Q3 2025 N-Able Inc Earnings Call
Hello, everyone. And thank you for joining the enable. Third quarter 2025 earnings call. My name is Lucy and I'll be coordinating your call today.
During the presentation, you can register a question by pressing star, followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2.
It is now my pleasure to hand over to your host Griffin gear of investor relations to begin. Please go ahead.
Thanks operator. And welcome everyone to enable third quarter 2025 earnings call.
With me today are John paluka enables president and CEO.
And Tim O'Brien.
EVP and CFO.
Following our prepared remarks, we will open the line for a question and answer session.
This call is being simultaneously webcast on our investor relations website at investors that enable.com
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 for looking statements.
Including those concerning our financial outlooks, our Market opportunities, and the impact of the global economic environment and our business.
Take 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 released and our filings with the SEC.
Additional information concerning these statements and the risk and uncertainties associated with them. This highlighted in today's earnings release and in our filings with the SEC,
Copies are available from the FCC 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.
Reconciliation of certain gaps and non-gaap financial measures discussed on today's call is available in our earnings press release on our investor relations website.
And now I will send the call over to John.
Thank you, Griffin.
And thank you all for joining us today.
We delivered strong, third quarter results.
reflecting robust demand for cyber security, and the rising strategic relevance of enable
Third quarter, ARR was 528 million but 14% year-over-year.
And adjusted epitome margin was 31%.
Quarterly gross, and net retention both increased year-over-year and quarter over quarter.
Underscoring, the momentum and traction we are seeing in the business.
We also expanded our security capabilities and further scales our Channel first. Go to market motion.
Key pillars of our long-term growth strategy.
Another quarter of growth profitability and superb execution.
Our performance stands out in a fast-changing technology landscape.
AI is intensifying the speed sophistication and scale of threats.
And the adversary has never been more dangerous.
Businesses need help adapting and enable as rising to the challenge.
leveraging proprietary data from our 11 million, it assets,
we are embedding Innovative AI capabilities across our platform.
Farming organizations, with The Cutting Edge solutions. They need to defend themselves in today's cyber Battleground.
Today, we will take a closer look at our recent progress.
And discuss how enables positioning itself to lead in an evolving, cyber security environment.
The digital state of operations for small. Mid-market businesses is rapidly changing.
The accessibility of AI tools to both the knowledge worker and the threat actor alike has created a new digital normal for organizations of all sizes.
Today's Workforce operates across hybrid systems, multicloud environments SAS applications.
And increasingly AI driven processes.
At the same time, as our digital infrastructure grows increasingly vital to business operations.
AI powered threats are putting those systems under greater pressure.
This is driving a paradigm shift and how businesses must think about cyber security.
In this new environment, security isn't just a line item, it's table stakes and the foundation of business resilience.
Enables end-to-end, cyber resilience platforms is purpose-built for this new world.
Delivering protection and performance.
Our platform spends 3 vectors.
Unified endpoint management or uem.
Security operations, and data protection.
It enables visibility across every endpoint.
Intelligence to help stop threats before they strike.
And data recovery at rapid speed.
We deliver coverage across the entire attack life cycle.
We believe this breath sets us apart from most cyber security competitors who take a siloed incomplete approach.
For small. And mid-market businesses who often face Enterprise Level Threats without Enterprise level resources, our end-to-end value is Paramount.
Our platform is designed to keep their entire business resilient.
Our recently published enabled 2025 annual threat report. Comprehensively assesses, the Ever Changing threat landscape.
1 key, takeaway.
AI is helping fuel, scalable low effort attacks.
That are split common gaps in visibility and response.
We identified a surge in detected threats against smbs over the past year as they increasingly invest in the proper security tools to monitor their environments and mitigate risk.
Broader industry data supports that AI is helping increase the scale of cyber attacks.
With MacKenzie reporting a 1200% increase in phishing attacks since 2022 and the rise of gender of AI
AI is also increasing the potency of attacks.
Cybercriminals are leveraging generative AI to better mimic real world, people and messages.
Harder to detect and more believable.
Further exacerbating the challenge. SMB economics makes them a prime target.
Ransom demands are often calibrated to just under the cyber insurance deductible, and the breach of a smaller firm is less likely to trigger a wider-scale investigation than an incident at a Fortune 500 company.
Insurance and regulation are adapting. These changing paradigms and implementing tighter security standards for businesses.
