Q1 2025 N-able Inc Earnings Call
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Speaker Change: Hello everyone. Thank you for your patience. The enable first quarter 2025 and links call will begin shortly. During the presentation, you will have the opportunity to ask the question by pressing star followed by one on your telephone keypad.
Thank you.
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Speaker Change: Michael Cikos, Jason Ader, Brian Essex, Jason Ader, Brian Essex, Jason Ader, Brian Essex, Jason Ader
Steve Hukeman Team Temples HYPERLINK Alphabetsecretario.commerce
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Speaker Change: Thank you for watching and I will see you in the next one.
Michael Cikos, Jason Ader, Brian Essex, Jason Ader, Brian Essex, Jason Ader, Brian Essex, Jason Ader, Brian
Angela: Good morning everyone, and welcome to the Enable First Quarter 2025 Endings call. My name is Angela, and I'll be coordinating your call today.
Angela: During the presentation, you can register to ask the question by pressing stop followed by one on your telephone keypad. If you change your mind, please press stop followed by T.
Speaker Change: I will not hand you over to your host, Griffin Gyr, invest in relations, senior manager to begin. Griffin, please go ahead.
Griffin Gyr: Thanks, operator, and welcome everyone to a navel's first quarter, 2025, Erning Skull.
John Pagliuca: With me today are John Pagliuca, Naples President and CEO , and Tim O'Brien, EVP and CFO .
Speaker Change: Following our prepared remarks, we will open the line for a question and answer session.
Speaker Change: There you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call.
Certain statements made during this call are forward-looking statements.
Speaker Change: including those concerning our financial outlook, our market opportunities, and the impact of the global economic environment on our business.
Speaker Change: These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except it's required by law.
Speaker Change: These statements are also subject to a number of risk and uncertainties, including those highlighted in today's earnings release and are filings with the SEC.
Speaker Change: Cafies are available from the SPC or on our best relations website.
Speaker Change: Furthermore, we will discuss various non-GAAP financial measures on today's call.
Speaker Change: Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures.
Speaker Change: A reconciliation of certain gap non-GAAP financial measures discussed on today's call is available in our earnings press release on our investor relations website.
And now, call us from the call over to jump.
John Pagliuca: Thank you, Griffin, and welcome everyone to our call this morning.
At Cyber Threats Continue, and Uncertainty Provades the Economic Conversation
John Pagliuca: Small and bid market businesses face mounting pressure to stay secure and efficient.
John Pagliuca: and with a cyber resiliency platform, purpose built for their needs, and able to deliver the protections and performance required to move forward.
Speaker Change: Our Value and Approach are resonating. At our recent Empower Conference in Berlin, within 500 international attendees responded to the enabled vision with enthusiasm.
John Pagliuca: underscoring the growing urgency around security and the confidence customers place in our platform.
John Pagliuca: This confidence was echoed at our investor day. We relayed out our target to reach $750 million dollars in ARR by 2028.
Three growth drivers underpin our path to the target.
John Pagliuca: First, driving security success, second, scaling our go-to-market, and third, boosting customer expansion.
John Pagliuca: Today, we will walk through updates on each and discuss why we believe enable is ready for both the challenges of today and the opportunities ahead.
Let's begin with our quarterly results.
First quarter revenue was $118.2 million dollars.
and adjusted EBITDA was $31.6 million, reflecting a 27% margin.
John Pagliuca: We once again defeated our top and bottom-line guidance as we executed against our strategy and set ourselves to gain share and our large and growing tam.
John Pagliuca: Turning to our growth pillars, let's first look at our security initiatives.
John Pagliuca: We made excellent progress on our product roadmap, highlighted by the release of breach prevention from Microsoft 365.
We believe this offering saw the deep customer pain point.
John Pagliuca: Microsoft serves as a core technology provider to a large portion of our customer base.
John Pagliuca: An attackers are increasingly bypassing traditional endpoints targeting digital identities to infiltrate organizations.
John Pagliuca: Our solution ingest Microsoft 365 user telemetry to proactively detect and remediate threats.
Securing this Critical Identity Attack Vector. Thank you.
John Pagliuca: This is a compelling way for customers to enhance their Microsoft security posture, while positioning us to be strong demand and drive growth.
John Pagliuca: We also launched vulnerability management as a new built-in feature in our unified endpoint management or UEM solution.
This is a major stuff for the industry.
John Pagliuca: Customers looking to identify and remediate vulnerabilities in their environments have historically needed to purchase and deploy two separate tools
John Pagliuca: One to identify vulnerabilities, and another to patch and remediate those endpoints.
John Pagliuca: Enable, now delivers the capability to accomplish these workflows with a single solution.
John Pagliuca: This is a differentiator for an Able and a better way to do business for our customers.
John Pagliuca: We are reducing software sprawl, reducing fragmentation and closing security gaps while making the technicians we serve more efficient.
