Thank you and welcome everyone to N-able’s Second Quarter 2022 Earnings Call. With me today are John Pagliuca, N-able’s 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.n-able.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 are forward-looking statements, including those concerning our financial outlook, our market opportunities, our continued expectations following the spin-off of our business from solar wins in July of 2021 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 related to the spin-off transaction completed last year. Additional information concerning these statements and the risks and uncertainties associated with them is noted in today’s earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today’s call. Unless otherwise specified, when we refer to the financial measures, we will be referring to the non-GAAP financial measures. A reconciliation of the non-GAAP financial measures discussed on today’s call to their GAAP equivalents is available in our earnings press release on our Investor Relations website. And now, I will turn the call over to John.

Thanks, Jeff and thank you all for joining us today. Our financial performance in Q2 exceeded the high end of our outlook, with GAAP revenue growing year-over-year by 7% or 13% on a constant currency basis to $91.6 million, demonstrating success in our multi-product sales approach with particularly strong growth in our security offerings and data-protection-as-a-service. We also exceeded our adjusted EBITDA forecast coming in at $27.6 million, just over 30% EBITDA margin. During Q2, we made encouraging progress on multiple initiatives that we believe validate our strategy and we had a few well calculated bets in the market that appear to be playing out in our favor. I will go into more detail on that in a minute. But first, I wanted to talk about a major milestone we just had, our 1-year anniversary as an independent public company. From the outset, our business model was designed to allow us to grow as our MSP partners grow and the spin-off we undertook last year was primarily about focus, focus on empowering our MSP partners to serve their SME customers, a focus on delivering powerful and simple solutions for MSPs to scale their business and a focus on our employees. We believe that we have proven the value of the spin-off for our partners, employees and shareholders as we accelerate our product roadmap and continue to help MSPs achieve their goals. While we are mindful of the current macroeconomic dynamics, we will keep focus on what drives our business and we will continue to invest with a focus on growth to maintain our momentum. It has been a landmark year for us. Our team has grown by almost 12% to more than 1,400 people worldwide. We have hired across all functions and continue to build our team with industry leaders…

Thank you, Tim. As we head into the back half of the year, our team is focused on executing on our launch of Cove Data Protection now that the Standby Image feature is available. We will especially be leaning in on the unique segmentation opportunity, we believe, that we have with our two packaged RMM offerings. N-central, aimed at seasoned larger MSPs and N-sight, as I mentioned, aimed at earlier growth MSPs. For N-sight, we expect to drive even more new RMM customer lands as well as improved adoption of the other tools in our platform, namely Take Control and MSP Manager. And for N-central, we are planning to launch a global campaign by the end of the third quarter to better position this product in the marketplace and incentivize mature MSPs that the move to N-able is worth the switch. And finally, as I mentioned, we will be launching a new N-able cloud solution. My fellow N-ableites and I are fired up by the potential of our platform and the offerings we are bringing to market as well as the opportunity that we are seeing to empower a base of IT service providers that are becoming an increasingly essential part of the infrastructure for small and medium businesses around the world. As we manage through this current macro environment, we believe the long-term drivers of our business remain strong and that we have a winning business model that increases in value over time and create sticky relationships with our partners to help them face the mounting challenges in security, resources availability and increasing IT complexity. At the beginning of October, and for the first time in over 2 years, we will welcome our partners to our Empower conference in Las Vegas. This will be an impressive event, and we are really excited to bring together industry leaders to discuss the current state and future direction of the industry. With that, we look forward to talking with you on our next call in November. Operator, we are now ready to open the line for questions.

Thank you. [Operator Instructions] Our first question comes from Matt Hedberg from RBC Capital Markets. Matt, your line is open.

Great. Thanks for taking my questions. Hey, John, I am going to start with you. You [Technical Difficulty] for a long time in a lot of different economic cycles, you are taking about a point out of your constant currency growth for lower SME device adds. But can you talk about sort of like the durability of your end markets being exposed more to the MSP side to the direct customers and maybe how that buffers you a bit from perhaps a bigger downturn in SME customers?

