N-able Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025

There are 11 speakers on the call.

Operator

everyone. Thank you for your patience. The Enable First Quarter twenty twenty five Earnings Call will begin shortly. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. Thank you.

Operator

Good morning, everyone, and welcome to the Enable First Quarter twenty twenty five Earnings Call. My name is Angela, and I'll be coordinating your call today. I will now hand you over to your host, Griffin Gere, Investor Relations Senior Manager to begin. Griffin, please go ahead.

Speaker 1

Thanks, operator, and welcome everyone to Enable's first quarter twenty twenty five earnings call. With me today are John Palauka, Enable'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.enable.com. There you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call.

Speaker 1

Certain statements made during this call are forward looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website.

Speaker 1

Furthermore, we will discuss various non GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non GAAP financial measures. A reconciliation of certain GAAP to non GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now, I will turn the call over to John.

Speaker 2

Thank you, Griffin, and welcome everyone to our call this morning. As cyber threats continue and uncertainty pervades the economic conversation, small and mid market businesses face mounting pressure to stay secure and efficient. And with a cyber resiliency platform purpose built for their needs, Enable delivers the protection and performance required to move forward. Our value and approach are resonating. At our recent Empower Conference in Berlin, more than 500 international attendees responded to the Enable vision with enthusiasm, underscoring the growing urgency around security and the confidence customers place in our platform.

Speaker 2

This confidence was echoed at our Investor Day, where we laid out our target to reach $750,000,000 in ARR by 2028. '3 growth drivers underpin our path to this target. First, driving security success second, scaling our go to market and third, boosting customer expansion. 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.

Speaker 2

First quarter ARR grew 11% year over year in constant currency. First quarter revenue was $118,200,000 and adjusted EBITDA was $31,600,000 reflecting a 27% margin. We once again exceeded our top and bottom line guidance as we executed against our strategy and set ourselves to gain share in our large and growing TAM. Turning to our growth pillars, let's first look at our security initiatives. We made excellent progress on our product roadmap, highlighted by the release of breach prevention from Microsoft three sixty five.

Speaker 2

We believe this offering solves a deep customer pain point. Microsoft serves as a core technology provider to a large portion of our customer base. And attackers are increasingly bypassing traditional endpoints, targeting digital identities to infiltrate organizations. Our solution ingest Microsoft three sixty five user telemetry to proactively detect and remediate threats securing this critical identity attack vector. This is a compelling way for customers to enhance their Microsoft security posture, while positioning us to meet strong demand and drive growth.

Speaker 2

We also launched vulnerability management as a new built in feature in our Unified Endpoint Management or UEM solution. This is a major step for the industry. Customers looking to identify and remediate vulnerabilities in their environments have historically needed to purchase and deploy two separate tools. One to identify vulnerabilities and another to patch and remediate those endpoints. Enable now delivers the capability to accomplish these workflows with a single solution.

Speaker 2

This is a differentiator for Enable and a better way to do business for our customers. We are reducing software sprawl, reducing fragmentation and closing security gaps, while making the technicians we serve more efficient. We have already discovered millions of vulnerabilities and early positive customer reception gives us confidence that our solution hits the mark. In addition to launching new defensive capabilities, we also advanced our efforts to help customers operate more efficiently. Cove Data Protection shines particularly bright.

Speaker 2

The team improved Microsoft domain backup speeds up to 20%, extending Cove's value proposition as a trusted cost effective protector of data. Efficiency matters, especially in an uncertain macro environment and Cove's clear ROI positions enable to win. When you deliver value, awards and recognition follow. We're proud for Cove to be named a champion in managed BDR by Canalys for the second consecutive year, reinforcing our technical capabilities and continued market strength. Not to be outdone, our Lumen Security Operation Solution was recently named the market leader for MDR in the 2025 Cyber Defense Magazine Global InfoSec Awards.

Speaker 2

This award and our market trajectory validate our approach, which we discussed in our recent 2025 state of the stock publication. I'll give you some takeaways from the report. The volume, velocity and cost of cybersecurity attacks and breaches remain at all time highs. Security teams are overwhelmed. 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.

Speaker 2

Old paradigms simply don't work in the age of AI driven threats. A customer example brings this to life. 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 organization needed help.