John Pagliuca: We have already discovered millions of vulnerabilities. An early positive customer reception gives us confidence that our solution hits the mark.
John Pagliuca: In addition to launching new defensive capabilities, we also advanced our efforts to help customers operate more efficiently.
Code Data Protection, Shined Particularly Bright.
John Pagliuca: The team improves Microsoft domain backup speed at the 20%, extending coves value proposition as it trusted cost effective protector of data.
Efficiency Matters, especially in an uncertain macro environment.
and Cove's Claire R.O.I. physician's been able to win.
[inaudible]
When you deliver value, awards and recognition follow.
John Pagliuca: We're proud for Cove to be named the champion and managed BDR by Canalis for the second consecutive year. Reinforcing our technical capabilities and continued market strength.
John Pagliuca: Not to be outdone, our Edulman Security Operation Solution was recently named Market Leader for MDR in the 2025 Cyber Defense Magazine Global InfoSec Awards.
John Pagliuca: This award and our market trajectory validate our approach, which we discussed in our recent 2025 state of the SOC publication.
I'll give you some takeaways from the report.
John Pagliuca: The volume, velocity and cost of cyber security attacks and breaches remain at all-time highs. Security teams are overwhelmed.
John Pagliuca: They can't process an unending number of alerts, and they also don't have the budget or expertise to hire the multiple security analysts needed to properly reduce their risk profile.
John Pagliuca: Old paradigm simply don't work in the age of A.I. driven threats.
A customer example brings us to life
John Pagliuca: A security professional at a regional healthcare organization was single handedly managing over 1,500 devices.
This is a significant workload and involves substantial risk.
He and his organisation needed help.
John Pagliuca: Recognizing the business risk, he decided to trial our ad-loom and security operation solution. And during the trial period, we stopped three different security breaches.
John Pagliuca: The thwarting of these threats immediately proved the ROI of our solution leading to a six-figure ARR deal.
We are winning because we are built differently.
John Pagliuca: Our AI-powered solutions cut through the noise while our experts provide eyes on glass.
Contextualizing and remediating priority event
Technology is a mode for our AI powered sock.
John Pagliuca: We are automating 70% of incident and threat remediation activities across thousands of end customers.
John Pagliuca: This gives us a competitive edge against legacy approaches and empowers us to drive better outcomes for our customers.
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John Pagliuca: Our automated SOC, the development of breach prevention for M365 and vulnerability management highlights that we are building on our technical differentiation.
John Pagliuca: We are bullish on AI and security, and we are just getting started.
John Pagliuca: A second pillar of our growth strategy is expanding our go-to-market.
John Pagliuca: We are broadening our approach to capture the full spectrum of channel providers that small and mid-market companies rely on to protect the digital operations.
John Pagliuca: Our leading position in the MSP community is driven by a simple formula, quality partnership, coupled with purpose-built software.
John Pagliuca: resellers, system innovators, and distributors share similar needs and represent approximately twice the market opportunity of the MSP market.
John Pagliuca: We are applying our proven channel formula to partner with these providers, positioning us to deliver cyber resilience to more businesses regardless of which channel partner they choose.
This expansion is already taking shape [inaudible]
John Pagliuca: In the first quarter, we added resellers across the globe to our program. We revamped our partner portal to better facilitate reseller transactions.
John Pagliuca: and hosted a series of high-impact events with well-established resellers, including trade shows, round tables, and executive briefings.
John Pagliuca: And at our Empower Conference, we boldly showcased our commitment to delivering cyber resilience to businesses everywhere. We're executing on a robust playbook, and that work is resonating.
John Pagliuca: We were awarded a five-star rating in the CRN Partner Program Guide for the fourth straight year.
John Pagliuca: Underscoring our commitment to providing exceptional support and resources that help our customers thrive in a constantly evolving cyber security landscape.
Scaling our good market goes beyond our sales and marketing motion.
Technical considerations are also a key factor.
John Pagliuca: This is why we're thrilled to announce our commitment to CMMC 2.0 readiness, which will enhance our good-of-market strategy by widening our appeal to deals across more regulated sectors, including our customers who support defense and critical infrastructure.
John Pagliuca: A recent customer example valid if the progress we're making and scaling are good at market efforts.
John Pagliuca: A consortium of school systems serving thousands of users was evaluating the best way to protect their members.
John Pagliuca: Working alongside a value-added reseller, we educated the customer about our next-gen security capabilities, easy deployment, high number of out-of-the-box integrations, and commitment to partnership.
John Pagliuca: They saw the power of our approach, signing a large six-figure ARR deal, stealing an enabled win against the competition.
This was our largest new deal ever.
John Pagliuca: Make no mistake, our channel expansion isn't just planned, it's in progress.
Third pillar is boosting customer expansion. Thank you very much.
John Pagliuca: Our multi-category, multi-product software suite underpins in approximately $2.5 billion across our opportunity that we believe exists within our existing base.