Sure. And good morning, Matt. Thanks for hopping on, and thanks for the question. And yes, so a couple of things, right. So the first thing, our solutions are absolutely mission-critical to the MSPs, right? And I think that’s evident in our Q2 results, actually, right? The fact that we were able to beat the top line and the bottom line is a strong indicator, both to us internally and externally, that our solutions are mission-critical because they allow MSPs to monitor, manage and secure the IT assets of the SME, their customers, right? So it’s extremely mission-critical. And so therefore, our platform is in high demand, not just for our MSP partners, but also to the SME customers that are depending on them to make sure that they can run their businesses. And what we saw really, Matt, in the last couple of weeks, I was recently at an industry event talking to, MSPs, my management team and our team are in constant contact with MSPs is that they are seeing – they are taking a little bit more of a cautious approach and they are seeing that they are growing their business and achieving their goals by increasing wallet share of their end customers. And why? Well, our MSPs are having a little bit more of a difficulty adding additional resources on their side, thereby creating a little bit more of a challenge where they are saying, hey, I can achieve my goals by growing wallet share of my existing customer base, and it’s a prudent approach that a lot of the MSPs are taking. And as a result, we’re taking that cautious approach as well and pulling back a little bit on what we believe to be a device growth in the second half of the year.

Got it. That makes a lot of sense. And then on the new product side, you guys have a lot of stuff coming out in addition to Spinpanel and the Cove. Could you talk – like if you were to sort of [indiscernible] like it’s hard to pick a favorite, but like what do you think out of the newer products could have a more immediate tailwind to growth?

Sure. And you’re right. We have we’re excited about what the second half roadmap has. I’m really excited about with Mike out there and the technology and product group has delivered thus far in 2022. And we’re delivering on all different aspects of this multi-product approach that we’re bringing. The Cove Data Protection offering and our Standby Image will help us, and we believe will allow us to help with both new customer acquisition but also with better cross-sell within our customer base. So that one, Matt, as we begin to really expand into disaster recovery as a service and data-protection-as-a-service, that one will probably have the most immediate or short-term impact. But longer-term, I’m equally as excited about the acquisition that we just did with the Spinpanel technology. Really, this allows our MSPs to really own the cloud and better provide a managed service around the Microsoft stack, right? We all know more and more workloads that go into the cloud. We all know that the MSPs are there reselling the Microsoft technology, but they are struggling to do so in a scalable, efficient and profitable way. And that’s the hallmark of the solutions that we bring to market. And the Spinpanel technology will allow a tremendous amount of automation for MSPs, so they can onboard, they can provision and they can better manage securely the SaaS applications, in particular, out of the gate, the Microsoft bit. So those are probably the two that I’m keen to see how they grow in the second half of this year. Internally, I often refer to the different product lines and our cohorts of snowballs. And those are some of the two of the snowballs that we will be watching keenly over the next couple of quarters.

Thanks so much.

Thank you. Our next question comes from Jason Ader from William Blair. Jason, your line is open.

Yes. Thank you. Good morning, guys. I guess one question I had on the net retention rate, 108% constant currency, where do you see this going over time? And then what are the kind of levers to get you – I’m assuming you want to get higher. But where do you see it going, let’s say, over the next 2 to 3 years, just broadly without a specific number, but do you see it going higher about the same? And then how do you think about the puts and takes? Tim O’Brien: Hi, Jason, this is Tim. Thanks for the question. Yes, as we look at net retention, you hit on it, it’s about 108% in constant currency. As we look out over the next couple of years, we believe, net retention is our biggest lever in the model from a growth acceleration stand point. And investments we have been making across both R&D and products and technology group, combined with the investments in sale, marketing and PSM are really leading to gotten in that number I will tell you north of 1x. Ae we go forward, and John touched on and kind of where some of the MSPs are focusing now and some of the shifts from a focus standpoint that we’re looking at is opportunities to drive wallet share. MSPs are looking at that opportunity with their SME customers, we’re looking at that opportunity with our MSP partners as well, looking across the spectrum of products and the cross-sell opportunity that fits within our base of customers, we believe, has a long tail. And then we will be pointing some of our strategy and shifting some of our resources and focus towards capitalizing on that as we move forward. Over the next 12 to 24 or 36 months, looking out over that 2 to 3-year spectrum you spoke to. So combine that with bringing the new products we brought to market thus far this year, the new products that are lined up in the roadmap as well. We will continue to open up that wallet share opportunity for us as we go forward. So again, I’ll reiterate that we believe that to be the biggest lever from a growth acceleration standpoint in the model. And we believe the bets we’ve been making and the investments we’ve put in place to date are strategically set up to deliver there as we go forward.

