billion dollar MDR market.

John Pagliuca: While stopping an attack is paramount, businesses must also ensure that they have software systems in place to recover data due to successful fiber attack, natural disaster, unexpected outage, or any event that can cause data loss. Cove, our data protection solution, does this that. With Cove, MSPs can quickly, comprehensively, and affordably restore data and get back to business. Our Microsoft 365 backup solution is now protecting 2.4 million users, and we continue to grow our share in this critical data protection market segment. Security is a priority across organizations. Our quarterly results reflect this paradigm, with data protection and the security product group leading our growth.

Speaker Change: While stopping an attack is paramount, businesses must also ensure that they have software systems in place to recover data due to a successful cyber attack, natural disaster, unexpected outage, or any event that could cause data loss.

John Pagliuca: While stopping an attack is paramount, businesses must also ensure that they have software systems in place to recover data due to successful fiber attack, natural disaster, unexpected outage, or any event that can cause data loss. Cove, our data protection solution, does this that. With Cove, MSPs can quickly, comprehensively and affordably restore data and get back to business. Our Microsoft 365 backup solution is now protecting 2.4 million users, and we continue to grow our share in this critical data protection market segment.

Speaker Change: cove our data protest clusution does just that

Unnamed Speaker: With COVE, MSPs can quickly, comprehensively, and affordably restore data and get back to business. Our Microsoft 365 backup solution is now protecting 2.4 million users, and we continue to grow our share in this critical data protection market segment. Security is a priority across organizations. Our quarterly results reflect this trend, with data protection and the security product group leading our growth, with rising threat levels and cyber regulatory requirements creating considerable pressure and risk.

John: With COVE, MSPs can quickly, comprehensively, and affordably restore data and get back to business.

Speaker Change: our microsoftthree sixty-five backup solution is now procting two point four million users and we continue to grow our share in this critical data protection market segment

John: Security is a priority across organizations.

John Pagliuca: Security is a priority across organizations. Our quarterly results reflect this paradigm with data protection and the security product group leading our growth. With rising threat levels and cyber regulatory requirements created considerable pressure and risk, we are steadfast believers in the long-term demand for security software and are proud to bring MSPs and SMBs. The critical protection they deserve efficiently integrated into our IT management platform.

Speaker Change: Our quarterly results reflect this paradigm, with Data Protection and the Security Product Group leading our growth.

John Pagliuca: With rising threat levels and cyber regulatory requirements created considerable pressure and risk, we are steadfast believers in the long-term demand for security software and are proud to bring MSPs and SMBs. The critical protection they deserve efficiently integrated into our IT management platform.

Speaker Change: With rising threat levels and cyber regulatory requirements creating considerable pressure and risk

Unnamed Speaker: We are steadfast believers in the long-term demand for security software and are proud to bring MSPs and SMBs the critical protection they deserve efficiently integrated into our IT management platform. Let's now look at the progress made on our top business objectives. Our product development engine continues to deliver new capabilities, and in Data Protection, we dramatically improved our variable retention capabilities, allowing partners to meet changing legal and compliance requirements. We also further bolstered COBE's PSA integration capabilities. This PSA integration highlights product usage information, greatly enhancing the ease of billing.

Speaker Change: we are stead fast believers in the long-term demand for security software and are proud to bring mmsps and fmb the quitter protection they deserve efficiently integrated into our it managerment platform

John Pagliuca: Let's now look at the progress made in our top business objectives. Our product development engine continues to deliver new capabilities. In data protection, we dramatically improved our variable retention capabilities, allowing partners to meet changing legal and compliance requirements. We also further bolstered Cove's PSA integration capabilities. This PSA integration highlights product uses information, greatly enhancing the ease of billing. These strong value added capabilities with clear use cases build on our foundational product advantages of cloud-first multi-tenant architecture and favorable cost of ownership. We continue to further close position as a trusted protector of what our enterprise is most critical assets data.

John Pagliuca: Let's now look at the progress made on our top business objectives. This PSA integration highlights product usage information, greatly enhancing the ease of billing. These product efforts are responding in the market. On the go-to-market front, we made key advances. We are also seeing traction with our direct and upmarket customer segment. We are confident that long-term contracts are the right strategy for sustained success. The endpoint security space is also maturing, and while we address the short term, our focus is on investing and executing with rigor to drive enterprise value over the long term, and security and cloud backup spending are generally projected to grow faster than broader IT budgets.

Speaker Change: let's now look at the progress made in our top is of objectives

John Pagliuca: Let's now look at the progress made in our top business objectives. Our product development engine continues to deliver new capabilities. In data protection, we dramatically improved our variable retention capabilities, allowing partners to meet changing legal and compliance requirements. We also further bolstered Cove's PSA integration capabilities. This PSA integration highlights product uses information greatly enhancing the ease of billing. These strong value added capabilities with clear use cases build on our foundational product advantages of cloud-first multi-tenant architecture and favorable cost of ownership. We continue to further close position as a trusted protector of what our enterprise is most critical assets data.

Speaker Change: Our product development engine continues to deliver new capabilities.

John: and Data Protection, we dramatically improved our variable retention capabilities, allowing partners to meet changing legal and compliance requirements.

John: we also further bolstered co psa integration capabilities

John: this psa integration highlights product usage information greatly enhancing the ease of billing

Unnamed Speaker: These strong value-added capabilities with clear use cases build on our foundational product advantages of cloud-first multi-tenant architecture and favorable cost of ownership. We continue to further CODE's position as a trusted protector of our enterprise's most critical assets, data. We have also made great progress with our RMM platform. One exciting update is the strengthening of our identity centralization management capability. We now offer our partners an automated means of provisioning and deprovisioning users into N-Able. This highly requested feature is a powerful, time-saving enhancement.

John: these strong value added capabilities with clear use cases build on our foundational product advantages of cloud first mul-ant architecture in favorable cost of ownership

John: We continue to further co-position as a trusted protector of what are enterprises most critical assets, data.

John Pagliuca: We also made great progress with our RMM platforms. One exciting update is a strengthening of our identity centralization management capabilities. We now offer our partners an automated means of provisioning and deprovisioning users into Enable. This highly requested feature is a powerful time-saving enhancement. MSPs face considerable complexity and often tedious, repetitive process as they manage IT systems for multiple heterogeneous crime. Efficiency boosting improvements like identity centralization are critical for scaling their operations. These product efforts are resonating in the market. Incentral, our leading RMM platform, led the way in our new customer acquisition motion, representing core of the top five new customer deals in the quarter.

John: we also made great progress with our rm platforms

John Pagliuca: We also made great progress with our RMM platforms. One exciting update is a strengthening of our identity centralization management capabilities. We now offer our partners an automated means of provisioning and deprovisioning users into enable. This highly requested feature is a powerful time-saving enhancement. MSPs face considerable complexity and often tedious repetitive process as they manage IT systems for multiple heterogeneous crime. Efficiency boosting improvements like identity centralization are critical for scaling their operations. These product efforts are resonating in the market.

John: One exciting update is the strengthening of our identity centralization management capabilities.

John: we now offer our partners in automated means of provisioning and deprovisioning users into enable

John: This highly requested feature is a powerful time-saving enhancement.

Unnamed Speaker: MSPs face considerable complexity and often tedious, repetitive processes as they manage IT systems for multiple heterogeneous clients. Efficiency boosting improvements, like identity centralization, are critical for scaling their operations. These product efforts are resonating in the market, and Central, our leading RMM platform, led the way in our new customer acquisition efforts, representing four of the top five new customer deals in the quarter, and in Central customer lands, it was over 20% year over year.

Speaker Change: MSPs face considerable complexity and often tedious, repetitive process as they manage IT systems for multiple heterogeneous clients.

John: Efficiency boosting improvements, like identity centralization, are critical for scaling their operations.

John: These product efforts are resonating in the market.

Speaker Change: in central our leading rms platform led the way and our new customer acquisition motion representing fourre of the top five new customer deals in the quarter

John Pagliuca: Incentral, our leading RMM platform led the way in our new customer acquisition motion, representing core of the top five new customer deals in the quarter. An incentral customer land goes over 20% year over year. A growing number of MSP partner advocates and the strong presence of enable MSPs on the top third party MSP industry list, it was just confidence that our improvements are meeting the mark.

John Pagliuca: An incentral customer land goes over 20% year over year. A growing number of MSP partner advocates and the strong presence of enable MSPs on the top third party MSP industry list, it was just confidence that our improvements are meeting the mark.

John: And in central customer lands, it was over 20% year-over-year.

Unnamed Speaker: A growing number of MSP partner advocates and the strong presence of N-Able MSPs on the top third-party MSP industry lists gives us confidence that our improvements are meeting the mark. Our mission is to empower MSPs with software that makes IT simpler and safer, and we are delivering. On the go-to-market front, we made key advances. From a geographic perspective, we invested in our direct sales motion in German markets at the beginning of the year. While we are still in the early part of the investment curve, lead generation has already nearly doubled.

Speaker Change: a growing number of mc partner advocates and the strong presence of a val mmsp on the top third-party mp industry with gives us confidence that our improvements are meeting to mark

John Pagliuca: Our mission is to empower MSPs with software that makes IT simpler and safer, and we are delivering.

Speaker Change: Our mission is to empower MSPs with software that makes IT simpler and safer, and we are delivering.

John Pagliuca: Our mission is to empower MSPs with software that makes IT simpler and safer and we are delivering. On the go to market front, we made key advancements. From a geographic perspective, we invested in our direct sales motion in the German market at the beginning of the year. While we are still in the early part of the investment curve, lead generation has already nearly doubled. With the region representing significant GDP and MSP spending, we believe this investment will have a strong return over the coming months and years.

John Pagliuca: On the go-to-market front, we made key advancements. From a geographic perspective, we invested in our direct sales motion in the German market at the beginning of the year. While we are still in the early part of the investment curve, lead generation has already nearly doubled. With the region representing significant GDP and MSP spending, we believe this investment will have a strong return over the coming months and years. We are also seeing success with our business of security and co-master disaster recovery classes. These programs serve the dual purpose of educating customers on our product set and connecting them with MSPs, enabling them to learn from their fears.

Speaker Change: on the go to market front we made the advancements

Speaker Change: from a geographic perspective we invested in our direct sales motion in german markets at the beginning of the year

Speaker Change: while we are still in the early part of the investment curve lead generation has already nearly doubled

Unnamed Speaker: With the region representing significant GDP and MSP spending, we believe this investment will have a strong return over the coming months and years. We're also seeing success with our Business of Security and Cove Master Disaster Recovery Class. These programs serve the dual purpose of educating customers on our product set and connecting them with MSPs, enabling them to learn from their peers. Strategically Pairing a Human-in-the-Loop Approach with Efficient Digital Initiatives is part of our customer engagement model that allows us to profitably access the fragmented SME market.

Speaker Change: With the region representing significant GDP and MSP spending, we believe this investment will have a strong return over the coming months and years.

Speaker Change: we are also seeing success with our business of securities in cove master disaster recovery classes

John Pagliuca: We are also seeing success with our business of security and co-master disaster recovery classes. These programs serve the dual purpose of educating customers on our product set and connecting them with MSPs, enabling them to learn from their fears. Strategically pairing, a human-in-the-loop approach with efficient digital initiatives is part of our customer engagement model that allows us to profitably access the fragmented SME market. And we believe that our go beyond technology model is resonating with our partners and prospects.

John: These programs serve the dual purpose of educating customers on our product set and connecting them with MSPs, enabling them to learn from their peers.

John Pagliuca: Strategically pairing a human-in-the-loop approach with efficient digital initiatives is part of our customer engagement model that allows us to profitably access the fragmented SME market. And we believe that our go beyond technology model is resonating with our partners and prospects. We are also seeing traction with our direct and market customer segments. In general, IT sales continue to grow at a fast grip, and we start continued success with larger enterprise-focused MSPs. This success reflects both market trends and our operational achievement. From a market perspective, we have seen increasing IT complexity, prompting larger enterprises to outsource portions of their work to specialize to mature MSPs.

Speaker Change: Strategically pairing a human-in-the-loop approach with efficient digital initiatives is part of our customer engagement model that allows us to profitably access the fragmented SME market.

Unnamed Speaker: And we believe that our Go Beyond Technology model is responding with our partners and prospects. We are also seeing traction with our direct and upmarket customer segment. Internal IT sales continue to grow at a fast clip, and we saw continued success with larger, enterprise-focused MSPs.

John: And we believe that our Go Beyond Technology model is resonating with our partners and prospects.

John: We are also seeing traction with our direct and upmarket customer segment.

John Pagliuca: We are also seeing traction with our direct and market customer segments. In general, IT sales continue to grow at a fast grip and we start continued success with larger enterprise-focused MSPs. This success reflects both market trends and our operational achievement. From a market perspective, we have seen increasing IT complexity, prompting larger enterprises to outsource portions of their work to specialize to mature MSPs. And on the operational front, our product innovation expands our appeal across the market.

Speaker Change: Internal IT sales continue to grow at a fast clip and we saw continued success with larger enterprise focused MSPs.

John: This success reflects both market trends and our operational achievement. From a market perspective, we have seen increasing IT complexity prompting larger enterprises to outsource portions of their work to specialized, mature MSPs, and on the operational front, our product innovation expands our appeal across the market. Our recognition on the MES Mid-Market 100 stands as a testament to our success in the market.

Speaker Change: this success reflects both market trends and our operational achievement

Speaker Change: From a market perspective, we have seen increasing IT complexity prompting larger enterprises to outsource portions of their work to specialized, mature MSPs.

John Pagliuca: And on the operational front, our product innovation expands our appeal across the market.

Speaker Change: and on the operational front our product innovations expand our appeal across the market

John Pagliuca: Our recognition on the MES bid market 100 stands as a testament to our success and the specter.

Speaker Change: Our recognition on the MES Bid Market 100 stands as a testament to our success in the sector.

John Pagliuca: Our recognition on the MES bid market 100 stands as a testament to our success and the specter.