John Pagliuca: Helping customers realize the technical and service benefit of standardizing on a cyber resilience platform, and executing this crossover opportunity is key to our growth algorithm and strategy.
A customer when brings out platformization strategy to life.
John Pagliuca: A roughly 300 person organization was frustrated with a patchwork of multi-bender solutions and recognized the need for a more reliable and efficient security approach.
John Pagliuca: Realizing the criticality of secure streamlined operation, they turn to enable the trusted partner.
John Pagliuca: and adopted our unified endpoint management, security, and data protection solutions.
The result, the high five figure ARR deal.
John Pagliuca: Wins like this are a testament to the impact of our approach.
John Pagliuca: Our cyber resiliency platform addresses SMB a bid market core security needs, and our customer success model is dedicated to their outcomes.
John Pagliuca: Without us, these businesses are left to stick together to spare tools and are often lacked in line for customer support from larger enterprise focus vendors.
John Pagliuca: We believe our ability to profitably serve the SMB in mid-market is a competitive mode for an Able.
John Pagliuca: We help them step off the IT treadmill, stay safe, and focus on what matters most.
running their business. [inaudible]
Speaker Change: And with that, I will turn it over to our CFO , Tim O'Brien, then I will circle back for closing remarks. Tim?
Tim OBrien: Thank you, John , and thank you all for joining us today.
Tim OBrien: We had a solid start to the year with Q1 revenue and adjusted EBITDA, both coming in, help out the high end of our guidance range and continue progress across our strategic priorities.
Tim OBrien: We were also pleased to announce a $75 million share repurchase authorization program.
Tim OBrien: While we haven't re-purchased any shares to date, this program gives us an additional capital allocation option and underscores our belief in the enabled business.
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Tim OBrien: For our first quarter results, total ARR was $492.7 million growing at 10% year over year on a reported basis and 11% on a constant currency basis.
Tim OBrien: Full revenue was $118.2 million, $2.2 million about the high end of our guidance, representing approximately 4% year-over-year growth on a reported basis and 6% on a constant currency basis.
Tim OBrien: Subscription revenue was $116.8 million, representing approximately 5% year-over-year growth on a reported basis, and 7% on a constant currency basis.
Tim OBrien: We enter the quarter with 2,398 customers that contributed $50,000 or more of ARR, which is up approximately 10% year over year.
Tim OBrien: Customers with over $50,000 of ARR now represent approximately 58% of our total ARR up from approximately 56% a year ago.
Tim OBrien: Dollar-based net revenue retention, which is calculated on a trailing 12-month basis was approximately 101% on both a reported and constant currency basis.
Tim OBrien: 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 gaps in non-GAAP reconciliation provided in today's press release.
Tim OBrien: First quarter, Gross Margin, was 80.6% compared to 84.7% in the same period in 2024.
Tim OBrien: First quarter, adjusted EBITDA with $31.6 million, $3.1 million above the high end of our guidance, representing approximately 27% adjusted EBITDA margin.
Tim OBrien: I'll love it free cash flow with $28.1 million in the first quarter.
Tim OBrien: CapEx, inclusive of $2.8 million of capitalized software development costs with $6.1 million or 5.1% of revenue.
Tim OBrien: Non-GAF earnings per share were 8 cents in the quarter based on 189.1 million weighted average
Tim OBrien: We ended the quarter with approximately $94 million of cash and an outstanding loan principal of approximately $38 million, representing net leverage of approximately 1.5 times.
Tim OBrien: Approximately 43% of our revenue was outside of North America in the quarter.
Tim OBrien: Turning to our financial outlook, our guidance accounts for the following elements.
Tim OBrien: First, we are assuming tax rates of 1.07 for the euro and 1.27 for the pound for the remainder of 2025, along with updates to other currencies.
Tim OBrien: Second, while changing power of policy is injecting caution and uncertainty into the macro environment, the need for cybersecurity and resiliency remain persistent.
Tim OBrien: On Balance, we are raising our reported ARR in revenue guidance to reflect our first quarter results.
and inclusive of updated effect rates on our business.
Tim OBrien: Additionally, we are maintaining our full-year constant currency revenue and ARR guidance as we monitor the fast-changing macro dynamics closely.
Tim OBrien: Third, on the expense front, we continue to balance profitability while investing for growth.
Tim OBrien: Our operating plan includes multiple strategic priorities, including the development of our India R&D site, the integration and success of AdLumon.
and new products and go-to-market initiatives.
Tim OBrien: We are raising our adjusted EBITDA guidance and our confidence we can deliver on these operational priorities.
Tim OBrien: With that in mind, for the second quarter of 2025, we expect total revenue in the range of 125.5 to 126.5 million dollars, representing approximately 5% to 6% year-over-year growth on a reported and constant currency basis.
Tim OBrien: For the full year 2025, we now expect total revenue of $492 to $497 million, representing approximately 6-7% year-over-year growth, or approximately 6-8% on a constant currency basis.