Excellent. Thanks. And then just a quick follow-up for you, Tim, on the Spinpanel acquisition, did you guys talk about the impact on revenues and EBITDA from that acquisition this year? Tim O’Brien: We did not, but I can give you a little bit of color. This is more of a technology buy. So virtually no revenue contribution from existing partners that they had, we will be looking to launch that product here in the next few months and start cross-selling that into the base, but impact on 2022 from a revenue standpoint, is pretty much immaterial from an expense standpoint, it’s about 0.5 point of impact on the second half of the year. Just to kind of give you some color on the contribution of...

On EBITDA mark – 0.5-point impact on EBITDA margin. Tim O’Brien: Yes. Correct.

Yes. Okay. Great, thank you. And then John, for you, question on the impact that you’re seeing in the market from the Datto and Kaseya merger?

Yes, there is a – good morning, Jason. There is a good amount of noise in the industry and we follow the noise, but really the message I told my team is to focus on our rally cry and that’s around earning more fans. And we believe that if we continue to drive the right products to market and deliver the right level of partner success, that will have a positive impact on our customers that ultimately will help us gain market share. And so we’ve been focusing on admitting here in N-able and on our rally cry to earn more N-able fans and those are both existing MSP partners and customers and partners that are not in our full yet. So we’re focused there and hoping to drive good results there.

But more specifically, have you seen any examples of customers from those other partners – from all those other vendors that maybe it’s getting a little bit looser, it’s getting a little bit easier to get calls returned and opportunities, maybe a little more ripe to kind of displace or take share?

I think like in all things where there is a great level of uncertainty, and there is a great level of change. There is a great level of potential disruption. And so for those two organizations, they’ll need to rationalize their teams, they’ll need to rationalize their products, they’ll need to rationalize their customer service and partner success teams. And through that rationalization, there is going to be inevitably a level of change and disruption. And so when you have that, you’re going to have bumps and hiccups and that’s for that organization to really sift through and work through. And have I seen it, and there is some anecdotes, and I’m sure you can hop on read in other exchanges and forms and look for yourself. But again, we’re really focused on if there partners out there in the community that are looking to grow, looking to future proof their business, looking to maybe go through a consolidation or have a technology that really is the broadest and widest and deepest. We’re hoping that they are looking and coming and talking to us here at N-able.

Great. So maybe not the top tailwind for you, but could be a tailwind over the next 18 to 24 months.

I think that’s fair. Yes.

Okay, alright. Thank you, guys. Good luck.

Thanks, Jason.

Thank you. [Operator Instructions] The next question comes from Mike Cikos with Needham. Mike, your line is open.

Hi, guys. Thanks for getting me on here. I appreciate the time today. And I apologize if I’m rehearsing something that you guys went through earlier with the prepared remarks. I was just tuning in a little bit late, juggling a couple of different earnings calls on my side. But just wanted to first ask about pipeline creation that you guys are working through? if I’m looking at 1Q as an example, I know that you guys had commented that you generated a sequential increase in total sales pipeline where March had actually been the largest month for that creation if you look over the last 2 years. Can you just help us think through what you guys saw on the pipeline creation with respect to the cadence throughout 2Q and how that trended?