This is driving do activity for enable.
1 of our largest sales. This quarter was to a prospective customer looking to supplement, their on-premise backups with cloud-based data copies to stay in line with m 2 Data redundancy standards
With quick deployment, compelling TCO and easy scalability. Our Cloud First Data protection, solution perfectly met their need.
While AI is still in the early Innings, the impact on cyber security is evident.
Throughout the turbocharged, it is more complex. Regulations are tightening and data is increasingly important.
For enable the implications of clear.
We Believe AI is making our mission more critical and our opportunity larger
As AI drives demand for cyber security, we are also embedding AI, both in-house and across our platform.
Data is gold in the AI era.
And with the Telemetry from over 11 million, it assets and a solution that spans the it security stack.
We have the critical data needed to create and deliver AI Solutions.
We believe this scale, breadth, and data ownership is a powerful mode.
Let's look at how we are using AI today and building more effectively tomorrow.
This quarter, we established an industry standard by sponsoring catnip.
Our framework for shared AI language, across organizations and vendors.
This is a market first initiative that establishes consistent vocabulary for use across MSP and it ecosystems.
To help Drive seamless, AI Automation and MC server Behavior.
Enabling customers to harness AI, effectively for enhanced cyber resilience
We are empowering AI agents to interpret and act on commands with precision.
Across multiple different systems.
This address is 1 of the biggest challenges in it management.
Fragmented and inconsistent terminology across businesses.
By introducing these standards enable isn't just participating in the AI evolution.
We are taking a role in building the field and writing the playbook for how AI operate for our customers.
In uem, we are making meaningful scribes to use the power of AI to automate key workflows.
Our developer portal access a customer's AI assistant.
Helping users, leverage AI to operate more, effectively and efficiently.
We are seeing particular success, driving automated, script, generation, and API Integrations.
Cutting hours of manual work to minutes.
Building on our momentum, we are pushing to extend our capabilities further.
We are developing AI agents that it and security teams will be able to use across their operations.
This supports our larger vision of delivering near autonomous it.
The opportunity is significant.
It and security teams everywhere are washing complexity and often burdened by tedious repetitive work.
Managing endpoints, resolving tickets. Implementing policies. Maintaining compliance securing data and more.
We are aiming to transform this paradigm.
Our vision is resonating underscored by the fact that our largest deal, this quarter was driven by our uem solution.
Representing an ARR win of nearly a half a million dollars.
And our uem leadership continues to be recognized in Industry media and press.
We are delighted to win the MSP rmm, platform reward for crn's 2025 annual report card.
A recognition based directly on feedback from our customers.
Our security operations solution is also at the Forefront of AI and innovation.
It starts with our vendor agnostic technology and ingest data from the endpoint Network.
Cloud identity layer and SAS applications.
This delivers the necessary bird's eye view of customers it environments.
Our AI powered technology stack then serves as the orchestration layer transforming raw data into actionable, insights for security teams and automating threat response.
These orchestration capabilities position enable as an active threat neutralizer in real time decision maker.
And our approach is working.
our AI powered sock is analyzing billions of security events, a month, adding hundreds of businesses a month and driving meaningful, ARR growth for enable
for solving a major Market pain point.
Operating even a small sock team can cost Millions annually.
Enable as democratizing security by delivering Advanced AI soft capabilities at a fraction of the cost.
And we're not stopping here.
Is near autonomous. Cyber defense.
And enables building toward that reality today.
We're also utilizing AI in our data, protection solution.
Our recovery testing capability uses AI to provide proof of recoverability without requiring customers to fully initiate a backup test.
Saving them significant time and reducing operational burden.
This supports our broader value proposition to ensure data is always protected and recoverable.
looking ahead, we plan to introduce AI based scanning of backup data that will continue sleep monitor data, flows, and flag unusual patterns,
Further enhancing our ability to detect threats before they cause harm.
While data is gold. It is not sufficient for AI leadership.
Trust and distribution are also key in both our areas where enabled has strong advantages.
As it relates to trust.
Cyber security is not an area where we believe businesses will experiment with self-created or non-specialized options.
The cost of a single mistake is simply too painful to trust a homegrown model or a company that only does security part-time.
We are a trusted security provider.
Distribution is also important.
Our base of over a half a million businesses allows us to efficiently test and ultimately deliver AI Solutions.