Tim OBrien: We expect full-year ARR in the range of $519 to $525 million, representing 8-9% year-over-year growth for 7-9% on a constant currency basis.
Tim OBrien: We are raising our adjusted EBITDA outlook and expect full year adjusted EBITDA of $134 to $139 million representing 27 to 28% adjusted EBITDA margin.
Tim OBrien: We reiterate that we expect Cabets, which includes capitalized software development costs will be approximately 6% of total revenue for 2025.
Tim OBrien: We are also raising our expected adjusted evida to unleavened free cashflow conversion percentage from 65% to approximately 68% for the full year.
Tim OBrien: We expect total weighted average by Looted Shares outstanding of approximately 189 to 190 million for the second quarter and the full year.
Tim OBrien: Finally, we expect our non-gab tax rate to be approximately 20 to 21% in the second quarter and for the full year. Now I will turn it over to John for closing remarks.
Thanks Tim.
John Pagliuca: Our earnings reflect continued progress, advancing cyber resilience for businesses worldwide.
Tim OBrien: Our customer confidence demonstrates the continued belief in the value we deliver.
John Pagliuca: and our industry accolades are proof points that are ever to resonating.
Tim OBrien: While evolving trade policies can create uncertainty, cyber threats don't pause and neither do we.
Tim OBrien: The launch of new security capabilities, the growth of channel partners in our partner program, and our largest new booking deal ever, showcase that enable is innovating and growing.
Tim OBrien: We look forward to building on this progress throughout the year.
Tim OBrien: And with that operator, we'll open up the lines for questions.
Speaker Change: Thank you. Everyone, if you would like to ask the question, please press star 4 by 1 on your telephone keypad now. If you change your mind, please press star 4 by 2. When preparing to ask your question, please ensure your device is unmuted locally.
Speaker Change: The first question comes from my Cikos with Neil. Your line is self at please go ahead.
Speaker Change: Terrific. Thanks for the question to you guys. I just wanted to see before getting into it, but with the ad aluminum acquisition, can you segment how much the acquisition contributed to revenue growth or AR just so we can get an organic growth rate for you guys?
Speaker Change: The kind of starting point of revenue from the addubin acquisition upon the point of acquisition was about twenty one million dollars of ARR or so and that
Speaker Change: Yes, there's no impact for my 606 Rev Rec on that, so that's kind of recognized rapidly, so that should help you get back into an organic growth rate.
Okay, and then for the-
The follow-ups here, I know we're still...
Speaker Change: Relatively new with the new disclosures around ARR, which is as we think about the rest of the year. Are there any considerations? We should have in our models when thinking about seasonality or different movements of the business year on a quarterly basis throughout the year.
Speaker Change: Yeah, Mike, I wouldn't expect it to be fairly consistent as we set it up with, I would say, some slight improvement as we go through the year. We gave that similar color on the last call as well that we'd expect the ARR.
Speaker Change: Sequential Goat to kind of be building as we went through calendar 2025.
Terrific. I'll turn it over to my colleagues. Thank you.
Thanks Mike.
John Pagliuca, John Pagliuca, John Pagliuca,
Speaker Change: Thank you. The next question comes from Brian Essex with JP Morgan. Your line is open. Please go ahead.
Brian Essex: Good morning and thank you for taking the question. I guess, you know, first question is just overall
Brian Essex: View on the market and the health of the spending environment, particularly after, you know,
Brian Essex: Beginning of April when things seem to have gotten a little bit noisier from the macro perspective. We'd love to hear what you're, what you. [inaudible]
Brian Essex: You're hearing from both enterprise customers and MSPs and how they're experiencing the current
Brian Essex: Sure, good morning Brian , this is John . Thanks for the question. Look, whether it be data protection or the thwarting of the threat actors, the need for cyber resiliency, it's a must, right? It's not like a nice to have. So we continue to see the demand, and that's both reflected in our bookings and our pipeline remains strong. Thank you very much.
Brian Essex: So we're not really hearing, we're not really seeing any major differences from the demand point of view. The offerings continue to resonate in the market.
Brian Essex: That being said, I'd say anecdotally with some of the channel checks we do here folks talking about you know certain deals taking a little bit longer or you know a little bit more of a measure twice kind of cut white approach before folks are launching a big project but overall
Brian Essex: The demand remains strong and the offerings continue to resonate in the market.
[inaudible]
Speaker Change: Database Net Retention for us. How do you anticipate that this is a trough here?
Speaker Change: Is there further to decline there? And then maybe the e-components of that in terms of churn.
Speaker Change: Cross so upsell, any pricing increases, just so you can kind of get an idea of the dynamics by understanding if the it's a trillion 12 month metric, but just trying to understand when we might start to see that kind of like head in the other direction. [inaudible]
Speaker Change: Yeah, he runs the system. I would expect we were at to be more in that job. I think with the trailing 12 months.