Speaker 2

Recognizing the business risk, he decided to trial our adLoom and security operation solution. And during the trial period, we stopped three different security breaches. The thwarting of these threats immediately proved the ROI of our solution leading to a 6 figure ARR deal. We are winning because we are built differently. Our AI powered solutions cut through the noise while our experts provide eyes on glass, contextualizing and remediating priority events.

Speaker 2

Technology is the mode for our AI powered SOC. We are automating 70% of incident and threat remediation activities across thousands of end customers. This gives us a competitive edge against legacy approaches and empowers us to drive better outcomes for our customers. Our automated SOC, the development of breach prevention for M365 and vulnerability management highlights that we are building on our technical differentiation. We are bullish on AI and security and we are just getting started.

Speaker 2

A second pillar of our growth strategy is expanding our go to market. 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. Our leading position in the MSP community is driven by a simple formula, quality partnership coupled with purpose built software. Resellers, system integrators and distributors share similar needs and represent approximately twice the market opportunity of the MSP market. 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.

Speaker 2

This expansion is already taking shape. In the first quarter, we added resellers across the globe to our program, revamped our partner portal to better facilitate reseller transactions and hosted a series of high impact events with well established resellers including trade shows, roundtables and executive briefings. And at our Empower Conference, we broadly showcased our commitment to delivering cyber resilience to businesses everywhere. We're executing on a robust playbook and that work is resonating. We were awarded a five star rating in the CRN Partner Program Guide for the fourth straight year, underscoring our commitment to providing exceptional support and resources that help our customers thrive in a constantly evolving cybersecurity landscape.

Speaker 2

Scaling our go to market goes beyond our sales and marketing motion. Technical considerations are also a key factor. This is why we were thrilled to announce our commitment to CMMC two point zero Readiness, which will enhance our go to market strategy by widening our appeal to deals across more regulated sectors, including our customers who support defense and critical infrastructure. A recent customer example validates the progress we're making efforts. A consortium of school systems serving thousands of users was evaluating the best way to protect their members.

Speaker 2

Working alongside a value added reseller, we educated the customer about our next gen security capabilities, ease of deployment, high number of out of the box integrations and commitment to partnership. They saw the power of our approach signing a large 6 figure ARR deal, sealing an Enable win against the competition. This was our largest new deal ever. Make no mistake, our channel expansion isn't just planned, it's in progress. A third pillar is boosting customer expansion.

Speaker 2

Our multi category, multi product software suite underpins an approximately $2,500,000,000 cross sell opportunity that we believe exists within our existing base. Helping customers realize the technical and service benefit of standardizing on a cyber resilience platform and executing this cross sell opportunity is key to our growth algorithm and strategy. A customer win brings our platformization strategy to life. Our roughly 300 person organization was frustrated with the patchwork of multi vendor solutions and recognized the need for a more reliable and efficient security approach. Realizing the criticality of secure streamlined operation, they turned to Enable as a trusted partner and adopted our unified endpoint management, security and data protection solutions.

Speaker 2

The result, a high 5 figure ARR deal. Wins like this are a testament to the impact of our approach. Our cyber resiliency platform addresses SMB and mid market core security needs and our customer success model is dedicated to their outcomes. Without us, these businesses are left to stitch together disparate tools and are often last in line for customer support from larger enterprise focused vendors. We believe our ability to profitably serve the SMB and mid market is a competitive mode for Enable.

Speaker 2

We help them step off the IT treadmill, stay safe and focus on what matters most, running their business. And with that, I will turn it over to our CFO, Tim O'Brien, then I will circle back for closing remarks. Tim?

Speaker 3

Thank you, John, and thank you all for joining us today. We had a solid start to the year with Q1 revenue and adjusted EBITDA both coming in above the high end of our guidance range and continued progress across our strategic priorities. We were also pleased to announce a $75,000,000 share repurchase authorization program. While we haven't repurchased any shares to date, this program gives us an additional capital allocation option and underscores our belief in the Enable business. For our first quarter results, total ARR was $492,700,000 growing at 10% year over year on a reported basis and 11% on a constant currency basis.

Speaker 3

Total revenue was $118,200,000 2 point 2 million dollars above the high end

Speaker 4

of our

Speaker 3

guidance, representing approximately 4% year over year growth on a reported basis and 6% on a constant currency basis. Subscription revenue was $116,800,000 representing approximately 5% year over year growth on a reported basis and 7% on a constant currency basis. We ended the quarter with 2,398 customers that contributed $50,000 or more of ARR, which is up approximately 10% year over year. Customers with over $50,000 of ARR now represent approximately 58% of our total ARR up from approximately 56% a year ago. Dollar based net revenue retention which is calculated on a trailing twelve month basis was approximately 101% on both a reported and constant currency basis.