And with healthy cash flow. Margins, we have a sustainable business model that allows us to invest in our business to compete in the dynamically changing, AI world.
These are all big advantages over competitors. Still searching for product Market, fit and sustainable profitable business models.
Embedding AI into our platform unlocks meaningful value.
From automating technician workflows to the detecting and preventing more threats to enabling new services.
AI raises the feeling for the value. We can deliver to customers.
We are leaning into the opportunity as we see a clear path to how developing AI powered Solutions allows us to competitively differentiate and take care in a vast and growing cyber security Market.
Our Channel letter approach is also key to our strategy to capitalize on the AI world.
Businesses face challenges managing cyber security and it themselves.
According to the September copier report. Tech unemployment is at just 3%.
And with the skill sets needed to stay ahead rapidly evolving. Keeping pace is a challenge.
that's why businesses turn to the channel for help with cyber security and it
Whether fully Outsourcing to a managed service provider or working with a value added reseller to guide vendor selection.
The channel provides expertise and scale to SMB and mid-market businesses.
We see the arrival of AI as an accelerant to the businesses using the channel.
With deep roots in the MSP community and growing investment in vs, we believe our go to market strategies aligned with the market opportunity created by Ai and cyber security trends.
We've talked a lot about AI today.
I'll leave you with this.
AI, expands the scope of software and would enable can do for our customers.
It elevates the need for cyber security and expands our opportunity.
there is never been a more exciting time for enable, and we are creating that future now,
Let's now talk more about our progress, this quarter.
Our growth strategy rests on 3, key elements, first driving security, success, second scaling our go to market and third boosting customer expansion.
we saw progress with all 3,
We will first. Look at our efforts to drive security success.
The market need is clear.
Our efforts align with the significant opportunity and our broader ambition, to set a new standard in cyber resilience for small and mid-market businesses.
And data protection. We advance our powerful solution with the launch of anomaly detection as a service.
These new capabilities are designed to detect unauthorized access with backup environments and proactively flag indicators of compromise.
Unlike traditional backup solutions that Focus solely on restoration.
Our approach helps prevent data loss before it occurs.
this marks a strategic shift from reactive Defence to proactive resilience
We believe, we are ahead of the competition in this regard and we are excited about the impact for our customers.
More broadly, we deliver the Simplicity power and affordability our customers crave.
And our data protection vision is resonating.
In fact.
Customer recently shared that they went from spending 60 hours a week managing backups to just 1 hour a week. After adopting, our solution
The number is reflect what our customers are telling us.
Our data protection solution. Once again, let our net new ARR growth in the quarter.
And security operations in uem.
We continue our strong pace of innovation with new threat, detection capabilities and Powerful Integrations.
Our latest enhancements, strengthen endpoint visibility and accelerate incident response.
Let's now turn to our go to market progress.
Enable scaling with purpose.
Anchored in a Channel. First model that continues to prove its strength nearly all of our businesses flow to the channel.
And we're investing to deepen those relationships and expand our reach with a strong focus on further engaging, the reseller Channel.
This reseller motion is building momentum.
We initiated it with a geo-specific approach, starting in the UK and plan to expand another regions.
We're already well established in North America via the at lumination. And this deliberate expansion strategy is designed to maximize impact and efficiency.
1 powerful proof point. We now have active relationships with the sizable number of the top 25, UK partners for crn's 2025 listing.
Up from virtually no Presence at the beginning of the year.
We believe this traction, underscores the model and the effectiveness of our targeted approach.
We continue to see strength up Market.
A standout example of this quarter was a 70,000-device win.
Firmly validating our investments in mid-market expansion and ability to win large deals.
We saw another proof point with the reseller driven uem, mid-market win, where we displaced and Consolidated 3 separate competitors across multiple categories.
Including remote access endpoint management and privileged access.
Our ability to meet complex requirements, including on-premise deployment, and a road map, cmmc Readiness and fedramp compliance was key to winning this business.
We're elevating our message to match this momentum and showcase the full strength of our platform.
We just posted our first annual cyber resilience Summit, where we brought together, hundreds of Industry, leaders and practitioners and discuss the hard problems facing our customers.
1 clear, takeaway
Cyber resilience is business resilience.
Cyber security is no longer just an IT concern. It's a business imperative.