John Pagliuca: Now, turning to an update on our long-term contract initiative in the market environment. We enter 2024 with a strategic objective to transform our customer relationship. As the MSP market matures, so have our customer needs. Scaling MSPs for operational predictability and stability over consumption level flexibility. To meet this growing demand and to drive a more predictable commercial relationship for Enable, we ramped up our effort to transition customers from consumption and or month-to-month contracts to annual and multi-year agreements. We began the year with less than 10% of revenue from annual multi-year deal. Now, approximately 40% is from long-term contracts, and we expect most of our revenue will be long-term committed MRR by the end of the year.

John: Now, turning to an update on a long-term contract initiative in the market environment. We enter 2024 with a strategic objective to transform our customer relationship. As the MSP market matures, so have our customer needs. Scaling MSPs prefer operational predictability and stability over consumption-level flexibility. To meet this growing demand and to drive a more predictable commercial relationship for N-Able, we ramped up our effort to transition customers from consumption and or month-to-month contracts to annual and multi-year agreements.

Speaker Change: Now, turning to an update on our long-term contract initiative in the market environment.

John Pagliuca: Now, turning to an update on our long-term contract initiative in the market environment. We enter 2024 with a strategic objective to transform our customer relationship. As the MSP market matures, so have our customer needs. Scaling MSPs for operational predictability and stability over consumption level flexibility. To meet this growing demand and to drive a more predictable commercial relationship for enable, we ramped up our effort to transition customers from consumption and or month-to-month contracts to annual and multi-year agreements.

Speaker Change: We entered 2024 with a strategic objective to transform our customer relationship.

Speaker Change: as the nc market matures so have our customer needs

Speaker Change: Scaling MSPs prefer operational predictability and stability over consumption-level flexibility.

Speaker Change: to meet this growing demand and to drive a more predictable commercial relationship unable we ramped up our effort to yourtransition customers' print consumption and a month-month contracts to annual and multiyear agreements

John: We began the year with less than 10% of revenue from annual multi-year deals. Now, approximately 40% is from long-term contracts, and we expect most of our revenue will be long-term committed MRR by the end of the year. We believe this initiative cements our position as a strategic partner with our customers' operations and will drive stronger alignment and better long-term economics for both sides. Providing our MSPs with predictability drives multiple benefits for N-A

Speaker Change: we in the year with less than ten percent of revenue from annual multiyear deal

John Pagliuca: We began the year with less than 10% of revenue from annual multi-year deal. Now, approximately 40% is from long-term contracts and we expect most of our revenue will be long-term committed MRR by the end of the year. We believe this initiative demands our position as a strategic partner with our customer's operations and will drive stronger alignment and better long-term economics for both sides. Providing our MSP's predictability tries multiple benefits for enable.

Speaker Change: Now, approximately 40% is from long-term contracts, and we expect most of our revenue will be long-term committed MRR by the end of the year.

John Pagliuca: We believe this initiative demands our position as a strategic partner with our customer's operations and will drive stronger alignment and better long-term economics for both sides. Providing our MSP's predictability tries multiple benefits for enable. We believe entering into long-term contracts with our customers will help minimize future downward spending fluctuations and support strong growth retention. This initiative also frees up our partner success resources, allowing them to spend more time on symbiotic expansion-focused discussions, which can help drive high crossover and net retention. We are confident that long-term contracts are the right strategy for sustained success.

Speaker Change: We believe this initiative cements our position as a strategic partner with our customers' operations and will drive stronger alignment and better long-term economics for both sides.

Speaker Change: providing our mp's predictability dri multiple benefits enabable

John: We believe entering into long-term contracts with our customers will help minimize future downward spending fluctuations and support strong growth retention. This initiative also frees up our partner success resources, allowing them to spend more time on symbiotic, expansion-focused discussions, which can help drive high cross-sell and net retention. We are confident that long-term contracts are the right strategy for sustained success. That said, there have been near-term negative financial impacts as customers optimize their estates before signing long-term deals.

Speaker Change: we believe entering into long-term contractswithour customers help minimize future downward spending fluctuation and support strong gross retention

John Pagliuca: We believe entering into long-term contracts with our customers will help minimize future downward spending fluctuations and support strong growth retention. This initiative also frees up our partner success resources allowing them to spend more time on symbiotic expansion focused discussions, which can help drive high crossover and net retention. We are confident that long-term contracts are the right strategy for sustained success.

Speaker Change: this initiative also freeze up our partner successor resources allowing them to spend more time on symbiotic expansion focused discussions which can help drive high cross-sell and net retention

Speaker Change: We are confident that long-term contracts are the right strategy for sustained success.

John Pagliuca: That said, there have been near-term negative financial impact as customers optimize their state before signing long-term deal.

John Pagliuca: That said, there have been near-term negative financial impacts as customers optimize their state before signing long-term deals. Turning to the market, as MSPs continue to scale and strive for operational excellence, they remain cost-illigent and face take customer budget. The endpoint security space is also maturing. Although these factors have weighed or not growth this year, our general checks with MSPs remain positive. And MSPs continue to provide mission-critical IT and security services to hundreds of thousands of organizations globally. Customers continue to grow their business with enable with our bookings up 20% year over year. And while we navigate short-term, our focus is on investing and executing with rigor to drive enterprise value over the long-term.

Speaker Change: That said, there have been near-term negative financial impacts as customers optimize their estates before signing long-term deals.

Tim: Turning to the market, as MSPs continue to scale and strive for operational excellence, they remain cost-diligent and face tight customer budgets. The F-Point security space is also maturing. Although these factors have weighed on our growth this year, our channel checks with MSPs remain positive, and MSPs continue to provide mission-critical IT and security services to hundreds of thousands of organizations globally, customers continue to grow their business with N-Able, with our bookings up 20% year over year.

Speaker Change: turning to the market as mmsps continue to scale and strive for operational excellence they remain cost diligent and face take customer budgets

John Pagliuca: Turning to the market, as MSPs continue to scale and strive for operational excellence, they remain cost-illigent and face take customer budget. The endpoint security space is also maturing. Although these factors have weighed or not growth this year, our general checks with MSPs remain positive. And MSPs continue to provide mission critical IT and security services to hundreds of thousands of organizations globally.

Speaker Change: The F-Point security space is also maturing.

Speaker Change: although these factors have weghed on our growth this year our annel checks with msp remain positive and mmsps continue to provide mission critical it and security services to hundreds of thousands organizations globally

Speaker Change: Customers continue to grow their business with N-Able, with our bookings up 20% year-over-year.

John Pagliuca: Customers continue to grow their business with enable with our bookings up 20% year over year.

Tim: And while we navigate the short term, our focus is on investing and executing with rigor to drive enterprise value over the long term. Our gaze is fixed on two clear objectives. One top objective is modernizing our IT management platform. Modernization efforts have already delivered new cloud management capabilities, core performance upgrades, and a streamlined user experience. We believe that continuing to execute our strategic focus areas will allow us to capture a broader and deeper slice of the expanding SME IT market and propel our growth.

Speaker Change: And while we navigate short term, our focus is on investing and executing with rigor to drive enterprise value over the long term.

John Pagliuca: And while we navigate short-term, our focus is on investing and executing with rigor to drive enterprise value over the long-term.

John Pagliuca: Our gaze aspects on two clear objectives. One top objective is modernizing our IT management platform. Modernization efforts have already delivered a new cloud management capability, core performance upgrades, and a streamlined user experience. We believe that continuing to execute the strategic focus area will allow us to capture a broader and deeper slice of the expanding SME IT estate and propel our growth.

Speaker Change: Our gaze is fixed on two clear objectives.

Speaker Change: One top objective is modernizing our IT management platform.

Speaker Change: Modernization efforts have already delivered a new cloud management capabilities, core performance upgrades, and a streamlined user experience.

Speaker Change: We believe that continuing to execute the strategic focus area will allow us to capture a broader and deeper slice of the expanding SME IT estate and propel our growth.

John Pagliuca: Another objective is deepening our presence and security. Protection and resilience are paramount to customers. And security and cloud backup spending are generally projected as growth faster than broader IT budgets. We believe COV, MDR, and our powerful IT management platform, which is tailored to MSPs' unique needs, positions us to win in these attractive growth categories.

Tim: Another objective is deepening our presence in security. Protection and Resilience are paramount to customers, and security and cloud backup spending are generally projected to grow faster than broader IT budgets. We believe Cove, MDR, and our powerful IT management platform, which is tailored to MSPs' unique needs, positions us to win in these attractive growth categories. With that said, I would like to turn the call over to Tim to discuss our financial results and outlook. And then I'll circle back for some closing remarks. Tim?

Speaker Change: Another objective is deepening our presence in security.

John Pagliuca: Another objective is deepening our presence and security. Protection and resilience are paramount to customers. And security and cloud backup spending are generally projected as growth faster than broader IT budgets. We believe COV, MDR, and our powerful IT management platform, which is tailored to MSPs unique needs, positions us to win in these attractive growth categories.

Speaker Change: protection and resilience are paramount to customers

Speaker Change: and security and cloud backup spending are generally projected to grow faster than broader IT budgets.

Speaker Change: We believe Cove, MDR and our powerful IT management platform, which is tailored to MSP's unique needs, positions us to win in these attractive growth categories.

Timothy OBrien: With that, I would like to turn the call over to Tim to discuss our financial results and outlook.

Speaker Change: With that, I would like to turn the call over to Tim to discuss our financial results and outlook. And then I'll circle back for some closing remarks. Tim?

John Pagliuca: With that, I would like to turn the call over to Tim to discuss our financial results and outlook. And then I'll circle back for some closing remarks.

Timothy OBrien: And then I'll circle back for some closing remarks.

Timothy OBrien: Tim? Thank you, John. And thank you all for joining us today. Our second quarter results were strong, exceeding guidance on the top and bottom lines. SMEs and MSPs continue to rely on our IT management, data protection, and security solutions to produce critical business outcomes, with data protection and security leading our growth in the quarter. For our second quarter results, total revenue was $119.4 million, representing approximately 13% year-over-year growth on a reported and constant currency basis. Subscription revenue was $117.4 million, representing approximately 14% year-over-year growth on a reported and constant currency basis. Other revenue, which consists primarily of revenue from the sale of maintenance services associated with the historical sales of perpetual licenses and revenue from professional services, was $2 million.

Tim: Thank you, John, and thank you all for joining us today. Our second quarter results were strong, exceeding guidance on the top and bottom lines. SMEs and MSPs continue to rely on our IT management, data protection, and security solutions to produce critical business outcomes, with data protection and security leading our growth in the quarter. For our second quarter results, total revenue was $119.4 million, representing approximately 13% year-over-year growth on a reported and constant currency basis.

Timothy OBrien: Tim? Thank you, John.

Tim: Subscription revenue was $117.4 million, representing approximately 14% year-over-year growth on a reported and constant currency basis. Other revenue, which consists primarily of revenue from the sale of maintenance services associated with the historical sales of perpetual licenses and revenue from professional services, was $2 million. We ended the quarter with 2,194 partners contributing $50,000 or more of ARR, which is up approximately 1% year over year. Partners with over $50,000 of ARR now represent approximately 56% of our total ARR, up from approximately 55% a year ago.

Tim OBrien: thank you john and thank you all for joining us today

Timothy OBrien: And thank you all for joining us today. Our second quarter results were strong, exceeding guidance on the top and bottom lines. SMEs and MSPs continue to rely on our IT management, data protection, and security solutions to produce critical business outcomes with data protection and security leading our growth in the quarter. For our second quarter results, total revenue was $119.4 million, representing approximately 13% year over year growth on a reported and constant currency basis.

Tim OBrien: our second quarter results were strong exceeding guidance on the top and bottom lines

Speaker Change: sm and mmsds continue to rely on our it management data protection and security solutions to produce critical business outcome with data protection and security leading our growth in the quarter

Speaker Change: for our second quarter result total revenue was one hundred nineteen point four million dollars representing approximately thirteen percent year over-year growth on a reported and constant currency basis

Speaker Change: Subscription revenue was $117.4 million dollars, representing approximately 14% year-over-year growth on a reported and constant currency basis.

Timothy OBrien: Subscription revenue was $117.4 million, representing approximately 14% year over year growth on a reported and constant currency basis. Other revenue, which consists primarily of revenue from the sale of maintenance services associated with the historical sales of perpetual licenses and revenue from professional services was $2 million. We ended the quarter with 2,194 partners, contributing $50,000 or more of ARR, which is approximately 1% year over year. Partners with over $50,000 of ARR now represent approximately 56% of our total ARR up from approximately 55% a year ago.

Speaker Change: Other revenue, which consists primarily of revenue from the sale of maintenance services associated with the historical sales of perpetual licenses and revenue from professional services, was $2 million.

Timothy OBrien: We ended the quarter with 2,194 partners, contributing $50,000 or more of ARR, which is approximately 1% year over year. Partners with over $50,000 of ARR now represent approximately 56% of our total ARR, up from approximately 55% a year ago. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 108% or 106% on a constant currency basis. As a reminder, our pricing and packaging changes, coupled with rationalization related to our long-term contract initiative, began materially impacting net revenue retention starting in the second quarter.

Speaker Change: We ended the quarter with 2,194 partners contributing $50,000 or more of ARR, which is up approximately 1% year-over-year.

Speaker Change: Partners with over $50,000 of ARR now represent approximately 56% of our total ARR up from approximately 55% a year ago.

Speaker Change: Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 108%.

Timothy OBrien: Dollar-based net revenue retention which is calculated on a trailing 12 month basis was approximately 108% or 106% on a constant currency basis. As a reminder, our pricing and packaging changes coupled with rationalization related to our long-term contract initiative began materially impacting net revenue retention starting in the second quarter.

John Pagliuca: or 106% on a constant currency basis. Non-GAAP earnings per share were $0.14 in the quarter based on 187 million weighted average diluted shares, and ASC 606 Accounting Standards call for a portion of on-premise revenue. 606 treatment drives lumpiness in revenue results, which flows through to our adjusted EBITDA and will impact revenue and adjusted EBITDA in future periods. Turning to our financial outlook, our guidance accounts for the following elements. First, we are assuming FX rates of 1.08 for the Euro and 1.27 for the Pound for the remainder of 2024, along with updates to other currencies to more closely reflect the current rate environment. In closing, we were pleased with the second quarter and our ability to raise the midpoint of our full-year revenue and adjusted EBITDA outlook.