Like, impact on, you know...
the improvements we're looking to drive. Thank you very much.
Speaker Change: will be driven mostly through the cross-el opportunity that we have.
Speaker Change: Okay, and what that's helpful, and what kind of considerations will we need to make on the pricing side?
Speaker Change: I expect pricing to be in the one to two percent range for calendar 25.
Very helpful. I want to be part of the materials. Thank you.
Okay, thank you Brian.
Speaker Change: Thank you. The next question is from Matt Hepburn with RBC Capital Markets. Your line is open, please go ahead.
Great. Thanks for taking my questions, guys.
Speaker Change: You know, John , I wanted to ask you about the reseller traction. You know, it seems really exciting, you know, as another girl's a vector. It's something we're still early. I just I kind of wanted to see like where are we at, like, I don't know what inning are we in that kind of reseller motion. We're going to see if we can get in.
Speaker Change: And, you know, how do you think about, you know, potentially that aiding girl this year? I have to imagine you probably haven't invented a ton in guidance for that. Just sort of curious on that element.
John Pagliuca: Yeah, Amat, great question. Yeah, and so just maybe to remind the audience a bit, we traditionally were focusing on the route to the SME or mid-market via the MSP.
John Pagliuca: And now we're widening that net, so to speak, and really beginning to invest a little bit more in other type of channel participants, value add resellers, even some FIs and some of the folks like that. Matt, I categorized it as early earnings for sure, but it's already seeing some green shoots. We have...
John Pagliuca: We're focusing right now on adding resellers, active resellers both in North America and international. Part of the, one of the benefits from the Abouman acquisition is they had a reseller network in the US.
John Pagliuca: And so what we're doing there is we're adding to that network, but we're also now giving them other, you know, adding other items for their shelf, so to speak, and their line card with cove.
John Pagliuca: and with our UEM offerings. And so that's been getting some good traction. And then in Europe where we're adding, we've added some cams in the UK, we've added some cams in the dock markets.
John Pagliuca: and those are already starting to throw off some green shoots. And so, you know our business, it's a, I often refer to it as a snowball business where, you know, 20,000 plus customers.
John Pagliuca: And so we're lining up those pipeline, we're starting to get deals, bookings are starting to come in.
John Pagliuca: We'll have an impact on 2025, but not necessarily material, just because of the nature of the way the snowball kind of builds. We do expect it to have a bigger impact in 2026, but so far so good. The demand is there. The products resonate and we're really beginning to seed and we're starting to see that pipeline build nicely. We're starting to see that pipeline build nicely.
Speaker Change: That's fantastic. Yeah, it does seem like a really interesting, additional growth factor versus historical, historical, MFP distribution. I guess the other thing that really stood out to me, you know, Johnny mentioned it kind of early near prepared marks was sort of the year VM management solution.
Speaker Change: We often hear of a lot of custom issues with the VM side and the patch management, especially I can imagine that's even more relevant in the SMD space.
Speaker Change: You know, it sounds like you're having some strong early traction with that as well. Wondering if you can give us a little bit of sense too on, you know, maybe where you're seeing that success and is it competitive displacement? [inaudible]
Speaker Change: Or is it the case where, you know, they may be not using anything for VM and some of your customers?
Speaker Change: Sure. When we surveyed our managed service providers in particular, the two biggest areas are need were around security operations and XDRMDR activity and a close second was vulnerability management.
Speaker Change: Madison, it's a hybrid, you know, some have disparate tools.
Speaker Change: that they were using. No one really had it in one unified platform inside their UEM. And so...
Speaker Change: This is definitely will be a differentiator in our UEM for sure. We're starting with with the scanning of endpoints in the applications and then we're going to add to that and add on with scanning of networks and then and then to the cloud.
Speaker Change: and so I'd say it's a little bit of a hybrid in that. We'll probably be displacing some folks.
Speaker Change: on at the first tranche or the first horizon with the end point, but then it'll be a little bit more of a green field or blue ocean, so to speak.
Speaker Change: with the network and definitely with the cloud. And so, it's really exciting. Right now, we actually have it. It's actually included in our UEM. We're not charging.
Speaker Change: R-R-R MSPs for it, and it's showing up. Look, I often refer to this as left hand right hand clapping, right? You need to scan and understand what the vulnerabilities are, and then you need to patch.
Speaker Change: Our passion, we believe, is best in class, the level of automation, the level of policies that folks can do, it all goes squarely right into our mission, right? We're helping these MSPs be more secure, helping their customers be more secure, and making sure they can do this effectively and efficiently. So this is right in the cross-airs of really our mission, and like I said, this was one of the top two priorities that MSPs were looking for. [inaudible]
Speaker Change: and it really frankly is a gap in the industry. We know there's a lot of enterprise players and some of our MSPs are forced to use some of those enterprise players.