Speaking, clearly about business resilience isn't just marketing and messaging, we're helping Partners translate fabri, resilience into tangible business outcomes.
A great example, is our new executive summary report feature?
This highly requested capability, enables customers to clearly communicate protection outcomes to internal and external stakeholders.
Delivering transparency accountability, and peace of mind.
The final pillar of our growth strategy is customer expansion.
Deepening Relationships by delivering more value across our platform.
A powerful example of this quarter.
Came from a long-standing customer.
A respected Regional MSP in the southwest of the United States that utilizes our uem EDR and data protection Solutions.
Just days before a major tax deadline, a large PPA client of theirs. Experienced a targeted Cyber attack at 2 a.m.
exploiting a vulnerability in their environment.
While the attack caused damage, it was quickly contained.
Thanks to the latest defense provided by enable including our data protection solution. They were back up and running by lunchtime.
What could have been a multi-week outage and potential extension of events for their business was resolved in hours.
Demonstrating the real world impact of our cyber resilience platform.
These are the moments of Truth in what enables all about.
In the aftermath our customer reinforces this defenses by making our MDR a standard non-negotiable service for its clients.
Closing the loop on true end-to-end cyber business resilience.
This type of outcome is driving stronger, customer loyalty and deeper adoption.
In fact, 43% of new uem lands, this quarter included in additional Solutions.
Demonstrating that our end-to-end cyber resilience platform is resonating.
Further the largest deal this quarter, which I mentioned earlier was a cross sell to a security operations. Mid-market customer validating our cross sell success.
And we're seeing the results in our metrics.
Both gross and net retention improved year-over-year in quarter over quarter underscoring, the value, customer seeing and expanding with enable.
As we continue to deliver outcomes like these, we're confident in our ability to grow with our customers, helping them stay protected resilient and ready for whatever comes next.
With that, I'll turn it over to Tim and then Circle back for closing remarks. Tim
Thank you, John and thank you all for joining us today. Our strategy remains disciplined, delivering scalable cyber resilience for small and mid-market businesses throughout our expanded Channel ledge approach.
This quarter is performance reflects that Focus, strong Topline growth quality margins healthy, free cash, flow and considerable operational progress.
We believe in fusing AI into our cyber resilience platform further positions us for long-term success.
Long-term value of the enable business.
Reviewing the quarter, ARR performance was a standout highlight.
Constant currency year-over-year, ARR growth accelerated for the second consecutive quarter. When adjusting for currency impact, net new ARR dollar growth in Q3 was our best performance year to date.
These results demonstrate the strength of our business, and validate our strategy and operational execution.
We are executing with precision and investing with purpose to lead in a fast-changing cyber security environment.
Let's now discuss our results for the third quarter and our outlook for the fourth quarter and full year.
For our third quarter results, total ARR was $528.1 million, growing at 14% year-over-year on a reported basis and 13% on a constant currency basis.
Total revenue was 131.7 Million 3.7 million dollars above the high end of our guidance.
Representing a proximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis.
Subscription Revenue with 130.5. Million representing approximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis.
we ended the quarter with 2,611 customers that contributed or more of ARR which is top approximately, 15% year-over-year,
Over 50,000 dollars of ARR. Now represent approximately 61% of our total ARR up from approximately 57% a year ago.
Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 102% on a reported basis.
On a constant currency basis, dollar-based, net revenue, retention was 102% up from the previous 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.
Third quarter, gross margin was 81.1% compared to 83.7% in the same period in 2024.
Third quarter adjusted ibida was 41.4 Million. 4.4 million above the high end of our guidance representing approximately 31.4% adjusted, Eva to margin.
On levered, free cash flow with 22.6 million in the third quarter.
Capex inclusive of 2.8 million of capitalized software development costs.
Was 9.4 million or 7.2% of Revenue.
Non-gaap earnings per share was 13, cents in the quarter based on 188.4 million weighted, average diluted shares.
We ended the quarter with approximately 101 million of cash and an outstanding loan principal balance of approximately 336 million representing net leverage of approximately 1.5 times.
Approximately 45% of our Revenue was outside of North America in the quarter.
Turning to our financial Outlook. Our guidance account to the following elements,
In regards to FX rates, we are assuming rates of 1.13 for the Euro and 1.29 for the pound, for the remainder of 2025, along with updates to other currencies.