Speaker Change: or one hundred and six percent on a constant currency basis

Speaker Change: As a reminder, our pricing and packaging changes, coupled with rationalization related to our long-term contract initiative, began materially impacting net revenue retention starting in the second quarter.

Timothy OBrien: Turning to profit and margins, notes 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. Second quarter gross margin was 84.7% compared to 84.8% in the same period in 2023. Second quarter adjusted evita was $46.8 million, up approximately 34% year over year, representing approximately 39% adjusted evita margin. Unlettered free cashflow was $35.5 million in the second quarter. Capac, inclusive of $1.9 million of capitalized software development costs, was $5.1 million or 4.3% of revenue.

Unnamed Speaker: Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 108%, or 106% on a constant currency basis. As a reminder, our pricing and packaging changes, coupled with rationalization related to our long-term contract initiative, began materially impacting net revenue retention starting in the second quarter. 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 reconciliations provided in today's press release.

Speaker Change: 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 reconciliations provided in today's press release.

Timothy OBrien: Turning to profit and margins, notes that unless otherwise stated, all references to profit measures and expenses are calculated on a non-gap basis and exclude the items outlined in the gap to non-gap reconciliation provided in today's press release. Second quarter gross margin was 84.7% compared to 84.8% in the same period in 2023. Second quarter adjusted evita was $46.8 million up approximately 34% year over year representing approximately 39% adjusted evita margin. Unlettered free cashflow was $35.5 million in the second quarter.

Tim: Second quarter gross margin was 84.7% compared to 84.8% in the same period in 2023. Second quarter adjusted EBITDA was $46.8 million, up approximately 34% year-over-year, representing approximately 39% adjusted EBITDA margin on Leopard Free Cash Flow of $35.5 million in the second quarter. CapEx, inclusive of $1.9 million of capitalized software development costs, with $5.1 million, or 4.3% of revenue. Non-GAAP earnings per share was $0.14 in the quarter based on 187 million weighted average diluted shares.

Speaker Change: Second quarter gross margin was 84.7% compared to 84.8% in the same period in 2023.

Speaker Change: second quarter adjusted ebitda was forty-six point eight million dollars approximately thirty-four percent year-over-year representing approximatelylead thirty nine percent adjusted ebitda margin

Speaker Change: Unlevered free cash flow was $35.5 million in the second quarter.

Speaker Change: CAPEX, inclusive of $1.9 million of capitalized software development costs, was $5.1 million, or 4.3% of revenue.

Timothy OBrien: Capac, inclusive of $1.9 million of capitalized software development costs was $5.1 million or $4.3% of revenue. Non-gap earnings per share was 14 cents in the quarter based on 187 million weighted average diluted shares. We ended the quarter with approximately $158 million of cash and an outstanding loan principal balance of approximately $340 million representing net leverage of approximately 1.1 times. Approximately 46% of our revenue was outside of North America in the quarter.

Timothy OBrien: Non-GAAP earnings per share was 14 cents in the quarter based on 187 million weighted average diluted shares. We ended the quarter with approximately $158 million of cash and an outstanding loan principal balance of approximately $340 million, representing net leverage of approximately 1.1 times. Approximately 46% of our revenue was outside of North America in the quarter.

Speaker Change: Non-GAAP earnings per share was $0.14 in the quarter, based on 187 million weighted average diluted shares.

Tim: We ended the quarter with approximately $158 million of cash and an outstanding loan principal balance of approximately $340 million, representing net leverage of approximately 1.1 times. Additionally, approximately 46% of our revenue was outside of North America in the quarter. Before turning to our financial outlook, I will give commentary on our second quarter results. Revenue was above the high end of our guidance range. Our performance was driven by steady demand, a positive FX impact of approximately $500,000 relative to expectation, and a positive net impact from our long-term contract initiative.

Speaker Change: We ended the quarter with approximately $158 million of cash and an outstanding loan principal balance of approximately $340 million, representing net leverage of approximately 1.1 times.

Speaker Change: approximately forty six percent of our revenue was outside of north america in the quarter

Timothy OBrien: Before turning to our financial outlook, I will give commentary on our second quarter results. Revenue was above the high end of our guidance range. Our performance was driven by steady demand, a positive impact of approximately $500,000 relative to expectation, and a positive net impact from our long-term contract initiative. The net effect of our long-term contract initiative in the quarter reflects a positive impact from accelerated revenue recognition in accordance with ASC 606, triggered by the signing of long-term contracts, partially offset by the spend rationalization from some customers that John mentioned. About 15% of our ARR is on-premise in nature.

Tim: The net effect of our long-term contract initiative in the quarter reflects a positive impact from accelerated revenue recognition in accordance with ASC 606 triggered by the signing of long-term contracts partially offset by the spend rationalization from some customers that John mentioned. About 15% of our ARR is on-premise in nature, and ASC 606 Accounting Standards call for a portion of on-premise revenue in long-term contracts to be recognized as a lump sum in the month the contract begins, with the remainder recognized routably over the contract term.

Speaker Change: before turning to our financial outlook i will give commentary on our second quarter results

Speaker Change: Revenue was above the high end of our guidance range.

Speaker Change: Our performance was driven by steady demand, a positive FX impact of approximately $500,000 relative to expectation, and a positive net impact from our long-term contract initiative.

Speaker Change: The net effect of our long-term contract initiative in the quarter reflects a positive impact from accelerated revenue recognition in accordance with ASC 606 triggered by the signing of long-term contracts, partially offset by the spend rationalization from some customers that John mentioned.

Timothy OBrien: An ASC 606 accounting standard called for a portion of on-premise revenue in long-term contracts to be recognized as a lump sum in the month the contract begins, with the remainder recognized radically over the contract term. This result in an increase amount of in-period revenue recognized from customers that transitioned from month-to-month arrangements to long-term contracts. 606 treatment drives lumpiness and revenue results, which flows through to our adjusted EBITDA and will impact revenue and adjusted EBITDA in future periods. We expect the net positive impact from the long-term contract initiative to be most pronounced in the second quarter and to result in a net positive impact to revenue for the year.

John: About 15% of our ARR is on-premise in nature.

Timothy OBrien: About 15% of our ARR is on-premise in nature. An ASC 606 accounting standard called for a portion of on-premise revenue in long-term contracts to be recognized as a lump sum in the month the contract begins with the remainder recognized radically over the contract term. This result in an increase amount of in-period revenue recognized from customers that transitioned from month to month arrangements to long-term contracts. 606 treatment drives lumpiness and revenue results, which flows through to our adjusted EBITDA, and will impact revenue and adjusted EBITDA in future periods. We expect the net positive impact from the long-term contract initiative to be most pronounced in the second quarter and to result in a net positive impact to revenue for the year.

Speaker Change: and ASC-606 Accounting Standards call for a portion of on-premise revenue

Speaker Change: in long-term contract to recognize as a lumpthum in the month the contract begins with the remainder of recognized ratably over the contract term

Tim: This results in an increased amount of in-period revenue recognized from customers that transition from month-to-month arrangements to long-term contracts. 606 treatment drives lumpiness in revenue results, which flows through to our adjusted EBITDA and will impact revenue and adjusted EBITDA in future periods. We expect the net positive impact from the long-term contract initiative to be most pronounced in the second quarter and to result in a net positive impact on revenue for the year.

Speaker Change: This results in an increased amount of in-period revenue recognized from customers that transition from month-to-month arrangements to long-term contracts.

Speaker Change: 606 treatment drives lumpiness in revenue results, which flows through to our adjusted EBITDA and will impact revenue and adjusted EBITDA in future periods.

Speaker Change: We expect the net positive impact from the long-term contract initiative to be most pronounced in the second quarter and to result in a net positive impact to revenue for the year.

Timothy OBrien: Turning to our financial outlook, our guidance accounts for the following elements. First, we are assuming FX rates of 1.08 for the euro and 1.27 for the pound for the remainder of 2024. Along with updates to other currencies to more closely reflect the current rate environment. These updated rates drive approximately $1.3 million of positive revenue impacts for the remainder of 2024, relative to our FX assumptions during our May call. Second, our guidance reflects continued success in converting customers to long-term contracts. We anticipate the net revenue impact associated with our long-term contract initiative will be less pronounced in the second half of the year.

Tim: Turning to our financial outlook, our guidance accounts for the following elements. First, we are assuming FX rates of 1.08 for the euro and 1.27 for the pound for the remainder of 2024, along with updates to other currencies to more closely reflect the current rate environment.

Speaker Change: turning to our financial outlook our guidance accounts for the following element

Speaker Change: First, we are assuming FX rates of 1.08 for the Euro and 1.27 for the Pound for the remainder of 2024, along with updates to other currencies to more closely reflect the current rate environment.

Tim: These updated rates drive approximately $1.3 million of positive revenue impacts for the remainder of 2024 relative to our FX assumptions during our May call. Additionally, our guidance reflects continued success in converting customers to long-term contracts. We anticipate the net revenue impact associated with our long-term contract initiative will be less pronounced in the second half of the year. Additionally, we anticipate net retention will face moderate near-term pressures to drive long-term benefits. Third, we anticipate operating in an uncertain macroenvironment.

Speaker Change: These updated rates drive approximately $1.3 million of positive revenue impacts for the remainder of 2024 relative to our FX assumptions during our May call.

Speaker Change: second our guidance reflects continued success in converting customers to long-term contracts we anticipate the net revenue impact associated with our long-term contract initiative will be less pronounced in the second half of the year

Timothy OBrien: We anticipate net retention will face moderate near-term pressures to drive long-term benefits.

Speaker Change: We anticipate net retention will face moderate near-term pressures to drive long-term benefits.

Timothy OBrien: Third, we anticipate operating in an uncertain macro environment. With that in mind, for the third quarter of 2024, we expect total revenue in the range of $114.5 to $115 million, representing 6 to 7% year-over-year growth on a reported basis and approximately 7% growth on a constant currency basis. We expect third quarter adjusted EBITDA in the range of $39.5 to $40 million, representing an adjusted EBITDA margin of 35%. For the full year 2024, we now expect total revenue of $463 to $465 million, representing approximately 10% year-over-year growth on a reported and constant currency basis. We are raising our adjusted EBITDA outlook and now expect full year-adjusted EBITDA in the range of $165.5 to $167.5 million.

Speaker Change: Third, we anticipate operating in an uncertain macroenvironment.

Timothy OBrien: Third, we anticipate operating in an uncertain macro environment. With that in mind for the third quarter of 2024, we expect total revenue in the range of $114.5 to $115 million representing 6 to 7% year-over-year growth on a reported basis and approximately 7% growth on a constant currency basis. We expect third quarter adjusted EBITDA in the range of $39.5 to $40 million, representing an adjusted EBITDA margin of 35%. For the full year 2024, we now expect total revenue of $463 to $465 million, representing approximately 10% year-over-year growth on a reported and constant currency basis.

Tim: With that in mind, for the third quarter of 2024, we expect total revenue in the range of $114.5 to $115 million, representing 6 to 7% year-over-year growth on a reported basis and approximately 7% growth on a constant currency basis. We expect third-quarter adjusted EBITDA in the range of $39.5 to $40 million, representing an adjusted EBITDA margin of 35%. For the full year 2024, we now expect total revenue of $463 to $465 million, representing approximately 10% year-over-year growth on a reported and constant currency basis.

Speaker Change: With that in mind, for the third quarter of 2024, we expect total revenue in the range of $114.5 to $115 million, representing 6-7% year-over-year growth on a reported basis, and approximately 7% growth on a constant currency basis.

Speaker Change: We expect third quarter adjusted EBITDA in the range of $39.5 to $40 million, representing an adjusted EBITDA margin of 35%.

Speaker Change: For the full year 2024, we now expect total revenue of $463 to $465 million, representing approximately 10% year-over-year growth on a reported and constant currency basis.

Tim: We are raising our Adjusted EBITDA outlook and now expect full-year Adjusted EBITDA in the range of $165.5 to $167.5 million, off approximately 16% year-over-year at the midpoint and representing an approximately 36% Adjusted EBITDA margin. While 606 Dynamics created shifts within the quarters, we are slightly raising the midpoint of our full-year revenue outlook and profit outlook relative to our last guide. We reiterate that we expect CapEx, which includes capitalized software development costs, to be approximately 5% of total revenue in 2024.

Timothy OBrien: We are raising our adjusted EBITDA outlook and now expect full year-adjusted EBITDA in the range of $165.5 to $167.5 million. Up approximately 16% year-over-year at the midpoint and representing an approximately 36% adjusted EBITDA margin. While 606 dynamics created shifts within the quarters, we are slightly raising the midpoint of our full-year revenue outlook and profit outlook relative to our last guide. We reiterate that we expect CAPEX, which includes capitalized software development costs, will be approximately 5% of total revenue for 2024.

Speaker Change: We are raising our adjusted EBITDA outlook and now expect full year adjusted EBITDA in the range of $165.5 to $167.5 million, up approximately 16% year-over-year at the midpoint, and representing an approximately 36% adjusted EBITDA margin.

Timothy OBrien: Up approximately 16% year-over-year at the midpoint and representing an approximately 36% adjusted EBITDA margin. While 606 dynamics created shifts within the quarters, we are slightly raising the midpoint of our full-year revenue outlook and profit outlook relative to our last guide. We reiterate that we expect CAPEX, which includes capitalized software development costs, will be approximately 5% of total revenue for 2024. We also expect the adjusted EBITDA conversion to unlearn free cash flow to be approximately 64% for the full year. We expect total weighted average diluted shares outstanding of approximately 187 to 1808 million for the third quarter and 1807 to 1809 million for the full year.

Speaker Change: While 606 Dynamics created shifts within the quarters, we are slightly raising the midpoint of our full-year revenue outlook and profit outlook relative to our last guide.

Speaker Change: We reiterate that we expect CAPEX, which includes capitalized software development costs, will be approximately 5% of total revenue for 2024.