Mike, good morning, and thanks for joining. I know you’re juggling a bunch of things. This is John. Sure. In the prepared remarks, Tim touched on the fact that we have multiple different levers of dimension to our growth algorithm, right? And the one that we’re seeing or that we’re being cautious about is the one that’s probably leased in our control, and that’s around the consumption of our MSPs and partner-enabled growth. The things that are more in our control is more along the lines what you were asking for. And pipeline and what we often measure and discuss internally is around bookings. Q2 actually was better than our Q1 in terms of bookings. And we talk bookings, Mike, we’re talking both new customer acquisition and new SKUs, so both a mix of new customers and existing customers buying brand-new offerings. So that combined bookings was better quarter-over-quarter. It was better year-over-year in the same point in Q2. So from that point of view, sales conversion pipeline build has been better than last quarter and better than year. And that gives us a lot of strong signals that again, the products that we’re offering are mission-critical, the industry tailwinds are strong and why we continue to invest in areas of growth and continue to do acquisitions and invest in R&D because we believe strong tailwind that not only N-able is enjoying but also the MSP industry. So overall, Q2 bookings were, like I said, stronger than last quarter and stronger than a year ago this time of the year.

Thanks for the color. That’s very helpful. And if I could just tack on one more, again, a little bit of a comparison versus Q1, but I know last quarter, you had discussed how, let’s say, dedicated partner success reps, we’re driving among the highest close rates among the opportunities N-able will seen. Just wanted to get a temperature test here, but is that still the case and how is that initiative tracking versus your internal expectations?

So just for – just maybe for the rest of the audience, with not as good of a memory as you, Mike. So we – yes, we’ve invested heavily in the last couple of years and a partner success organization that couples with our MSP partners and talk them through technical challenges. But also business challenges, and that’s different in our business model than maybe other software companies. Again, our partner success folks and our growth strategists are helping our partners with some of their technical challenges and their business challenges. As a result of those rich conversations that we have with most of our partners quarterly a tremendous amount of value and opportunity comes out of those. Those opportunities and those conversations, we refer to them as one of our QBRs with our partners continue to drive the highest conversion rates for opportunities within our company, right? So that hasn’t changed. And we’re quite pleased with the success that partner success organization has touched on. When Tim talks about earlier, net retention being our biggest lever, that’s a combination of us in our investments and partner success and in our R&D teams to deliver roadmap products and offerings so that our MSPs can leverage this technology to better serve their businesses to grow both their top line and their bottom line. But that partner success organization is there as a shepherd or a guide, if you will, to help them not just instrument the technology, but then apply it to their business, package that up so that they can have an offering and grow their wallet share for their SMEs. So that continues to be a strong point in the business model. We continue to invest in partner success. And that’s one of the big reasons why we believe our net retention number will continue to progress and hit the number that, as Tim mentioned earlier, that’s north of 110%.

That’s great to hear. And if I could just put a finer point on it, just where I’m coming from and just to make sure I’m not mischaracterizing it, but with those partner success resources that you guys have in place to drive those conversations around whether it’s the technical or the business challenges. I’m guessing that there is also a bit of a virtuous feedback, where those conversations are, in fact, helping benefit you guys as far as guiding your internal product roadmap and the demands that the market is making of N-able. Is that fair?

Yes, that’s exactly right. So the conversations, it’s not just us projecting our opinions or recommendations to the customers. It’s very much a relationship and very much a partnership where we’re actually farming effectively feedback, not just on the road map and how we can improve our products, but where we should go next. By the way, that’s a good example as to why what even drive some of our M&A. One of the number one challenges we see managed service providers struggle with is the ability to scale and monitor SaaS applications. That’s feedback directly that we’re getting from the partners, that better informs us and helps us take a better view as to what we should build, what we should partner and what we should buy. And as one of the number one challenges that these managed service providers are facing is how can I own the cloud? How do I better monetize and wrap a service around the SaaS applications, cloud infrastructure as a service to these SMEs, the small and medium enterprises and Spinpanel was a perfect ad for that. So you’re exactly right, Mike. It’s a bidirectional conversation where we’re sitting down with our MSPs, not just our PSMs, me and my leadership team spend much a lot of time at industry events, having one-on-ones with customers in their offices, trying to understand their pain points so we can better service them and achieve their goals.

Terrific. Thank you again, guys. I really appreciate it.

Thanks Mike. Tim O’Brien: Thanks, Mike.

Thank you. Currently, we have no further questions. Therefore, I would like to hand back to John Pagliuca, CEO of the company, for any closing remarks. John, please go ahead.

Thank you all and I appreciate your time and investment in N-able today and look forward to talking to you all sometime in November. Have a great day.