Also, as a reminder, we acquired add lumen in the fourth quarter of last year as such add Lumen is on a like, for like basis, in our year-over-year, ARR growth and our expected fourth quarter, ARR growth rate, reflects the natural impact of lapping that acquisition.
Additionally as part of our deferred payment deal structure, we anticipate executing a plan cash installment payment of approximately $50 million in the fourth quarter.
We also experienced flight, seasonality and results due to 606 Revenue recognition Dynamics.
Given this dynamic, as it relates to profit margin, we believe our full year, ebit of margin guide.
Better represents our overall operating profile than our fourth quarter guidance.
Order is slightly higher than our average quarterly year-to-date results.
Also, while we are not giving guidance for 2026, we do want to provide some brief commentary on expectations.
We remain committed to returning adjusted EBITDA margin to 30% in FY26.
That said, we remain focused on balancing profitability with growth.
The AI wave is now and with structural advantages that position us favorably. We believe it's critical to invest appropriately to realize the opportunity at hand.
With that, in mind for the, fourth quarter of 2025. We expect total revenue in the range of 126.5 to 127.5. Million representing approximately 9%, year-over-year growth on a reported basis and 7 to 8% on a constant currency basis.
We expect fourth quarter adjusted, evida in the range of 33.6 to 34.6 million representing an adjusted EBA margin of approximately 27%.
For the full year. 2025, we are raising our total revenue Outlook to approximately 507.7 to 58.7 million representing approximately 9%, year-over-year growth on a reported basis and 8% on a constant currency basis.
We are raising our full year ARR Outlook to 530 to 531 million representing 10% year-over-year, growth, or 8% on a constant currency basis.
As a reminder, our full year ARR Outlook is on a, like, for like basis, as abdomen was included in our year, end 2024 ARR.
We are raising our adjusted Eva Outlook and expect full year adjusted Eva of 148.2 to 149.2 million representing 29%. Adjusted Eva to margin.
We reiterate that we expect capex, which includes capitalized software. Development costs will be approximately 6% of total revenue for 2025.
We also expect our unlevered free cash flow to be in line with previous guidance of approximately 96 to 98 million.
We expect total weighted average diluted shares outstanding of approximately 188 to 189 million for the fourth quarter and the full year.
Finally, we expect our non-gaap tax rate to be approximately 23% for the fourth quarter and 21% for the full year.
Now, I will turn it to John for closing remarks.
Thank you, Tim.
Cyber security is entering a transformative period.
When the demands it become a core part of a company's overall business strategy.
With our scale.
Platform breath and data ownership.
We are positioned to excel in this new era.
AI driven threats. Demand. AI driven defense.
And enable is delivering the Cyber resilience solutions that we believe will redefine the standard the small and mid-market businesses.
And with that operator, we're open the line for questions.
Thank you to ask questions. Please, press star, followed by 1 on your telephone keypad now.
If you change your mind, please press star followed by 2.
When preparing to ask your question, please, ensure your devices unmuted locally.
The first question comes from Matt, Hedberg of RBC Capital markets, your line is now open. Please go ahead.
Hey, it's Dan bergstr for Mad. Hatteberg, thanks for taking our questions.
Um, our Revenue, both accelerated quarter of a quarter on a constant currency basis for several quarters. Now, you know, could you talk to some of the keys behind that building momentum? You know what's really been? Maybe the incremental the last several quarters? And then maybe with, with guidance for the fourth quarter here in the FX impact and and and and Lumen anniversary, I think it's the case, but we still be thinking of, you know, more growth in the second half than the first half.
Hey thanks for the question. Um yeah. As it relates to the the acceleration that we've seen through the year it it it really boils back to executing on I would say probably a couple of key components of the strategy 1 on executing on the around the thesis of the adlumin acquisition 1 on cross-selling that into the base of customers that we have um as well as continuing um to push that product through the mid-market via the channel partners that came along with that acquisition
um,
And then 2 broadening um, our Channel presence as well um, via you know, bringing on new new Disney's and and resellers. Um,
That we've seen through the year and then unpacking the Q4. So
Um, FX is weighing a bit in into the equation. Um, we still are expecting, um, more growth in the second half of the year than the first half of the year. Um, Q3 was our best. Um,
Uh, quarter of the Year from an, uh, sequential ARR, growth excluding any currency impact. We expect Q4 to be above average for the year as well. So we are expecting more, uh, our growth overall in the second half of the year than we are in the first half of the year for sure, that that uh, that still holds. And that's what the guide reflects.