Speaker 3

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. First quarter gross margin was 80.6% compared to 84.7% in the same period in 2024. First quarter adjusted EBITDA was $31,600,000 3 point 1 million dollars above the high end of our guidance, representing approximately 27 adjusted EBITDA margin. Unlevered free cash flow was $28,100,000 in the first quarter.

Speaker 3

CapEx inclusive of $2,800,000 of capitalized software development costs was $6,100,000 or 5.1% of revenue. Non GAAP earnings per share were $08 in the quarter based on 189,100,000.0 weighted average diluted shares. We ended the quarter with approximately $94,000,000 of cash and an outstanding loan principal balance of approximately $38,000,000 representing net leverage of approximately 1.5 times. Approximately 43% of our revenue was outside of North America in the quarter. Turning to our financial outlook, our guidance accounts for the following elements.

Speaker 3

First, we are assuming FX rates of 1.07 for the euro and 1.27 for the pound for the remainder of 2025 along with updates to other currencies. Second, while changing tariff policy is injecting caution and uncertainty into the macro environment, the need for cyber security and resiliency remain persistent. On balance, we are raising our reported ARR and revenue guidance to reflect our first quarter results and inclusive of updated FX rates on our business. Additionally, we are maintaining our full year constant currency revenue and ARR guidance as we monitor the fast changing macro dynamics closely. Third, on the expense front, we continue to balance profitability while investing for growth.

Speaker 3

Our operating plan includes multiple strategic priorities including the development of our India R and D site, the integration and success of AdLumin and new products and go to market initiatives. We are raising our adjusted EBITDA guidance and are confident we can deliver on these operational priorities. With that in mind, for the second quarter of twenty twenty five, we expect total revenue in the range of $125.5 to $126,500,000 representing approximately 5% to 6% year over year growth on a reported and constant currency basis. We expect second quarter adjusted EBITDA in the range of $34,000,000 to $35,000,000 representing an adjusted EBITDA margin of approximately 27% to 28%. For the full year 2025, we now expect total revenue of $492,000,000 to $497,000,000 representing approximately 6% to 7% year over year growth or approximately 6% to 8% on a constant currency basis.

Speaker 3

We expect full year ARR in the range of $519,000,000 to $525,000,000 representing 8% to 9% year over year growth or 7% to 9% on a constant currency basis. We are raising our adjusted EBITDA outlook and expect full year adjusted EBITDA of $134,000,000 to $139,000,000 representing 27% to 28% adjusted EBITDA margin. We reiterate that we expect CapEx, which includes capitalized software development costs will be approximately 6% of total revenue for 2025. We are also raising our expected adjusted EBITDA to unlevered free cash flow conversion percentage from 65% to approximately 68% for the full year. We expect total weighted average diluted shares outstanding of approximately $189 to $190,000,000 for the second quarter and the full year.

Speaker 3

Finally, we expect our non GAAP 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.

Speaker 2

Thanks, Tim. Our earnings reflect continued progress advancing cyber resilience for businesses worldwide. Our customer confidence demonstrates a continued belief in the value we deliver. And our industry accolades are proof points that our efforts are resonating. While evolving trade policies can create uncertainty, cyber threats don't pause and neither do we.

Speaker 2

The launch of new security capabilities, the growth of channel partners in our partner program and our largest new bookings deal ever showcase that Enable is innovating and growing. We look forward to building on this progress throughout the year. And with that operator, we'll open up the line for questions.

Operator

Thank The first question comes from Mike Sikos with Nehal. Your line is open. Please go ahead.

Speaker 4

Terrific. Thanks for the questions here guys. I just wanted to see before getting into it, with the AdLumin acquisition, can you segment how much the acquisition contributed to revenue growth or ARR just so we can get an organic growth rate for you guys?

Speaker 3

Hey, Mike. Yes, I would point to we

Speaker 5

size the kind

Speaker 3

of starting point of revenue from the Abdulman acquisition upon the point of acquisition was about $21,000,000 of ARR or so and that has no impact from like six zero six rev rec on that. So that's kind of recognized ratably. So that should help you guys back into an organic growth rate.