Speaker Change: And it might be a little bit heavier than what an MSP needs. They're not necessarily architected in an end tier so that they can deploy this across their group. And now what an MSP can do is run certain and common policy across all of their customers, which drives a tremendous amount of efficiency.
Speaker Change: So we're really excited about it and the reception has been great. We announced this in Berlin at our Empower event.
Speaker Change: and we had 500 plus attendees there and the place went nuts. Literally the audience that it's screaming when our CTO announced.
Speaker Change: announced that this is going to be included in an insight both of our UEM. So we're looking forward to it. This will help us make the platform stickier. This will help us displace competitors as we're going in because the competition does not have this. So this is truly a differentiator. This will help us make the platform stickier. This will help us make the platform stickier. This will help us make the platform stickier.
[inaudible]
Sounds great, best of luck guys.
Speaker Change: Thank you. The next question is from Keith Bachman with BMO. Your line is open, please go ahead.
[inaudible]
John Pagliuca, John Pagliuca, Timothy OBrien
Hello, Keith. You're on your soap and please go ahead.
Speaker Change: Yeah, thanks very much. I just wanted to ask three questions if I could. Good morning. The first is, could you tell us how much did the Rev Guide change due to the FX?
Speaker Change: Hey Keith, this is Tim. Primarily we held our constant currency outlook for the year, so all the increase on rev guys related to FX for the year.
Speaker Change: Okay, great. Then the second question is, thank you. The second question is, um,
Speaker Change: sort of where Brian was digging in a little bit. You mentioned that...
Brian Essex: There's more scrutiny on deals. Just to be clear, though, is the pipe the same, but there's deal alongation, or you not even seeing the deal alongation or sales cycle expanding.
Brian Essex: Is there any agents in the cadence that's really worked? Yeah.
Brian Essex: Yeah, this is John , what I mentioned is really more anecdotes, what we're saying, but...
Brian Essex: That being said, we wanted to maintain, I would say, a prudent kind of outlook given some of the uncertainty. But no, look, the bookings are strong. The pipe remains quite strong. And we're not really seeing anything that's materially different in the metrics. But it's more some of the anecdotes that we're hearing. [inaudible]
Brian Essex: from some of our channel checks. Not necessarily what we're seeing in our direct business.
Speaker Change: Fair enough, fair enough. Okay, thank you, John . And then the last question I had is really related to slide 25 on the deck.
Speaker Change: and just wanted to maybe you could revisit on the EBITDA margin expectations as we go out. And what's interesting is, you know, your EBIT dollars. [inaudible]
are roughly consistent to what they were. [inaudible]
Speaker Change: and, say, in 23, and while the revenue is expanded. So, it is the thesis that, you know, the EBIT margins remain constant here, or go up, or, you know, just give us a little, remind us how.
Speaker Change: Either the EBIT margins will transition into or the dollars as you aspire to the larger ARR targets.
Speaker Change: Yeah Keith, looking at calendar 2025, we're squarely focused on growth re-acceleration and a couple of key...
Speaker Change: Investment Initiatives, Juan on Adloom and Making Adloom and Successful, two on launching our new site in India and three is driving the expansion of our channel in both North America and internationally on adding new resellers and getting that.
Speaker Change: That channel, adding, you know, points of growth to the overall business. So from 2025 standpoint, that's that's focused. I'd say we're we're saying conservative on the on on on EBITDA there with the number one focus on growth as we look at 26.
Speaker Change: I would expect it to move back into the low 30s from an EBITDA perspective as we balanced the investment between profit and growth in 26. Yeah, that was really the spirit of the question was.
Speaker Change: Okay Okay, Fair enough that's it for me. So low 30s kind of margins as we conceptualize 26.
Yeah.
Okay, perfect. Many thanks. That's it for me.
Thank you.
Speaker Change: Thank you. The next question is from Jason Ader with William Black. Go on yourself and please go ahead.
Jason Ada: Thank you. Good morning, guys. First, I wanted to get a clarification, so the $2.6 million
Beat of Versus on the Revenue Cyber Versus Guidance.
Jason Ada: And you had two million positive impact from FX, just wanted to make sure those numbers are right and whether that was contemplated in the original guidance, in other words.
Jason Ada: If not for our facts, you would have beaten by 0.6 million. Is that the right way to think about it or was it contemplated in the guidance?
Jason Ada: No, the kind of thing in the guy with the rates that we stated back in fab, so there was some effects upside on the Q1 results. The other part on the revenues to hide, Jason is we had some, I would say some impact from 606 to the positive, which doesn't carry through for the full year in Q1 as well.
Okay, very helpful. Okay, good. And then on the...
customer expansion side. Can you just talk about...
Jason Ada: I don't know anything that you didn't talk about in the prepared remarks in terms of some of the things you're working on.
Jason Ada: Bundling, or other initiatives, go to market initiatives, and then specifically what metrics should we be looking at going forward to check on the success of some of those initiatives.