That's great and helpful. Thanks. And then on nrr, you know, Trends up your, your core quarter of a quarter, same as last quarter. So it was nice to see, you know, maybe talk to some some of the trends around the metrics. There are how confident are you? That maybe it bottomed in the first quarter there and could be building at this point?
Yeah, I was like confidence is is high that it that it bought them in the first quarter and and has continued to build as as we've gone through the year, I think that that lends back to the execution, um, that we've seen around the ad Lumen acquisition in successfully, um, being able to cross sell that into our MSP customer base, um, and driving, nrr up, um, as well. Part of the nrr drive also is that that grr has been improving as we've gone through the year as well, just from a gross retention standpoint. Um, we've been making steady progress there as as we've been going through um Talent.
25 here. We've been able to renew, um, our longer term contract, um, at, you know, a, a a rate around 90%, um, that's continued to progress and perform. Um, and start to contribute to the grr story, um, which fuels nrr at the end of the day. So, um, those are some of the key drivers Trends have been have been positive on both fronts as as John spoke to. Yeah. And and the xdr is still an early Innings, right? Uh, so, um, we're, we're our, our penetration rates have been climbing, but as we were really, just beginning to get into our base and selling into that base, that's a nice ASP per device, uh, offering that is, uh, essential for more and more of these, uh, msps and bid Market businesses. So, as we continue to, you know, go into that base that gives us, uh, you know, some confidence that we could should continue to see that expand part of the nrr continue to climb. Um, and then and then looking forward, we have we have some
Nice add-ons. As we go through both on our data protection, part in other parts of the business that um, should lend itself to additional skus. And and you know, we've been, we've done a good job continuing to increase our, you know, our Revenue, per device type of thing. So that's all giving us confidence in a, in a, in a strong nrr as we look forward.
Thank you.
Thank you. The next question comes from Mike sikos of Neiman company. Your line is now open. Please go ahead.
Hey guys, this is metrie on for Mike secos over at need. Um, thanks for taking our questions, um, sticking on the, on the ARR guidance. Um, the the sequential diesel on a constant currency basis that is implied here. How much of that is based off a lapping that at Lumen contribution compared to conservative or or conservativism? And what other factors are you considering there?
Yeah, we we we quantify the impact of the abdomen acquisition in in the 4 to 5% range. So it's primarily all related to lapping the ad Lumen acquisition um, and just unpacking the the sequential part of ARR growth for Q4 on the surface due to some FX Dynamics. Um it's it's looking lower than in in what it is X currency. So um just additional color there is that um, you know, Q Q4 sequential growth from a guide perspective, XC currency is um, you know, it would be a million dollars higher if you assume the same rates as Q3 just as an example. So Q3 if you look at some of the Euro and and pound rates
They were some of the highest they were in the month of September. Um,
Year to date. Um, so that's that, that most of the impact, as it relates to Q4
So so, so both. And and so the, the, the really cool part about the anomaly detection, is it, it really helps us, you know, transition, our, our Cove data protection to just, not just the recovery, but actually part of the detection spots where, you know, we are reaching out to both msps and mid-market companies, uh, and actually detecting, um, a threats and breaches earlier than some of their, their, uh, MDR xDrive alerts have have been, right? So often often the, the threat actor, the bad guy will go after the backups. And if we see anything there, what we put honeypots in. So if they're going after their, or if there's any type of other anomaly, we're alerting, uh, we're alerting the, um, the, the MSP or, or the internal it department. So it's, it's a great way for us to demonstrate higher value. It will help us with our win rate. It'll help us get into even larger accounts and we'll be able to monetize that directly on, on, on, on, on capm. Not to be confused with catnip. Um, this is really a
Standard, right. So the, the big thing here, is that more and more of our customers are asking about our AI roadmap and our AI strategy. And so we're able to do a couple of things. We're able to demonstrate proof because a lot of our offerings. As we mentioned in the script, our AI infused today and that's why we're able to do these things at scale and Democrat democratize the technology that we have. But with catnip, we're really giving that confidence to the msps that we're leading this wave, right? It's that crazy.