Tim: We also expect adjusted EBITDA conversions to unleveraged free cash flow to be approximately 64% for the full year. We expect total weighted average diluted shares outstanding to be approximately $187 to $188 million for the third quarter and $187 to $189 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 28% in the third quarter and 25% for the full year.

Speaker Change: We also expect adjusted EBITDA conversion to unleveraged free cash flow to be approximately 64% for the full year.

Timothy OBrien: We also expect the adjusted EBITDA conversion to unlearn free cash flow to be approximately 64% for the full year. We expect total weighted average diluted shares outstanding of approximately 187 to 1808 million for the third quarter and 1807 to 1809 million for the full year. Finally, we expect our non-GAP tax rate to be approximately 28% in the third quarter and 25% for the full year.

Speaker Change: We expect total weighted average diluted shares outstanding of approximately $187 to $188 million for the third quarter and $187 to $189 million for the full year.

Timothy OBrien: Finally, we expect our non-GAAP tax rate to be approximately 28% in the third quarter and 25% for the full year.

Speaker Change: finally we expect our non-gaap x rate tobe approximately twenty eight percent in the thirdquarter and twenty-five percent for the full year

Timothy OBrien: In closing, we were pleased with the second quarter and our ability to raise the midpoint of our full-year revenue and adjusted EBITDA outlook. While we see some transitory pressures, MSP level retention and new customer acquisition have remained steady, which we believe set a strong foundation for future growth. We will aim to make selective growth investments capture the growing market opportunity and with our strong profit margins, cash generation, and balance sheet. We also continue to explore avenues for inorganic growth.

John: In closing, we were pleased with the second quarter and our ability to raise the midpoint of our full-year revenue and adjusted EBITDA output. While we see some transitory pressures, MSP level retention and new customer acquisition have remained steady, which we believe sets a strong foundation for future growth. We will aim to make selective growth investments to capture the growing market opportunity. And with our strong profit margins, cash generation, and balance sheet, we will also continue to explore avenues for inorganic growth. Now I will turn it over to John for his closing remarks.

Speaker Change: In closing, we were pleased with the second quarter and our ability to raise the midpoint of our full year revenue and adjusted EBITDA output.

Timothy OBrien: In closing, we were pleased with the second quarter and our ability to raise the midpoint of our full year revenue and adjusted EBITDA outlook. While we see some transitory pressures, MSP level retention and new customer acquisition have remained steady, which we believe set a strong foundation for future growth. We will aim to make selective growth investments capture the growing market opportunity and with our strong profit margins, cash generation and balance sheet.

Speaker Change: while we see some transitory pressures t level retention and new customer acquisition have remained steady which we believe that a strong foundation for future growth

Timothy OBrien: We also continue to explore avenues for inorganic growth.

Speaker Change: We will aim to make selective growth investments to capture the growing market opportunity, and with our strong profit margins, cash generation, and balance sheet, we also continue to explore avenues for inorganic growth.

John Pagliuca: Now I will turn it over to John for closing remarks. Thanks, Jim.

John Pagliuca: Now I will turn it over to John for closing remarks Thanks, Jim. We believe we've made tremendous progress across the business in the second quarter and have ambitious goals for the second half of the year and beyond. Our view of the long-term opportunity and our growth outlook remains dead fast. With platform modernization and security fueling our product vision, we believe successful tactical execution can meaningfully drive the enabled growth algorithm forward. Primary drivers include our contract initiative and market shift towards larger MSPs to sustain growth retention in the high 80s to low 90s.

Speaker Change: Now, I will turn it over to John for closing remarks.

John: We believe we've made tremendous progress across the business in the second quarter and have ambitious goals for the second half of the year and beyond. Our view of the long-term opportunity and our growth outlook remain steadfast, with platform modernization and security fueling our product vision. We believe successful, tactical execution can meaningfully drive the N-Able growth algorithm forward. Primary drivers include our contract initiative and market shift towards larger MSPs to sustain gross retention in the high 80s to the low 90s, successful cross-selling of our expanded product set to drive net retention in the 110% range, and growth in the market presence of code, both with MSPs and internal IT, coupled with our new MDR solution to fuel new customer acquisition and contribute an In total, we aim to grow the business in the mid-teens.

John Pagliuca: We believe we've made tremendous progress across the business in the second quarter and have ambitious goals for the second half of the year and beyond. Our view of the long-term opportunity and our growth outlook remains dead fast. With platform modernization and security fueling our product vision, we believe successful tactical execution can meaningfully drive the enabled growth algorithm forward. Primary drivers include our contract initiative and market shift towards larger MSPs to sustain growth retention in the high 80s to low 90s. Successful cross-selling of our expanded products set to drive net retention in the 110% range and grow into market presence of Cove both with MSPs and internal IT, coupled with our new MDR solution, to fuel new customer acquisition and contribute an additional mid-single digits of growth.

John: thanks jann

John: We believe we've made tremendous progress across the business in the second quarter and have ambitious goals for the second half of the year and beyond.

John: Our view of the long-term opportunity and our growth outlook remain steadfast.

John: with platform modernization and security fueling our product vision

John: We believe successful, tactical execution can meaningfully drive the N-Able Growth Algorithm forward.

John: Primary drivers include our contract initiative and market shift towards larger MSPs to sustain gross retention in the high 80s to low 90s.

Speaker Change: Successful cross-selling of our expanded product set to drive net retention in the 110% range.

John Pagliuca: Successful cross-selling of our expanded products set to drive net retention in the 110% range and grow into market presence of cove both with MSPs and internal IT, coupled with our new MDR solution, to fuel new customer acquisition and contribute an additional mid-single digits of growth.

John Pagliuca: and growing the market presence of Code, both with MSPs and internal IT, coupled with our new MDR solution to fuel new customer acquisition and contribute an additional mid-single digits of growth. As the recent global outage demonstrated, IT is needed to keep the world running.

Speaker Change: and growing the market presence of co both with msp s and internal it coupled with our new mddr solution to fuel new customer acquisition and contribute an additional mid-single digits of growth

John Pagliuca: In total, we aim to grow the business in the mid-teens. As the recent global outage demonstrated, IT is needed to keep the world running.

Speaker Change: In total...

John Pagliuca: In total, we aim to grow the business in the mid-teens. As the recent global outage demonstrated, IT is needed to keep the world running.

Operator: As the recent global outage demonstrated, IT is needed to keep the world running. We believe that our mission to empower MSPs with leading technology has never been more important, and we are excited to continue to drive successful IT outcomes for businesses across the globe. Operator?

Speaker Change: We aim to grow the business in the mid-teens.

Speaker Change: As the recent global outage demonstrated, IT is needed to keep the world running.

Operator: We believe that our mission to empower MSPs with leading technology has never been more important, and we are excited to continue to drive successful IT outcomes for businesses across the globe. With that, we will open up the line for questions. Operator? Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally.

Speaker Change: We believe that our mission to empower MSPs with leading technology has never been more important, and we are excited to continue to drive successful IT outcomes for businesses across the globe.

Operator: We believe that our mission to empower MSPs with leading technology has never been more important and we are excited to continue to drive successful IT outcomes for businesses across the globe and with that, we will open up the line for questions.

Speaker Change: and with that we will open up the lineines for questions operator

Operator: Operator? Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now.

Operator: Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally.

Speaker Change: thank you very much if you would like to ask a question please press star followed by one on your telephone and keep ad now if you change your mind please press star followed by two when preparing to ask a question please ensure your phone is unmuted locally

Operator: If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally.

Matthew Hedberg: We have our first question from Matthew Hedberg from RBC. Matthew, your line is open.

Speaker Change: We have our first question from Matthew Hedberg from RBC. Matthew, your line is open.

Matthew Hedberg: We have our first question from Matthew Hedberg from RBC.

Michael Richards: Hey guys, it's Mike Richards on for Matt. Thanks for taking the question. Maybe you guys could talk more about the optimization you're seeing from customers. How has that come in relative to your expectations? Where are you seeing it from customers in terms of your product portfolio? Could you quantify that positive impact that you've seen? Was this already contemplated in guidance setting into the quarter? Thanks.

Michael Richards: Hey guys, it's Mike Richards on for Matt. Thanks for taking the question. Maybe you guys could talk more about the optimization you're seeing from customers, like, how does that come in relative to your expectations? Where are you seeing it from customers in terms of your product portfolio? And then, you know, could you quantify that, that positive impact that you've seen? And was this already contemplated in guidance heading into the quarter?

Michael Richards: Matthew, your line is open.

Mike Richards: Hey guys, it's Mike Richards on for Matt. Thanks for taking the question. Maybe you guys could talk more about the optimization you're seeing from customers. How is that coming relative to your expectations? Where are you seeing it from customers in terms of your product portfolio?

Speaker Change: You know could you quantify that that positive impact that you've seen and was this like already contemplated in in guidance heading into the quarter?

John Pagliuca: Good morning, Mike. This is John.

John: Hey, good morning, Mike. This is John.

John Pagliuca: I'll start. I'll ask him to add a little bit more color on the second part of his question. Look, I think it's important to make sure that the reason for the strategy and the makes your folks are aligned and understand that. We look at it. We've mentioned to this group and also just into the broader audience that within our base, we have an opportunity of about $30 plus per device per month to really go realize. We've been realizing about three to four dollars of that. Part of the strategy is to lock in our customers, give them the predictability, then we can focus on the expand.

Speaker Change: Hey, good morning, Mike. This is John . I'll start. I'll ask Tim to add a little bit more color on the second part of your question.

John: I'll start. I'll ask Tim to add a little bit more color on the second part of your question. Look, I think it's important to make sure the reason for the strategy and to make sure folks are aligned and understand that. We looked at it.

Michael Richards: I'll ask him to add a little bit more color on the second part of his question. Look, I think it's important to make sure that the reason for the strategy and the makes your folks are aligned and understand that. We look at it. We've mentioned to this group and also just into the broader audience that within our base, we have an opportunity of about $30 plus per device per month to really go realize.

Speaker Change: Look, I think it's important to make sure that the reason for the strategy and to make sure folks are aligned and understand that. We look at it.

John: We've mentioned to this group and also just to the broader audience that within our base, we have an opportunity of about $30 plus per device per month to really go after, and we've been realizing about $3 to $4 of that. And part of the strategy is to lock in our customers, give them predictability, so then we can focus on expanding. The timing of this exercise really is more related to the expansion that we have in our offerings.

Tim OBrien: We've mentioned to this group and also just to the broader audience that within our base we have an opportunity of about $30 plus per device per month.

Michael Richards: We've been realizing about three to four dollars of that. Part of the strategy is to lock in our customers, give them the predictability, then we can focus on the expand. The timing of this exercise really is more related to the expansion that we have in our offerings. Now that we've added MDR and now that we've added additional bits and cove with that cross-sell opportunity, that white space opportunity growing, we felt the right thing would be to lock in the customers.

Tim OBrien: to really go realize, and we've been realizing about, you know, three to four hours of that.

Tim OBrien: and part of the strategy is to lock in our customers, give them the predictability, so then we can focus on the expand. The timing of this exercise really is more related to the expansion that we have in our offerings. Now that we've added MDR, and now that we've added additional bits in Cove, with that cross-sell opportunity, that white space opportunity growing, we felt the right thing would be to lock in the customers. So I would call it two-thirds offense, so we're really trying to lean in, but also one-third defense. When we go into a customer arrangement that's month-to-month or consumption-based,

John Pagliuca: The timing of this exercise really is more related to the expansion that we have in our offerings. Now that we've added MDR and now that we've added additional bits and cove with that cross-sell opportunity, that white space opportunity growing, we felt the right thing would be to lock in the customers. I would call it two-thirds offense. We're really trying to lean in, but also one-third defense. When we go into a customer range with that month-to-month or consumption-based, we see fluctuations on what those buildings would be. Then, most notably, the MSP market itself, not us, but the MSP market itself, we do see consolidation.

John: Now that we've added MDR and now that we've added additional bits in Cove with that cross-sell opportunity, that whitespace opportunity growing, we felt the right thing would be to lock in the customers. So I would call it two-thirds offense, where we're really trying to lean in, but also one-third defense.

John: When we go into a customer arrangement that's month-to-month or consumption-based, we see fluctuations in what those billings would be. And then, most notably, the MSP market itself, not us, but the MSP market itself, we do see consolidation. And we believe that when we're locking in our customers for two or three years, and there may be consolidation, now Enable has a much better opportunity to remain the technology stack of choice, which is what the MSP usually wants.

Michael Richards: I would call it two-thirds offense. We're really trying to lean in, but also one-third defense. When we go into a customer range with that month to month or consumption-based, we see fluctuations on what those buildings would be. Then most notably, the MSP market itself, not us but the MSP market itself, we do see consolidation. We believe that when we're locking in our customers to two or three years and there may be consolidation, now we have enabled how's a much better opportunity to remain the technology stack of choice, which is what the MSP usually want.

Speaker Change: we see fluctuations on what those billings would be and then most notably the mmsp market itself not not us for the mmsp market itself

John Pagliuca: We believe that when we're locking in our customers to two or three years and there may be consolidation, now we have enabled how's a much better opportunity to remain the technology stack of choice, which is what the MSP usually want. For us, it's also just being able to lock in those customers, focusing in on the growth, and therefore we can get going on really that expand part of the equation because the opportunity to white space within our base is massive.

Tim OBrien: we do see consolidation and we believethat when we're locking in our customers it'stwo three years and there may be consolidation now we have enabable has a much better opportunity to remain the technology stack of choice which is which is look the mms usually want

John: And so for us, it's also just being able to lock in those customers, focus on the growth, and therefore we can get going on really that expansion part of the equation because the opportunity, the whitespace within our base is massive. So, that's really the big bits. Where we're seeing some of the rationalization, look, I'd say it's a collection of things.