Hey Jason, this is John . Yeah, look, so- [inaudible]
Speaker Change: One of the things that the Illumina acquisition afforded us is, if you think about the economic staff that we bring to market.
Speaker Change: You know, that's now $30 per user per month, right? And which, you know, the Aluminum ASP by itself was anywhere from, you know, $5 to $12. So it's a substantial uptick in our economics stack.
Speaker Change: And that allows us the ability to do a little bit more of a bundling and packaging, which will help.
Speaker Change: Our customers, both the mid-market customers and the MSPs. What we believe is that...
Speaker Change: at the mid-market, at the low end in particular. If you're buying things in a silo, those silos are not as efficient, not as effective and potentially not as secure. So by bundling via one kind of platform.
Speaker Change: The end customer is getting the benefit of that. And so, we're going to package that up, that should drive, that will drive, you know, our ASPs up, what you can look to, for proof points there, an acceleration, an ARR, you know, an uptick in NRR as well, as we go through, because we should get some of that upsell, or excuse me, crosssell, as we go through. And we try to give a little bit of an example of that in the prepared remarks.
Speaker Change: That's a high five figure <unk> deal.
Speaker Change: Before at lumen that might've been more like a 12% to $14000 ACB type of deal. If it was just the OEM or one of our offerings, but now bundling that together, we're getting four or five times six times. The ACB for a 300 person organization or a 300 device MSP. So.
Speaker Change: The bundling and packaging I expect to actually have benefit both on the low end and the high end, but maybe even on an overweight impact on the lower end of the market because thats really.
Speaker Change: It can drive some of the economic benefit for themselves, but more importantly drive the efficiency for the technicians that those organizations R. R.
Speaker Change: Frankly, a little bit overstretched, if they're using more of a siloed approach.
Speaker Change: Is that where you have seen.
Speaker Change: On the end market side is that where you're seeing most of the success for.
Speaker Change: Maybe some of your competitors like on the low end of the MSP market just some of that.
Speaker Change: So kind of full full platform.
Speaker Change: Yes, So let me split that answer up because it's important.
Speaker Change: Add lumen automated sock, that's resonating on the low end thats resonating in the middle of that is resonating in the high end that's resonating in the mid market like that that's that remains our fastest growing SKU and it's in the cross sell has been really really strong across across all the.
Speaker Change: The entire spectrum.
Speaker Change: Bundling.
Speaker Change: And yes, the bundling I would say the success was a little bit more on the on the middle to lower end.
Speaker Change: Hum.
Speaker Change: Very good thank you.
Speaker Change: And frankly, we're actually really just getting started with some of that where it's more I would say in testing and we look to bring a little bit more of that systematically to the back half of this year and into 2026.
Speaker Change: Thanks.
Speaker Change: Yes. Good question. Thank you.
Speaker Change: The next question is from Joseph <unk> with Scotiabank. Your line is open. Please go ahead.
Speaker Change: Yes. Thanks for the question John If you could talk about traction you're having with the bloom and remind us what's the catalyst for Greenfield adoption is it typically a breach someone trying to get cyber insurance, maybe some other reason really just trying to understand why this market is poised to take off now.
Speaker Change: Sure. Thanks, Joe.
Speaker Change: Based on our research, but also research of analysts in the space.
Speaker Change: <unk>.
Speaker Change: I would call the xdr slash MTR.
Speaker Change: Is really a blue ocean.
Speaker Change: <unk>.
Speaker Change: The market for the MSP is I'd say, the majority and we've seen as low as 55 and as high as like 70% depending on the survey do not have a solution in place today and so that's exciting what's.
Speaker Change: What's driving that you kind of hit at all.
Speaker Change: Like hitting for the cycle rates, yes, if somebody has.
Speaker Change: A cyber a cyber breach or an incident, that's a catalyst if it's a need for insurance and or hopefully.
Speaker Change: It's also smbs mid market companies and MSP is being proactive, saying that they can't handle the threats that are needed. They can't handle it shouldnt be building of sockets millions of dollars for a lot of these managed service providers are mid market companies to build a sock. So if they can rely on a company that's leveraging AI to help them in a much more automated way.
Speaker Change: Search for threats and worked the threats and the biggest part of the aluminum solution that we believe is a differentiator is what we refer to as big and that we remediated. So before a customer can even be there can be sleeping in we're already take action and remediate one of the more interesting things that I mentioned this in the prepared remarks.
Speaker Change: <unk>. We're also we also went to market with Microsoft 365, breach prevention right. So we were at RSA last week, our first time enable us ever an exhibitor at at the at the Cyber security event in San Francisco last week, and one of the big themes is identity and and <unk> hundred 65 really is one of those business.
Speaker Change: It's effectively completely automated and we're if we're seeing any anomalous behavior with the signing in or just the logging in or a user or an identity <unk> hundred.