The standard. So, if you think about, uh, apis or or do you use the analogy of a, more of, like, a connector, it standardizes the connections, both for other vendors and for MSP so that now an MSP with a um, with an approved mCP, um, agent. Now it can connect to these servers in a way, that that's more, that's more secure, but it gains a lot more efficiency. So it's just another way that we're, we're helping these msps Drive the efficiency, uh, and and this just will begin to start the wave of of both Innovation, but also monetization for enable and for the msps.
Great to hear. Thank you.
Thank you. The next question comes from Joe. Vandri of Scotia Bank. Your line is now open. Please go ahead.
Thanks for taking our questions, maybe 1 for, for John, and then 1 for Tim.
John and it's been almost a year since the ad Lumen acquisition can can you talk a little bit about how that business is performing relative to your initial expectations? And then what are any key learnings about the the market or the business that that you've had after operating it for a year?
Sure. Uh, so look, I I'd say the, uh, the acquisition thesis, uh, overall is very much holding holding, uh, true. Uh, it's the stories resonating with our, with our msps. It's with the small shops, with the large shops, uh, and the, the 1, the fact that it's endpoint agnostic or just agnostic in general, that it can ingest all this different data from different firewalls from different, uh, you know, Cloud offerings from different endpoints in edrs. It really is a perfect fit, uh, in my estimation, for the MSP Community because we know they have a hybrid world. And, and so, we're scaling, this really nicely. As we mentioned, we're adding hundreds of end customers, uh, at the SMB level and because of the AI technology, we're able to scale it and not necessarily have the same linear type of cost. So we're really, I'm impressed with the with the level of scale that that the offering has uh and and the demand is here and now, right? Um this was uh, very much a green field space for the broader MSP market and that's turning over.
Msps know that they need to have this kind of Technology. The very, very, very large shops might have the ability to go and, and build their own sock, but that's for the far, that's for the, the very few and very large. And so the stories resonating. It also gives us, uh, you know, another way to uh, co co cross sell other bits right. The fact that
Velop, um, and be a bigger part of enable.
That's super helpful. And Tim 1 for you. I know 2025 has been somewhat of an investment here.
It sounds like maybe a new priority is to invest a little bit more heavily in in AI.
Um, so is that I guess should we think about? Um,
And you mentioned the commitment to 30% Eva margins in 2026. So
Should we think about those 30% EV without margins as a floor? Um, and um, I guess how how are you thinking about the investment in AI?
Yeah, so this is, this is John. I mean, look, so the, uh, we are investing in AI. Uh, and by the way, this is not, uh, new to enable, right? We've been we've been investing in machine learning, uh, for for quite some time with with, uh, generative Ai and now with the gentic AI. So it it's part of the mix, right? It it's going to continue to shift to be a a bigger part of the mix. But the, um, the interesting thing there, you know, we mentioned a couple of quarters ago. We've we've been investing in lower cost sites, um, you know, we we stood up a site in India uh, earlier this year, this gives us the ability to add bandwidth in high level skill with not the same level of cost and so that that was all part of the thinking. And so, you know, we we mentioned the 30%, uh, we always like to run the business rule up.
We look at AI as a tremendous opportunity for us not in the distant future, but more in the in the in the short term in midterm and so we want to make sure that we're we're realizing that opportunity. We have this this interesting competitive advantage in the fact that we have the data uh, and and we have the data. And these msps will look to us again, to continue to be their Control Center. And the fact that we can now pull the data, uh, with, from our uem, our data protection and xdr, and an AI, and an AI world and an automated world where they can that the msps themselves can build agents.
So that they can do their jobs more efficiently and more effectively. That's that's the opportunity we want to capture and we're going to begin capturing it and we have some waves, we'll be introducing agentic um agents inside of our products in in the short term here, um, which will also help with the efficiency and then we'll that will open up another Avenue for monetization, both for again for enable in our customers. So, um, I I think 30% to a good number and we'll continue to evaluate that as we go through. Um, and we're also continuing to invest and go to market and so the business will scale Tim and I look at this on a quarterly basis and and uh you know I think 30% is a good number um that you know. And as we scale we should be able to drive more of a of a creative profile as the business continues to scale. But our our Focus right now is to realize some of that opportunity that we believe is here and now
Makes sense. Thank you.
Thank you. We currently have no further questions so I'd like to hand back to John for any closing remarks.
Thank you all for joining us today and thank you for your ongoing interest in enable. We'll see you in a quarter.
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