Tim OBrien: and so for us it's also just behaving able to lock in those customers focusing in on the growth and therefore we can get going on on really that expand part of the equation because the opportunity the white space within our base is massive

Michael Richards: For us, it's also just being able to lock in those customers, focusing in on the growth and therefore we can get going on really that expand part of the equation because the opportunity to white space within our base is massive. That's really the big bits. Where we're seeing some of the rationalization? Look, I'd say it's a collection of things. I can give you more of an anecdote in that if a customer might be giving us $10 or $15,000 of monthly recurring revenue, that's completely consumption-based and we're asking them to commit to a 36-month period.

John Pagliuca: That's really the big bits. Where we're seeing some of the rationalization? Look, I'd say it's a collection of things. I can give you more of an anecdote in that if a customer might be giving us $10 or $15,000 of monthly recurring revenue, that's completely consumption-based, and we're asking them to commit to a 36-month period. You can imagine that the customer might look for some pricing concessions in exchange for that long-term commitment. We are seeing it in situations like that, but we're asking the customer to lock in long-term, and we're frankly fine with giving them some pricing concessions in exchange for that commitment as a strategic partner.

Tim OBrien: So that's really the big bits, where we're seeing some of the rationalization.

John: I can give you more of an anecdote in that, you know, if a customer might be giving us, you know, $10,000 or $15,000 of monthly recurring revenue that's completely consumption-based, and we're asking them to commit to a 36-month period, you can imagine that, you know, the customer might look for some pricing concessions in exchange for that long-term commitment. So, we are seeing it in situations like that where we're asking the customer to lock in for the long term, and we're, frankly, fine with giving them some pricing concessions in exchange for that commitment as a strategic partner.

Speaker Change: Look, I'd say it's...

Speaker Change: It's a collection of things. I can give you more of an anecdote in that, you know, if a customer might be giving us...

Speaker Change: $10,000 or $15,000 of monthly recurring revenue that's completely consumption based.

Speaker Change: and we're asking them to commit to a 36-month period. You can imagine that the customer might look for some pricing concessions in exchange for that long-term commitment. So we are seeing it in situations like that where we're asking the customer to lock in long-term and we're frankly fine with giving them some pricing concessions in exchange for that commitment as a strategic partner.

Michael Richards: You can imagine that the customer might look for some pricing concessions in exchange for that long-term commitment. We are seeing it in situations like that, but we're asking the customer to lock in long-term and we're frankly fine with giving them some pricing concessions in exchange for that commitment as a strategic partner. We're seeing it in there, and then just by nature, when you're asking somebody to commit, they're going to go through their estate and see if there might be some solutions or some devices that they might not necessarily have if there's some shelf where quote-unquote type of thing that they might try to realize.

John: So, we're seeing it in there. And then, just by nature, when you're asking somebody to commit, they're going to go through their estate and see if there might be some solutions or some devices that they might not necessarily have, if there's some shelfware quote-unquote type of thing that they might try to realize. So, there's no really heightened product area, I would say, that's seeing it. It's more about, hey, you're asking me to commit to 24, 36 months, 12 months. Let me look at my estate and make sure that I'm willing to commit.

John Pagliuca: We're seeing it in there, and then just by nature, when you're asking somebody to commit, they're going to go through their estate and see if there might be some solutions or some devices that they might not necessarily have if there's some shelf where quote-unquote type of thing that they might try to realize. There's no really heightened product area, I would say, that's seeing it. It's more about, hey, you're asking me to commit to 24, 36 months, 12 months. Let me look at my estate and make sure that I'm willing to commit because, at the end of the day, these MSPs are SMEs, and they want to make sure that they're driving their top and bottom line in a responsible manner.

Tim OBrien: So we're seeing it in there, and then just by nature, when you're asking somebody to commit, they're going to go through their estate and see if there might be some solutions or some devices.

Speaker Change: that they might not necessarily have if there's some shelf-ware quote-unquote type of thing that they might try to realize. There's no really heightened product area, I would say, that's seeing it. It's more about, hey, you're asking me to commit to 24, 36 months, 12 months.

Michael Richards: There's no really heightened product area, I would say, that's seeing it. It's more about, hey, you're asking me to commit to 24, 36 months, 12 months. Let me look at my estate and make sure that I'm willing to commit because at the end of the day, these MSPs are SMEs, and they want to make sure that they're driving their top and bottom line in a responsible manner. We expected some of this overall.

John: Because at the end of the day, these SMEs, excuse me, these MSPs or SMEs, want to make sure that they're driving their top and bottom line in a responsible manner. So, we expected some of this. The LTC program has been ahead of the expectations as far as customers wanting to commit and willing to commit. So, that gives us a good vote of confidence that we're putting the right products in the market.

Speaker Change: Let me look at my estate and make sure that I'm willing to commit because at the end of the day these SMEs Excuse me, these MSPs or SMEs

John Pagliuca: We expected some of this overall. The LTC program has been ahead of the expectation as far as customers wanting to commit, willing to commit. That gives us a good vote of confidence that we're putting the right products in market, and as a result, I think what ends up happening is we're ahead of that program, and you're seeing a little bit more pool, and I've waited for six hours. So I did, you know, the pulling on 606 is more of an indicator that the customers are willing to commit, and as a result, we have a more resilient revenue base than we had even six months ago.

Speaker Change: and they want to make sure that they're driving their top and bottom line in a responsible manner. So we expected some of this overall.

Speaker Change: The LTC program has been ahead of the expectation as far as

Michael Richards: The LTC program has been ahead of the expectation as far as customers wanting to commit, willing to commit. That gives us a good vote of confidence that we're putting the right products in market and as a result, I think what ends up happening is we're ahead of that program and you're seeing a little bit more pool and I've waited for six hours. So I did, you know, the pulling on 606 is more of an indicator that the customers are willing to commit and as a result, we have a more resilient revenue base than we had even six months ago. Great, thanks.

Speaker Change: customers wanting to commit willing to commit that gives us a good vote of confidence that we're putting the right products in market and as a result I think what ends up happening is we're ahead of that program and you're seeing a little bit more pull in it related to 606

John: And as a result, I think what ended up happening is we're ahead of that program, and you're seeing a little bit more pull in on 606 related to 607. So the pull-in on 606 is more of an indicator that customers are willing to commit, and as a result, we have a more resilient revenue base than we had even six months ago.

Tim OBrien: So, you know, the pull in on 606 is more of a kind of an indicator that the customers are willing to commit, and as a result, we have a more resilient revenue base than we had even six months ago.

Michael Richards: Great, thanks.

John: Great, thanks. And then a quick follow up. How did linearity shape up in the quarter? You know, was there anything you guys saw from like a macro perspective that, you know, things worsened heading out of the quarter into July, and maybe now with some of the market volatility and, you know, given some software peers have seen some, some heightened macro uncertainty? There's some more color on that as well.

Michael Richards: And then a quick follow-up, you know, how did linearity shape up in the quarter? You know, was there anything you guys saw from like a macro perspective that, you know, things were getting worse and heading out of the quarter into July? And maybe now with some of the market volatility and, you know, given some software peers have seen some heightened macro uncertainty to do some more color on that as well. Sure, the best indicator as far as, you know, some of the market velocity is with our bookings, and, you know, we referenced in the prepared remarks, elements of our booking being up 20% overall, both in new customer acquisition and new skew sales.

Speaker Change: Great, thanks. And then a quick follow-up.

Michael Richards: And then a quick follow up, you know, how did how did linearity shape up in the quarter, you know, was there anything you guys saw from like a macro perspective that, you know, things were getting worse and heading out of the quarter into July and maybe now with some of the market volatility and, you know, given some software peers have seen some, some heightened macro uncertainty to do some more color on that as well. Sure, the best indicator as far as, you know, some of the market velocity is with our bookings and, you know, we referenced in the prepared remarks, elements of our booking being up 20% overall, both in new customer acquisition and new skew sales.

Speaker Change: How did linearity shape up in the quarter? Was there anything you guys saw from like a macro perspective that things worsened heading out of the quarter into July and maybe now with some of the market volatility and given some software peers have seen some heightened macro uncertainty. So just some more color on that as well.

John: Sure, the best indicator, as far as you know some of the market velocity, is our bookings, and you know we referenced in the prepared remarks elements of our bookings being up 20%. Overall, both in new customer acquisition and in new SKU sales, our bookings were also up north of 20%, so that's a good indicator again that, as you know, as late as you know this quarter, we're continuing to see our products responding in the market.

Speaker Change: Sure, the best indicator as far as, you know, some of the market velocity is with our bookings and, you know, we referenced in the prepared remarks.

Speaker Change: elements of our bookings being up 20%. Overall, both in new customer acquisition and in new SKU sales, our bookings were also up north of 20%. So that's a good indicator again that as you know as late as you know this quarter we're continuing to see our products resonating in the market.

John Pagliuca: Our bookings were also up north of 20%. So that's a good indicator, again, that as, you know, as late as, you know, this quarter, we're continuing to see our products resonating in the market. Anything to call out within the month, not really. You know, I'd say, I'd say overall what we're seeing a customer is really just really making sure that they're double checking more their price. The demand is they are MSPs are in a high demand. All the channel checks support that the MSPs are continuing to be in high demand because they're providing a mission-critical service to their SMEs.

Michael Richards: Our bookings were also up north of 20%. So that's a good indicator, again, that as, you know, as late as, you know, this quarter, we're continuing to see our products resonating in the market. Anything to call out within the month, not really, you know, I'd say, I'd say overall what we're seeing a customer is really just really making sure that they're double, they're double checking more their price. The demand is they are MSPs are in a high demand.

Speaker Change: anything to call out within the month not not really you know I'd say I'd say overall

John: Anything to call out within the month not not really you know I'd say I'd say overall What we're seeing a customer is really just really making sure that they're double-checking more the price, the demand is there, MSPs are in high demand, all the channel checks support that the MSPs are continuing to be in high demand because they're providing a mission-critical service to their SMEs, and those SMEs are quite resilient, right? These SMEs, for the most part, they're in healthcare, they're in the financial institutes, some are even in state and local government, so they're in recession-resilient and I would say overall resilient SME markets, but that being said, those SMEs are double-checking to make sure that they're getting their best value, and we're seeing MSPs making sure that they're paying their right price for things like endpoint security.

Speaker Change: What we're seeing a customer is

Speaker Change: really just really making sure that 're double they're double checking more they're the price

Speaker Change: The demand is there, MSPs are in high demand, all the channel checks.

Michael Richards: All the channel checks support that the MSPs are continuing to be in high demand because they're providing a mission critical service to their SMEs. And those SMEs are quite resilient, right? These SMEs to the most part, they're in healthcare, they're in the financial institutes, some are even in, you know, state and local government. So they're in recession resilient and I would say overall resilient SME markets, but that being said, those SMEs are double checking to make sure that they're getting their best value. We're seeing MSPs, you know, making sure that they're paying their right price for things like endpoint security as an example. Thank you guys, congrats. Thank you very much.

Speaker Change: support that the MSPs continue to be in high demand because they're providing a mission-critical service.

John Pagliuca: And those SMEs are quite resilient, right? These SMEs, to the most part, they're in healthcare, they're in the financial institutes, some are even in, you know, state and local government. So they're in recession-resilient and I would say overall resilient SME markets, but that being said, those SMEs are double-checking to make sure that they're getting their best value. We're seeing MSPs, you know, making sure that they're paying their right price for things like endpoint security as an example.

Speaker Change: to their SMEs.

Speaker Change: And those SMEs are quite resilient, right? These SMEs, for the most part, they're in healthcare, they're in the financial institutes.

Speaker Change: some are even in state and local government. So they're in recession resilient and and I would say overall resilient SME markets but that being said those SMEs are double double checking to make sure that they're getting their best value. We're seeing MSPs you know making sure that they're they're paying their right price for things like endpoint security as an example.

Michael Richards: Thank you guys, congrats.

Unnamed Analyst: Thanks, guys. Congratulations.

Unnamed Speaker: Thanks, guys. Congratulations.

Operator: Thank you very much.

Speaker Change: Thanks guys, congrats.

Jason Ader: Our next question comes from Jason Eater from Mugen Blair. Jason, your line is about OK. Yeah, thank you. Good morning, guys. On the bookings up 20%, I just want to understand is that some of the annual shift that's going on there because if you're going to do a multi year or 36 month, that's going to really help the bookings number. Is that a factor and why that bookings was so strong?

Operator: Our next question comes from Jason Ader of William Blair. Jason, your line is now open.

Speaker Change: thank you very much

Speaker Change: our next question comes from jason ador from william blair jason your line is thatwork

Jason Ader: Our next question comes from Jason Eater from Mugen Blair. Jason, your line is about OK. Yeah, thank you.

Jason Ader: Yeah, thank you. Good morning, guys.

jason ador: yeah thank you good morning guys on the bookings up 20% I just want to understand is that some of the annual shift that's going on there because if you're going to do a multi-year 36 month that's going to

Jason Ader: Good morning, guys. On the bookings up 20%, I just want to understand is that some of the annual shift that's going on there because if you're going to do a multi year or 36 month, that's going to really help the bookings number. Is that a factor and why that bookings was so strong? Morning Jason, great question. I'm glad you asked us so that we could clarify. So the way that we define our bookings are, it's the annual contract value.

Speaker Change: It really helped the bookings number. Is that a factor in why that bookings was so strong?

John Pagliuca: Morning Jason, great question. I'm glad you asked this so that we can clarify. So the way that we define our bookings is it's the annual contract value, so the value of the next 12 months, so frankly, even if it was a multi-year deal, we wouldn't be counting that way. So this is purely the annual contract value from the first 12 months and of our new customer acquisition. So new landed customers to enable and then new SKUs.

Jason Ader: On the bookings up 20%, I just want to understand, is that some of the annual shift that's going on there? Because if you're going to do a multi-year, 36-month, that's going to... It really helped the bookings number. Is that a factor in why that booking was so important?

Timothy OBrien: Morning Jason, great question. I'm glad you asked us so that we could clarify. So the way that we define our bookings is, it's the annual contract value. So the value of the 12 months. So frankly, even if it was a multi-year deal, we wouldn't be counting that way. So this is purely the annual contract value from the first 12 months and of our new customer acquisition. New landed customers to enable and then new skew. So, you know, if you were an essential customer and you made the right decision to now go and consume Cove, that would be a new skew.