Speaker Change: 65, which you can imagine covers a large part of my base, we can actually shut down that access and so whether it would be a mid market company or an MSP that could still be sleeping and we will take action for them on their behalf, making sure that there's no lateral movement, making sure that that person no longer have access to their information. So we might have taken out.
Speaker Change: As before and.
Speaker Change: And prior technologies is now taking minutes for us to detect and then respond and go from there and Thats resonating in the market. It is a differentiated approach it's very much an AI powered automated sock and and it seems to be really resonating.
Speaker Change: That makes a lot of sense.
Speaker Change: Okay, and you've also talked a lot about the value of selling the entire platform.
Speaker Change: I think I heard the word platform renovation.
Speaker Change: Sure.
Speaker Change: So I'm curious is there an effort to integrate all the offerings together into a single pane of glass and does that add further value.
Speaker Change: But where are you on that journey.
Speaker Change: Sure when you think about the technicians need it's really about the workflows.
Speaker Change: And that culminates or people speak to it as a single pane of glass, but the reality is it's all about automating of the workflows. So what we have is effectively three best in class offerings, Our Cove data protection offering our OEM offerings and the alumina offerings. So best in class. So if a mid market company or an MSP has a need.
Speaker Change: For one of those three offerings. They can consume that and then frankly, we do pitch and do believe that it is a better together story. It makes the MSP or the technicians more efficient it makes our solution more effective and why it's because the workflows they don't need to log onto our need to manage that.
Speaker Change: The rules based account controls and all of the access as they're pushing and pulling of the data. We can automate things we can make the offerings more secure by looking at the if there was any anomalous detection.
Speaker Change: So I'll give you. An example, we actually had a.
Speaker Change: A customer that was using both cove and as lumen and a breach was detected so that breach was remediated.
Speaker Change: And then just for belt and suspenders approach because they had cove. They are able to go back and recover from the previous day just to make sure that there was no threat actors and their environment. None of their data was corrupted and so that's a good example of the cyber resiliency platform, where we're detecting remediated and then we can recover just to make sure.
Speaker Change: That the environment is clean and we believe that having that complete resiliency story is differentiated both for enable both of the MSP as we serve and the mid market companies that are that are that are dealing with the threats.
Speaker Change: Yeah.
Speaker Change: Yes, thanks, so much for taking my questions.
Speaker Change: Thank you we have a follow up question from Mike <unk> with Neil.
Speaker Change: Line is open. Please go ahead.
Mike Sikos: Hey, guys. Thanks for getting me back on here I just had a quick follow up I believe it was in response to Jason's line of questioning but just wanted to make sure. We're being thorough here if I go back a quarter ago management said that they expected a five point headwind to <unk> revenue and a four point headwind to calendar 'twenty five.
Speaker Change: From ASC 606.
Speaker Change: Did that five point headwind to <unk> play out as expected and are we still maintaining that four point headwind to calendar 'twenty five from these.
Speaker Change: The Rev Rec dynamics.
Mike Sikos: Hey, Mike Yeah.
Mike Sikos: We saw we saw things come in.
Mike Sikos: Very close to where we are.
Mike Sikos: Where we had kind of projected things for both Q1 and for 2025 Q1 was slightly less as we had a little bit of impact positive impact from 606, but that headwind for the year.
Mike Sikos: It is.
Mike Sikos: That is still consistent.
Mike Sikos: Okay.
Mike Sikos: <unk> update as well what percent of the customers today are on longer term contracts versus monthly.
Mike Sikos: That's that's north of 50% it than it is in the mid fifties.
Mike Sikos: From from LTC committed contract AAR standpoint.
Mike Sikos: Great and final follow up.
Mike Sikos:
Mike Sikos: But on the Unlevered free cash flow conversion and the fact that we're bumping up by three points today.
Speaker Change: Is it fair to assume that.
Speaker Change: Really being driven by the lower tax rate assumption for the year and then secondarily, what why is the tax rate coming down by four points, though.
Speaker Change: Yes.
Speaker Change: Thats, primarily the driver on the.
Speaker Change: On the change in the conversion.
Speaker Change: And the key driver on the lower tax rate is due to.
Speaker Change: Some of the benefit we're getting from the abdomen acquisition.
Speaker Change: We're able to realize a little bit more benefit than we originally expected there.
Speaker Change: That's great. Thank you guys.
Mike Sikos: Thanks, Mike.
Speaker Change: Okay.
John Pagliuca: Thank you. We currently have no further questions. So I'll hand back to John for closing remarks.
John Pagliuca: Thank you operator, and thank you everyone for checking in with us today and spending time with enable.
John Pagliuca: Yeah.
John Pagliuca: Yeah.
John Pagliuca: Thank you John This concludes today's call. Thank you all for joining you may now disconnect your lines.
John Pagliuca: Yeah.
John Pagliuca: Yeah.
John Pagliuca: [music].
John Pagliuca: Okay.