John Pagliuca: So you know if you were an essential customer and you made the right decision to now go and consume Cove, that would be a new SKU. And so it excludes anything or any type of multi-year type of, you know, shenanigans. It's all one year, 12 months. All right, that's helpful clarification with the guidance, you know, for the second half, which is

Speaker Change: Morning Jason, great question. I'm glad you asked this so that we could clarify. So the way that we define our bookings are it's the annual contract value, so the value of the 12 months. So frankly even if it was a multi-year deal we wouldn't be counting that way. So this is

Unnamed Analyst: Why wouldn't you see more? If you're converting more customers to annual contracts, why wouldn't you see more of that 606?

Jason Ader: So the value of the 12 months. So frankly, even if it was a multi year deal, we wouldn't be counting that way. So this is purely the annual contract value from the first 12 months and of our new customer acquisition. New landed customers to enable and then new skew. So, you know, if you were an essential customer and you made the right decision to now go and consume cove, that would be a new skew. And so it excludes anything or any type of multi year type of. It's all one year 12 month.

John: Morning, Jason. Great question. I'm glad you asked this so that we could clarify. So, the way that we define our bookings is it's the annual contract value. So, the value of the 12 months. Frankly, even if it was a multi-year deal, we wouldn't be counting that way. So, this is purely the annual contract value from the first 12 months of our new customer acquisition. So, new landed customers to enable and then new SKUs.

Speaker Change: This is purely the annual contract value from the first 12 months.

Speaker Change: and of our new customer acquisition a new landed customers to enable and a new sskkew so know if you are a central customer and you made the right decision to to now go and consume cove that would be a new sskw and so it excludes anything readyany type of multiyear type of

John: So, if you were an essential customer and you made the right decision to now go and consume Cove, that would be a new SKU. And so, it excludes anything or any type of multi-year type of, you know, shenanigans. It's all one year, 12 months. All right. That's helpful clarification. I guess it's, I'm just trying to reconcile the, you know, the bookings. Data with the guidance for the second half, which is, you know, under 10% growth. So how do you help us reconcile that delta?

Timothy OBrien: And so it excludes anything or any type of multi-year type of. It's all one year, 12 months.

Timothy OBrien: All right, that's that's helpful clarification, and then. I guess I'm just trying to reconcile the bookings data with the guidance for the second half, which is under 10% growth. So how do you help us reconcile that delta? A.J. And Tim, a couple of things, one we've spoken to before. One is the grow over the pricing and packaging changes that we spoke to last quarter, the last couple of quarters. And last quarter we referenced, that's about a two and a half to three point headwind in quarter two through four. This year and that all carry into Q1 of next year as well.

Speaker Change: connecticans that's think it's all one year probabty month right that's that's helpfull clarification and then

Timothy OBrien: All right, that's that's helpful clarification and then. I guess I'm just trying to reconcile the bookings data with the guidance for the second half, which is under 10% growth. So how do you help us reconcile that delta? A.J. And Tim, a couple of things, one we've spoken to before. One is the grow over the pricing and packaging changes that we spoke to last quarter, the last couple of quarters. And last quarter we referenced, that's about a two and a half to three point headwind in quarter two through four.

Speaker Change: I guess it's I'm just trying to reconcile the you know the bookings

Speaker Change: data with the guidance you know for the second half which is

Speaker Change: you know under 10% growth. So how do you help us reconcile that Delta?

Tim: Hey Jason, it's Tim. A couple of things. One we've spoken to before, one is the growth over the pricing and packaging changes that we spoke about last quarter, the last couple of quarters. And last quarter, we referenced that it was about a two and a half to three point headwind in quarters two through four this year, and that'll carry into Q1 of next year as well. And some of the transitory headwinds really carry for four quarters, and so that's part of that equation.

Speaker Change: Hey Jason, it's Tim. Couple of things. One we've spoken to before, one is the grow over the pricing and packaging changes.

Speaker Change: that we spoke to last quarter, the last couple of quarters. And last quarter we referenced, that's about a two and a half to three point headwind in quarter two through four.

Timothy OBrien: This year and that all carry into Q1 of next year as well. And some of the transitory headwinds really carry for four quarters. And so that's part of that equation, that's not part of our bookings. What's also not part of our bookings is any of that rationalization that John spoke to as customers have been moving into these long term contracts. So those two things combined are what I would say dragging the year over year performance that's factored into our guidance in the second half of the year versus the bookings component.

Speaker Change: This year and that'll carry into Q1 of next year as well.

Timothy OBrien: And some of the transitory headwinds really carry for four quarters. And so that's part of that equation; that's not part of our bookings. What's also not part of our bookings is any of that rationalization that John spoke to as customers have been moving into these long-term contracts. So those two things combined are what I would say dragging the year-over-year performance that's factored into our guidance in the second half of the year versus the bookings component. So, you know, we're really trying to highlight that the fundamental fundamentals of the business are very strong. Our MSP dollar retention is in line with the last three quarters; bookings are strong, you know, up 20% year over year.

Speaker Change: and, you know,

Tim: That's not part of our bookings. What's also not part of our bookings is any of that rationalization that John spoke about as customers have been moving into these long-term contracts. So those two things combined are what I would say dragging the year over year performance that's factored into our guidance for the second half of the year versus the bookings component. So, you know, we're really trying to highlight that the fundamentals of the business are very strong. Our MSP dollar retention is in line with the last three quarters.

Speaker Change: Some of the transitory headwinds really carry for four quarters, and so that's part of that equation. That's not part of our bookings. What's also not part of our bookings is any of that rationalization that John spoke to as customers that have been moving into these long-term contracts.

Speaker Change: So those two things combined are what I would say dragging the year-over-year performance.

Speaker Change: that's factored into our guidance in the second half of the year.

Speaker Change: We're really trying to highlight that the fundamentals of the business are very strong. Our MSP dollar retention is in line with the last three quarters. Bookings are strong, up 20%.

Timothy OBrien: So, you know, we're really trying to highlight that the fundamental fundamentals of the business are very strong. Our MSP dollar retention is in line with with the last three quarters bookings are strong, you know, up up 20% year over year. We just have a couple of those transitory headwinds that will carry with us through the second half of this year and into the early part of 2025. But post that, you know, we'll grow through those transitory headwinds will have, you know, the thesis and the benefit of really focusing on cross-selling into these long term customers, long term committed customers through the second half of this year and into next year and beyond the drive, you know, what we believe is growth acceleration, you know, in 2025, but more quickly in the second half.

Tim: Bookings are strong, you know, up 20 percent year over year. We just have a couple of those transitory headwinds that will carry with us through the second half of this year and into the early part of 2025. But post that, you know, we'll grow through those transitory headwinds. We'll have, you know, the thesis and the benefit of really focusing on cross-selling into these long-term customers, long-term committed customers through the second half of this year and into next year and beyond to drive, you know, what we believe is growth acceleration in 2025, but more acutely in the second half.

Timothy OBrien: We just have a couple of those transitory headwinds that will carry with us through the second half of this year and into the early part of 2025.

Speaker Change: year over year. We just have a couple of those transitory headwinds that will carry with us through the second half of this year and into the early part of 2025. But post that, you know, we'll grow through those transitory headwinds.

Timothy OBrien: But post that, you know, we'll grow through those transitory headwinds, will have, you know, the thesis and the benefit of really focusing on cross-selling into these long-term customers, long-term committed customers through the second half of this year and into next year and beyond the drive, you know, what we believe is growth acceleration, you know, in 2025, but more quickly in the second half.

Speaker Change: will have, you know, the thesis and the benefit of really focusing on cross-selling into these long-term customers, long-term committed customers.

Speaker Change: through the second half of this year and into next year and beyond to drive what we believe is growth acceleration in 2025, but more acutely in the second half.

Timothy OBrien: All right, and just a quick two-part follow-up. First, are our other vendors in the market also moving to annual from monthly, or are you guys unique there? And then secondly, why wouldn't you see more in period rev wreck in the second half like you didn't queue to tie to that shift from monthly to annual. Sure, maybe I'll take the first one; you can take a second with it. So yes, we are seeing competitors. In fact, a little bit of this, I mentioned the two thirds offense and the one third defense. You know, our competitors, by and large, are locking in customers to multi multi-year deals actually.

Jason Ader: All right, and just a quick two-part follow-up. First, are other vendors in the market also moving to annual from monthly? Are you guys unique there? And then secondly, why wouldn't you see more in period RevRec in the second half like you did in Q2 tied to that shift from monthly to annual?

Timothy OBrien: All right, and just a quick two part follow up first is our other vendors in the market also moving to annual from monthly or you guys unique there. And then secondly, why wouldn't you see more in period rev wreck in the second half like you didn't queue to tie to that shift from monthly to annual. Sure, maybe I'll take the first one you can take a second with it. So yes, we are seeing competitors.

Speaker Change: all right then just a quick two part fohoup

Speaker Change: First is...

Speaker Change: are other vendors in the market, also moving to annual from monthly.

Speaker Change: Are you guys unique there? And then secondly, why wouldn't you see more in-period RevRec in the second half like you did in Q2 tied to that shift from monthly to annual?

John: Sure, maybe I'll take the first one. You can take the second one.

Speaker Change: Sure, maybe I'll take the first one, you can take the second one. So, yes, we are seeing competitors. In fact, a little bit of this, I mentioned the two-thirds offense and the one-third defense.

John: So, yes, we are seeing competitors. In fact, a little bit of this, I mentioned the two-thirds offense and the one-third defense. Our competitors, by and large, are locking in customers to multi-year deals, actually. So, in some ways, we're playing a little bit more catch-up. That's also a good indicator.

Timothy OBrien: In fact, a little bit of this, I mentioned the two thirds offense and the one third defense. You know, our competitors by and large are locking in customers to multi multi year deals actually. So in some ways, we're playing a little bit more catch up. It's also a very good indicator as the MSPs mature as they're getting larger. There's a willingness. And actually, I would say even a propensity to lock in the customer contracts for longer term much more akin to an enterprise type of procurement relationship.

Speaker Change: Our competitors, by and large, are locking in customers to multi-year deals, actually. So in some ways, we're playing a little bit more catch-up. It's also a good indicator, as the MSPs mature, as they're getting larger, there's a willingness.

John Pagliuca: So, in some ways, we're playing a little bit more catch up. It's also a very good indicator as the MSPs mature, as they're getting larger. There's a willingness. And actually, I would say even a propensity to lock in the customer contracts for longer term, much more akin to an enterprise type of procurement relationship. So we are seeing the other, the other larger players in the space do the long term bit.

John: As the MSPs mature, as they're getting larger, there's a willingness, and actually, I would say even a propensity, to lock in the contracts for longer terms, much more akin to an enterprise-type procurement relationship. So, we are seeing the other larger players in the space do the long-term bit, and I can pass it over to Tim on the second part. Yeah.

Speaker Change: And actually, I would say even a propensity to lock in contracts for longer term, much more akin to an enterprise type of procurement relationship. So we are seeing the other larger players in the space.

Timothy OBrien: So we are seeing the other the other larger players in the space do the long term bit. I can pass over to them on the second part. Yeah, Jason on some of the dynamics of the rev rack as some of the revenue is accelerated or becomes more lumpy on up front versus over time. It does take away from revenue and future period. So all the success we had in the first half of 2024 on on getting caught, you know, customers committed into these long term contracts has pulled revenue into, you know, the first and more cutely the second quarter.

Timothy OBrien: I can pass over to them on the second part. Yeah, Jason, on some of the dynamics of the rev rack as some of the revenue is accelerated or becomes more lumpy on up front versus over time. It does take away from revenue and future period. So all the success we had in the first half of 2024 on getting caught, you know, customers committed into these long term contracts has pulled revenue into, you know, the first and more cutely the second quarter. And, you know, that that takes some revenue out of Q2, I'm sorry, out of Q3 and Q4.

Tim: Yeah, Jason, on some of the dynamics of the REVRAC, as some of the revenue is accelerated or becomes more lumpy upfront versus over time, it does take away from revenue in future periods. So all the success we had in the first half of 2024 on getting customers committed to these long-term contracts has pulled revenue into the first and, more acutely, the second quarter, and that takes some revenue out of Q2, sorry, out of Q3 and Q4, for the rest of the year.

Speaker Change: do the long-term bit, and I can pass it over to Tim on the second part.

Unnamed Analyst: Yeah, and Jason, on some of the dynamics of the REVRAC, as some of the revenue is accelerated or becomes more lumpy on up-front...

Tim OBrien: It does take away from revenue in future periods, so all the success we had in the first half

Timothy OBrien: And, you know, that that takes some revenue out of out of Q2, I'm sorry, out of Q3 and Q4, for the rest of the year. So why wouldn't you see more, if you're converting more customers Daniel, why wouldn't you see more of that 606 impact in the- We will, but so Q1 and Q2 did not have the headwinds from us committing customers prior to those quarters. So we really initiated this, you know, we really started this initiative at the beginning of the year, so there were no real headwinds in Q1 when we started this.

Speaker Change: of 2024 on getting, you know, customers committed into these long-term contracts.

Speaker Change: has pulled revenue into the first and more acutely the second quarter and that takes some revenue out of Q3 and Q4.

Timothy OBrien: for the rest of the year. So why wouldn't you see more, if you're converting more customers, Daniel? Why wouldn't you see more of that 606 impact in the- We will, but so Q1 and Q2 did not have the headwinds from us committing customers prior to those quarters. So we really initiated this, you know, we really started this initiative at the beginning of the year, so there were no real headwinds in Q1 when we started this. There were minimal headwinds in Q2 where we saw, you know, I would say a bigger portion of ARR committed in that period. Q3 and Q4 now have a bigger tax on them because of the success in Q1 and Q2.

Tim: Why wouldn't you see more? If you're converting more customers to annual contracts, why wouldn't you see more of that 606? We will, but so Q1 and Q2 did not have the headwinds from us committing customers prior to those quarters. So we really initiated this, you know; we really started this initiative at the beginning of the year.

Speaker Change: for the rest of the years like we re what we there why wouldn't you see more if you if you're converting more customers daniel wouldn't you see more of that six cess six

Speaker Change: We will, but Q1 and Q2 did not have the headwinds.

Speaker Change: fromus committing customers prior to those quarters so we really initiated this

Tim: So, there were no real headwinds in Q1 when we started this, and there were minimal headwinds in Q2, where we saw, you know, I would say a bigger portion of ARR committed in that period. Q3 and Q4 now have a bigger tax on them because of the success in Q1 and Q2. However, Q1 and Q2 did not have the same tax that Q3 and Q4 have from a dynamics point of view. We have baked in, and we have assumed that we continue to commit customers in that fashion, but it's offsetting some of the revenue that was pulled forward into Q1 and Q2 from the success that we had there.

Speaker Change: You know, we really started this initiative at the beginning of the year, so there were no real headwinds in Q1 when we started this.

Speaker Change: There were minimal headwinds in Q2 where we saw a bigger portion of ARR committed in that period. Q3 and Q4 now have a bigger tax on them because of the success in Q1 and Q2. Q1 and Q2 did not have the same tax.

Timothy OBrien: There were minimal headwinds in Q2 where we saw, you know, I would say a bigger portion of ARR committed in that period, Q3 and Q4 now have a bigger tax on them because of the success in Q1 and Q2. Q1 and Q2 did not have the same tax that Q3 and Q4 have from a dynamics. We have baked in and we have it soon that we continue to commit customers into that fashion, but it's offsetting some of the revenue that was pulled forward into Q1 and Q2 from the success that we had there.

Timothy OBrien: Q1 and Q2 did not have the same tax that Q3 and Q4 have from a dynamics. We have baked in and we have it soon that we continue to commit customers into that fashion, but it's offsetting some of the revenue that was pulled forward into Q1 and Q2 from the success that we had there. God, thanks.

Speaker Change: that Q3 and Q4 have from a dynamics. We have baked in and we have assumed that we continue to commit customers into that fashion, but it's offsetting some of the revenue that was pulled forward into Q1 and Q2 from the success that we had there.

Speaker Change: Got it, thanks.

Timothy OBrien: God, thanks.

Operator: Thank you very much.

Operator: Thank you very much. Our next question comes from Brian Essex from J.P. Morgan. Brian, your line is now open.

Charlotte Beatick: Our next question comes from Brian Essex from JP Morgan. Brian, your line is open. Hi, this is Charlotte Beatick on for Brian. Thank you so much for taking the question. Quick question on the net dollar retention rate. I know you mentioned some headwinds associated with the pricing and packaging. Can you give us an extent of like how much the headwind is expected to hit that in future periods and at what point do we expect it to I guess maybe go back to the 110 level or above, like at what point should be normalized, do you, what do you have factor into guidance?

Speaker Change: Thank you very much. Our next question comes from Brian Essex from J.P. Morgan. Brian , your line is now open.

Charlotte Beatick: Thank you very much.

Operator: Our next question comes from Brian Essex from JP Morgan, Brian, your line is out open.

Operator: Hi, this is Charlotte Biedek. I'm for Brian.

Charlotte Biedek: Thank you so much for taking the question. A quick question on... The net dollar retention rate, I know you mentioned some headwinds associated with pricing and packaging. Can you give us an extent of, like how much the headwind is expected to hit that in future periods? And at what point do we expect it to, I guess, maybe go back to the 110 level or above? Like, at what point should it be normalized? What do you have factored into your guidance?

Charlotte Beatick: Hi, this is Charlotte Beatick on for Brian. Thank you so much for taking the question. Quick question on the net dollar retention rate, I know you mentioned some headwinds associated with the pricing and packaging. Can you give us an extent of like how much the headwind is expected to hit that in future periods and at what point do we expect it to I guess maybe go back to the 110 level or above, like at what point should be normalized, do you, what do you have factor into guidance? Thank you.

Timothy OBrien: Thank you.

Timothy OBrien: Absolutely. Yeah, I'll reiterate some of the color I gave previously on some of the transitory headwinds we have on the net revenue retention for the second half of the year and we'll be parts of the beginning parts of 2025 as well. About 2.5 to 3 points has related some of the pricing and packaging changes that we mentioned last quarter, coupled with the impact from some of the rationalization we've seen from the long-term contract initiative that we've implemented. So, in terms of timing and the impact, I expect that impact to carry through the second half of this year and into Q1 and Q2 of 2025.

John Pagliuca: Yeah, absolutely. I'll reiterate some of the color I gave previously on, you know, some of the transitory headwinds we have on net revenue retention for the second half of the year and will be part of the beginning parts of 2025 as well. About two and a half to three points are related to some of the pricing and packaging changes that we mentioned last quarter, coupled with the impact of some of the rationalization we've seen from the long-term contract initiative that we implemented.

Tim: Thank you. Yeah, absolutely. Yeah, we...

John Pagliuca: Yeah, absolutely. Yeah, we...

Tim: Yeah, absolutely. I'll reiterate some of the color I gave previously on, you know, some of the transitory headwinds we have on net revenue retention for the second half of the year, and we'll be part of the beginning parts of 2025 as well. About two and a half to three points are related to some of the pricing and packaging changes that we mentioned last quarter, coupled with the impact of some of the rationalization we've seen from the long-term contract initiative that we implemented.

John Pagliuca: I'll reiterate some of the color I gave previously on some of the transitory headwinds we have.

Timothy OBrien: Absolutely. Yeah, I'll reiterate some of the color I gave previously on some of the transitory headwinds we have on the net revenue retention for the second half of the year and we'll be parts of the beginning parts of 2025 as well. About 2.5 to 3 points has related some of the pricing and packaging changes that we mentioned last quarter, coupled with the impact from some of the rationalization we've seen from the long-term contract initiative that we've implemented. So in terms of timing and the impact, I expect that impact to carry through the second half of this year and into Q1 and Q2 of 2025.

John Pagliuca: On the net revenue retention for the second half of the year and we will.

John Pagliuca: There will be parts of the beginning parts of 2025 as well.

John Pagliuca: About two five to three points is related to some of the pricing and packaging changes that we mentioned last quarter.

John Pagliuca: Coupled with the impact on some of the rationalization, we have seen from the long term contract initiatives that we've implemented so.

John Pagliuca: So in terms of timing and the impact, I expect that impact to carry through the second half of this year and into Q1 and Q2 of 2025. I would expect a more normalized, dollar-based net revenue tension rate in the second half of 2025.

Tim: So, in terms of timing and impact, I expect that impact to carry through the second half of this year and into Q1 and Q2 of 2025. I would expect a more normalized, dollar-based net revenue pension rate in the second half of 2025.

John Pagliuca: In terms of timing and the impact I expect that impact to carry through the second half of this year and into Q1 and Q2.

Timothy OBrien: I would expect a more normalized dollar-based net revenue pension rate in the second half of 2025.

John Pagliuca: 2025, I would expect a more normalized.

John Pagliuca: Dollar based net revenue retention rate in the second half of 2025.

Timothy OBrien: I would expect a more normalized dollar-based net revenue pension rate in the second half of 2025. Thank you. Thank you very much.

Speaker Change: Thank you.

Mike Sikus: Thank you very much. Our next question comes from Mike Sikus from Needham. Mike, you're like 9 is not open. Hey guys, thanks for taking the questions here. Maybe just to continue on that point for a second. If we think about those headwinds, is there a way like should we expect the headwinds to be most acute in 3Q and then abate thereafter or should this be like a mounting pressure where it'll actually be the biggest headwind by the time we get to Q2 next year? How do you think about the slope of this as it plays out?

Operator: Thank you very much. Our next question comes from Mike Cikos from Needham. Mike, your line is now open.

Speaker Change: Thank you very much. Our next question comes from Mike <unk> from Needham Mike Gerlich line is now open.

Mike Sikus: Our next question comes from Mike Sikus from Needham. Mike, you're like 9 is not open. Hey guys, thanks for taking the questions here. Maybe just to continue on that point for a second.

Mike Cikos: Hey guys, thanks for taking the questions here. Maybe just to continue on that point for a second, if we think about those headwinds, is there a way, like, what should we expect... The headwinds could be most acute in 3Q and then a bit of a tailwind thereafter? Or should this be like a building pressure where it'll actually be the biggest headwind by the time we get to Q2 next year? How do you think about the slope of this as it plays out?

Speaker Change: Hey, guys. Thanks for taking the questions here, maybe just to continue on that point for a second.

Speaker Change: If we think about those headwinds is there a way like should we expect.

Timothy OBrien: If we think about those headwinds, is there a way like should we expect the headwinds to be most acute in 3Q and then a bait thereafter or should this be like a mounting pressure where it'll actually be the biggest headwind by the time we get to Q2 next year? How do you think about the slope of this as it plays out? I would expect it to be steady on how we do the math on our retention rate as a drilling 12-month average.

John Pagliuca: The headwinds to be most acute.

Speaker Change: In <unk> and then abate thereafter should this be like a mounting.

John Pagliuca: Sure where.

Speaker Change: It will actually be the biggest headwind by the time, we get to Q2 next year like how do you think about the slope.

John Pagliuca: Of this as it plays out.

Tim: I would expect it to be steady based on how we do the math on our retention rate as a thrilling 12-month average. I would expect additional pressure that we mentioned in the prepared remarks on the dollar-based net revenue retention rate, but from a velocity standpoint, I would expect it to be gradually, You know, steady to gradually improving as we kind of chart through the end of 2024 and 2025.

Timothy OBrien: I would expect it to be steady on how we do the math on our retention rate as a drilling 12-month average. I would expect additional pressure that we mentioned in the prepared remarks on the dollar-based net revenue retention rate, but from a velocity standpoint, I would expect it to be gradually steady to gradually improving as we kind of charge through the end of 2024 and 2025. Okay, thank you for that. I guess the other question, I know, last quarter we were talking about this as well as for the shift to annual commitment. I just feedback if you're receiving.

John Pagliuca: I would expect it to be to be steady on on how we do the math on our retention rate is a trailing 12 month average.

John Pagliuca: I would expect additional pressure that we that we mentioned in the prepared remarks on the dollar based net revenue retention rate, but from.

Timothy OBrien: I would expect additional pressure that we mentioned in the prepared remarks on the dollar-based net revenue retention rate, but from a velocity standpoint, I would expect it to be gradually steady to gradually improving as we kind of charge through the end of 2024 and 2025.

John Pagliuca: From a from a velocity standpoint, I would expect it to be gradually.

John Pagliuca: Steady to gradually improving as we as we kind of chart through the end of 2024 and in 2025.

Tim: Thank you for that. And I guess the other question, I know... Last quarter we were talking about this as well as far as the shift to annual commitments. I just wanted to see which...

Speaker Change: Okay. Thank you for that.

Speaker Change: The other question I know.

John Pagliuca: Okay, thank you for that. I guess the other question, I know, last quarter we were talking about this as well as for the shift to annual commitment. I just feedback if you're receiving. Do they understand the reason for this push? I would think so if John is saying that this seems like it's a little bit more of a catch-up versus other players and competitors out there, but also trying to be cognizant of some of the pain out there just given people are trying to preserve capital and what is this uncertain macro we find ourselves in.

John Pagliuca: Last quarter, we were talking about this as well as far as the shift to annual commitments.

Speaker Change: I just wanted to see with the.

Mike Cikos: The first six months are under our belts now, but what is the feedback that you're receiving? Like do they understand the reason for this push? Should I think so if John is saying that this seems like it's a little bit more of a catch-up versus other players and competitors out there, but also trying to be cognizant of some of the pain out there just given people are trying to preserve capital and what this uncertain macro we find ourselves in. Hey Mike, good job.

Speaker Change: The first six months under our belts now.

Speaker Change: But what is the feedback that you're receiving like do they understand the reason for this push it I would think so if John is saying that it seems like it's a little bit more of a catch up versus.

Mike Sikus: Do they understand the reason for this push? I would think so if John is saying that this seems like it's a little bit more of a catch-up versus other players and competitors out there, but also trying to be cognizant of some of the pain out there just given people are trying to preserve capital and what is this uncertain macro we find ourselves in.

Unnamed Analyst: There are other players and competitors out there, but also

Speaker Change: Other players or competitors out there, but also.

Speaker Change: Trying to be cognizant of.

Unnamed Analyst: Some of the pain out there just given people are trying to preserve capital and what is this.

Unnamed Analyst: Uncertain macro we find ourselves in.

John Pagliuca: Hey, Mike. Good job. Look, the customer is actually resonating quite well. I think the customer's appreciate the level of predictability. We're giving them. By the way, we're also, unlike our competitors, our competitors kind of forced a lot of this on their customer base. We elected not to force this and make it an option. And so I should make that clear. And so I think the customer base appreciated the optionality that disappointed them, and effectively the option was, hey, look, if you're going to stay consumption-based or month to month, there will be a steady stream of price increases.

John: Hey Mike, it's John. Look, the customers are actually responding quite well. I think the customers appreciate the level of predictability we're giving them. By the way, we're also, unlike our competitors, who kind of forced a lot of this on their customer base. We elected not to force this and make it an option.

John Pagliuca: Hey Mike, it's John. Look, the customers are actually responding quite well. I think the customers appreciate the level of predictability we're giving them. By the way, we're also, unlike our competitors, who kind of forced a lot of this on their customer base. We elected not to force this and make it an option.

John Pagliuca: Hey, Mike It's John.

Unnamed Analyst: Look the customers, it's actually resonating quite well I think the customers appreciate the level of predictability, we are giving them.

John Pagliuca: Hey, Mike. Good job. Look, the customer is actually resonating quite well. I think the customer's appreciate the level of predictability. We're giving them, by the way, we're also, unlike our competitors, our competitors kind of forced a lot of this on their customer base. We elected not to force this and make it an option. And so I should make that clear. And so I think the customer base appreciated the optionality that disappointed them and effectively the option was, hey, look, if you're going to stay consumption-based or month to month, there will be a steady stream of price increases.

John Pagliuca: By the way we're also unlike our competitors our competitors kind of forced a lot of this on our on their customer base, we elected not to force this and make it an option and so I should make that clear and so I think our customer base appreciated the optionality that the supported them and effectively the option was hey look if you're going to stay.

John: And so I should make that clear. And effectively, the option was, hey, look, if you're going to stay consumption-based or month-to-month, there will be a steady stream of price increases. If you're looking to commit and provide that stability to us, that will turn into better economics for you. That will turn into better predictability for you.

John Pagliuca: Consumption based on month to month, there will be there will be a steady stream of.

John Pagliuca: Price increases if you are looking to commit and provides us the ability to us that will be that will turn into better economics for you that will turn into better predictability to you and.

John Pagliuca: If you're looking to commit and provide that stability to us, that will turn into better economics for you. That will turn into better predictability to you. And so I think overall, giving them the optionality is really resonating with the customer base. And then we can put our work and our collective focus on helping them grow their business, expand their services. And that's one of the other things. A lot of these conversations on Earth, opportunity when we're having conversations about their two or three-year tech stack, what they're trying to do, their goals over the long-term, it's unearthing additional code, it's opportunities, it's unearthing additional MDR opportunities.

John: And so I think overall, giving them the optionality is really satisfying the customer base. And then we can put our work and our collective focus on helping them grow their business, expand their services. And that's been the other thing.

John Pagliuca: And so I think overall given the Optionality is really resonating with the customer base and then we can put our work and our collective focus on helping them grow their business expand their services and thats been the other thing a lot of these conversations on earth opportunity when.

John: A lot of these conversations unearth opportunities. When we're having conversations about their two or three-year technology stack, what they're trying to do, their goals over the long term, it unearths additional opportunities. It's unearthing additional MDR opportunities, so we're locking in. They're looking at us as that strategic partner, and now we can focus on driving their business forward. So overall, I believe the tone is responding. It's differentiated from what some of the other folks in the market have done. And I think it's appreciated. Great. Thank you.

Speaker Change: When we're having conversations about their two two or three year Tech stack, what they are trying to do their goals over the long term, it's unearthing additional cove.

John Pagliuca: Opportunities its unearthing additional MTR opportunity. So we're locking in we're looking at us as a strategic partner and now we can focus on driving their business forward. So overall I believe the tone is resonating as differentiated from what some of the other folks in the market and have done I think it's been appreciated.

John Pagliuca: So we're locking in; they're looking at us as that strategic partner, and now we can focus on driving their business forward. So overall, I believe the tone is resonating, differentiated from what some of the other folks in the market have done. I think it's been appreciated.

John Pagliuca: So we're locking in, they're looking at us as that strategic partner, and now we can focus on driving their business forward. So overall, I believe the tone is resonating, differentiated from what some of the other folks in the market have done. I think it's been appreciated.

Mike Sikus: Great, thank you, guys.

Speaker Change: Great. Thank you guys.

Operator: Thank you very much. As a reminder, to ask any further questions, please press star followed by one on your telephone keypad now. We have a follow-up question from Jason Aitor from William Blair. Jason, your line is now open. Oh, hey again.

Operator: Thank you very much. As a reminder, to ask any further questions, please press star followed by one on your telephone keypad now. We have a follow-up question from Jason Ader on behalf of William Blair. Jason, your line is now open.

Speaker Change: Thank you very much as a reminder to ask any further questions. Please press star followed by one on your telephone keypad now.

Operator: Great, thank you, guys. Thank you very much. As a reminder, to ask any further questions, please press star followed by one on your telephone keypad now.

Operator: We have a follow-up question from Jason Ader of William Blair. Jason, your line is now open.

John Pagliuca: We have a follow up question from Jason Ader from William Blair. Jason Your line is now open.

Jason Ader: We have a follow-up question from Jason Aitor from William Blair. Jason, your line is now open. Oh, hey again.

Jason Ader: Oh, hey again. I thought I would ask a sort of zoom-in question for you, John. Just in this MSP space, do you have a sense of how much of the SMB IT market has shifted to kind of the MSP model and approach versus, you know, running their own? And do you think a weak macro backdrop actually slows down or speeds up the trend, which obviously has been towards MSPs and outsourced IT? But I just think it would help investors to just frame where we are in the market, you know, in terms of SMB shift to the MSP model.

Jason Ader: Oh, Hey, Hey, again.

Jason Ader: I thought I would ask a sort of zoom out question for you, John, just on this MSP space. Do you have a sense of how much of the SMB IT market has shifted to kind of the MSP? Model and approach versus, you know, running their own IT internally. And do you think a weak macro backdrop actually slows down or speeds up the trend, which obviously has been towards MSPs and outsource IT? But I think it would help investors to just frame where we are in the market, you know, in terms of SMDIT shift to the MSP model.

Jason Ader: I thought I would ask sort of zoom out question for you John.

John Pagliuca: I thought I would ask a sort of zoom out question for you, John, just on this MSP space. Do you have a sense of how much of the SMB IT market has shifted to kind of the MSP? Model and approach versus, you know, running their own IT internally. And do you think a weak macro backdrop actually slows down or speeds up to the trend, which obviously has been towards MSPs and outsource IT?

Jason Ader: Just on this MSP space do you have a sense of how much of the SMB market has shifted to kind of the MSP.

Jason Ader: Our model and.

Jason Ader: Approach versus running their own it.

Operator: Internally.

Jason Ader: And do you think.

Jason Ader: A weak macro backdrop actually slows down or speeds up.

Jason Ader: It is a trend, which obviously has been towards MSP as an outsource but.

Jason Ader: I was just I think it would help investors shareholders just frame, where we are in the market.

John Pagliuca: But I think it would help investors to just frame where we are in the market, you know, in terms of SMDIT shift to the MSP model. Sure. So ultimately, you know, small-medium business, mid-sized companies, large Fortune 500 companies, they're all left with the choice. And that choice is how do I best monitor, manage and protect my assets. And what we're finding, Jason, is that more and more of those enterprises are saying it's more cost-effective to let someone who's specializing on this to actually provide part of it.

Jason Ader: In terms of SMB.

Unnamed Analyst: shift to the MSP.

Jason Ader: Shift to the MSP model.

John: Sure, so ultimately...

John Pagliuca: Sure. So ultimately, you know, small-medium business, mid-sized companies, large Fortune 500 companies, they're all left with the choice. And that choice is how do I best monitor, manage, and protect my assets. And what we're finding, Jason, is that more and more of those enterprises are saying it's more cost-effective to let someone who's specializing on this to actually provide part of it. What we're seeing is more and more mid-market and larger companies using MSPs to augment. And so the TAM in which the MSPs are actually servicing or growing because, you know, Fortune 1000 companies, mid-market companies are now looking to MSP to do part of that.

Jason Ader: Sure. So ultimately small medium business mid size.

Speaker Change: Mid sized companies large fortune 500 companies, they're all left with the choice and that choices, how do I best monitor manage and protect my assets and what we're finding Jason is that more and more of those enterprises are saying, it's more cost effective to let someone who's specializing on this to actually provide part.

Speaker Change: What we're seeing is more and more mid market and larger companies using msp's to augment.

John Pagliuca: What we're seeing is more and more mid-market and larger companies using MSPs to augment. And so the TAM in which the MSPs are actually servicing or growing because, you know, Fortune 1000 companies, mid-market companies are now looking to MSP to do part of that. Why? Because it's getting harder, right? And everyone is struggling with very low unemployment rate for IT professionals and security professionals. So they're looking to MSPs to help with part of their stack.

Jason Ader: The Tam in which the MSP are actually servicing a growing because.

John Pagliuca: That could be patching. That could be with the security service, like an MDR offering. That could be with the backup disaster recovery offering. So by and large, we're seeing the demand for these MSPs to go to a further market. I've been in this industry now for over 11 years. And when I started, MSPs were primarily servicing the VSME, you know, companies that were 50 employees and under, MSPs are now servicing Fortune 1000 companies.

Speaker Change: Fortune 1000 companies mid market companies are now looking to MSP to do part of that why because it's getting harder right and and everyone is.

John Pagliuca: Why? Because it's getting harder, right? And everyone is struggling with a very low unemployment rate for IT professionals and security professionals. So they're looking to MSPs to help with part of their stack. That could be patching. That could be with the security service, like an MDR offering. That could be with the backup disaster recovery offering. So, by and large, we're seeing the demand for these MSPs to go to a further market.

Speaker Change: Is struggling with very very low unemployment rate for IP professionals and security professionals. So they are looking to MSP to help with part of their stack that can be packaging that could be with the security service like an MTR offering that can be with a backup disaster recovery offerings. So by and large we're seeing the demand for these MSP to go to a further market I've been in this industry now for over 11.

John Pagliuca: I've been in this industry now for over 11 years. And when I started, MSPs were primarily servicing the VSME, you know, companies that were 50 employees and under. MSPs are now servicing Fortune 1000 companies. And what's also happening is that these MSPs are growing up. MSPs are now publicly traded. MSPs are now part of multi-, you know, several billion dollar enterprises as a result of their maturity, of their scale. They're now able to service larger and larger enterprises. So these provide tailwind overall to the industry. And that's what has this confident in the long-term tailwind of the MSPs space.

Speaker Change: Years, and when I started msp's were primarily servicing the V. SME companies that were 50 employees and under Msp's are now servicing fortune 1000 companies and what's also happening is that these MSP is a growing up MSP.

John Pagliuca: And what's also happening is that these MSPs are growing up. MSPs are now publicly traded. MSPs are now part of multi-, you know, several billion dollar enterprises as a result of their maturity, of their scale. They're now able to service larger and larger enterprises. So these provide tailwind overall to the industry. And that's what has this confident in the long-term tailwind of the MSPs space. The service that these folks provide or mission critical.

Speaker Change: Msp's are now publicly traded.

Speaker Change: Msp's are now part of multi several billion dollar <unk>.

Speaker Change: Enterprises as a result of their maturity of their scale. They are now able to service larger and larger enterprises. So these provide tailwind overall to the industry and that's what has us confident in the long term tailwind of the MSP space. The service that these folks provide are mission critical and if you're a CIO or a CSO of a midsized company.

John Pagliuca: The service that these folks provide or mission critical. And if you're a CIO or a CISO of a midsize company or a large company, now with the level of maturity and the tools that, you know, companies that can able provide, they now can rely on MSPs as a nice augment, a cost-effective augment. So your other point, you know, when if you're a CISO or a CIO of a mid-market company and you're faced with budget, budget pressures from your CFO or your CEO, this augment plays a good way to offload. Maybe some of the higher labor costs if you were to do it yourself.

Speaker Change: We're a large company now with a level of maturity and the tools that companies like enable provide they now can rely on MSP as a nice augment our cost effective augment to your other point when.

John Pagliuca: And if you're a CIO or a CISO of a midsize company or a large company, now with the level of maturity and the tools that, you know, companies that can able provide, they now can rely on MSPs as a nice augment, a cost-effective augment. So your other point, you know, when if you're a CISO or a CIO of a mid-market company and you're faced with budget, budget pressures from your CFO or your CEO, this augment plays a good way to offload.

Speaker Change: If you are a CSO or a CIO of a mid market company and in your face with budget budget pressures from your CFO or CEO. This augment plays a good way to offload maybe some of the higher labor cost. If you were to do it yourself and so I believe actually it's a nice it's a nice play for mid market companies for larger companies to take a step back and say.

John Pagliuca: And so I believe actually it's a nice play for mid-market companies, for larger companies, to take a step back and say, hey, where can I outsource some of my costs, some of my labor and do so in a cost-effective, number one, but number two, in a lot of ways, more secure manner. And so our technology allows for this co-managed play where an internal IT department can have eyes on glass, the same eyes on glass that the MSP can have. So it gives the internal IT department the transparency that they want, but it saves them some of the cost because it's relying on that MSP to provide some of that labor in the expertise, which is why I believe overall for a bunch of factors, you know, it's very much a recession-resilient industry.

John Pagliuca: Maybe some of the higher labor costs if you were to do it yourself. And so I believe actually it's a nice play for mid-market companies, for larger companies, to take a step back and say, hey, where can I outsource some of my costs, some of my labor and do so in a cost-effective number one, but number two, in a lot of ways, more secure manner. And so our technology allows for this co-managed play where an internal IT department can have eyes on glass, the same eyes on glass, that the MSP can have.

Speaker Change: Hey, where can I outsource some of my cost some of my labor and do so in a cost effective number one but number two and a lot of ways more secure manner and so our technology allows for this co managed play where an internal it department can have eyes on glass the same eyes on glass that the MSP can have so it gives the internal it.

Speaker Change: The transparency that they want but it saves them some of the cost because it's relying on that MSP to provide some of that labor and the expertise.

John Pagliuca: So it gives the internal IT department the transparency that they want, but it saves them some of the cost because it's relying on that MSP to provide some of that labor in the expertise, which is why I believe overall for a bunch of factors, you know, it's very much a recession resilient industry. Thank you very much. As a final reminder to ask any further questions please press star followed by one on your telephone keypad now. We have no further questions.

Speaker Change: Which is why I believe overall for a bunch of factors, it's very much a recession resilient industry.

Jason Ader: Helpful. Thank you.

Operator: Thank you very much.

Speaker Change: Thank you very much as a final reminder to ask any further questions. Please press star followed by one on your telephone keypad now.

Operator: As a final reminder to ask any further questions, please press star followed by one on your telephone keypad now. We have no further questions.

Unnamed Analyst: We have no further questions I will now hand over back to John for closing remarks. Thank you operator, and thank you all for joining US today looking forward to talking to you next quarter.

John Pagliuca: I will now hand over back to John for closing remarks. John?

John Pagliuca: Thank you, operator, and thank you all for joining us today. Looking forward to talking to you next quarter. That concludes today's call. Thank you for.

John Pagliuca: I will now hand over back to John for closing remarks. John? Thank you operator and and thank you all for joining us today looking forward to talking to you next quarter.

Operator: That concludes today's call.

Speaker Change: That concludes today's call. Thank you for joining you may now disconnect your lines.

Unnamed Analyst: [music].

Operator: Thank you for

Unnamed Analyst: Okay.

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