Speaker 4

Okay. And then for the follow ups here, I know we're still relatively new with the new disclosures around ARR. But just 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 here on a quarterly basis throughout the year?

Speaker 3

Yes, Mike. I would expect it to be fairly consistent as the way 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 ARR sequential growth to kind of be building as we went through calendar 2025.

Speaker 4

Terrific. I'll turn it over to my colleagues. Thank you.

Speaker 3

Thanks Mike.

Operator

Thank you. The next question comes from Brian Essex with JPMorgan. Your line is open. Please go ahead.

Speaker 6

Hi, good morning and thank you for taking the question. I guess, question is just overall view on the market and the health of the spending environment, particularly after April when, you know, things seem to have gotten, you know, a little bit noisier from a macro perspective. We'd love to hear what you're what you're hearing from, you know, both enterprise customers and MSPs and how they're experiencing the current spending environment?

Speaker 5

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 a cyber resiliency, it's a must, right?

Speaker 5

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. 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. That being said, I'd say anecdotally, with some of the channel checks, we do hear folks talking about certain deals taking a little bit longer or just a little bit more of a measure twice kind of cut wise approach before folks are launching a big project.

Speaker 5

But overall, demand remains strong and the offerings continue to resonate in the market.

Speaker 6

Got it. That's helpful. And then I guess maybe could you decompose dollar based net retention for us? How do anticipate that this is a trough here? Is is there further to decline there?

Speaker 6

And then maybe the the key components of that in terms of churn, cross sell, upsell, any pricing increases just so we can kinda get an idea of the dynamics behind it? And understanding it's it's a trailing twelve month metric, but just trying to understand when we might start to see that kind of like heading the other direction.

Speaker 5

Hey, Brian. This is Tim.

Speaker 3

I would expect where we're at to be more in that trough. I think with the trailing twelve months, I would say this kind of fully captures the impact, that we saw and some of the dynamics back in 2024, that we've covered previously. I would say overall gross retention has been steady And like impact on the improvements we're looking to drive will be driven mostly through the cross sell opportunity that we have within the customer base. So that's where we're focused on executing in 2025 here on pushing that price per device up as we cross sell the white space opportunity that's sitting within the customer base.

Speaker 6

Okay. And what what that's helpful. And what kind of considerations will we need to make on the pricing side?

Speaker 3

I I I expect pricing to be in the in the 1% to 2% range, for calendar twenty five.

Speaker 6

Got it. Very helpful.

Speaker 2

It's going be very material. Thank you. Okay. Thanks, Brian.

Operator

Thank you. The next question is from Matt Hedberg with RBC Capital Markets.

Speaker 7

John, I wanted to ask you about the reseller traction. It seems really exciting as another growth vector. We're it sounds like we're still early. I just I I kinda wanted to see, like, where are we at? Like, I don't know.

Speaker 7

What inning are we in that kind of reseller motion? And, you know, how how how do you think about, you know, potentially that aiding growth this year? I I have to imagine you probably haven't embedded a ton in guidance for that. But just sort of curious on that element.

Speaker 5

Yes. Hey, Matt. Great question. Yes. And so just maybe to remind the audience a bit, we've traditionally been focusing on the route to the SME or mid market via the MSP.

Speaker 5

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 SIs and some of the folks like that. Matt, I'd categorize it as early innings for sure, but it's already seeing some green shoots. We have 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 ILLUMINA acquisition is they had a reseller network in The U. S.

Speaker 5

And so what we're doing there is we're adding to that network, but we're also now giving them other adding other items for their shelf, so to speak, in their line card with Cove and with our UEM offerings. And so that's been getting some good traction. And then in Europe, we're adding we've added some cams in The U. K. We've added some cams in the dock markets.

Speaker 5

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, 20,000 plus customers. And so we're lining up those pipelines. We're starting to get deals. Bookings are starting to come in.

Speaker 5

It will 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

Speaker 2

to see that pipeline build nicely.

Speaker 7

That's fantastic. Yes. It does seem like a really interesting additional growth factor versus historical historical MSP distribution. I guess the other thing that that really stood out to me, know, John, you mentioned it kind of earlier in your prepared remarks, was sort of the your VM management solution. You know, we we often hear of of a lot of, you know, customer issues with sort of that that both the the the VM side and and the patch management side.

Speaker 7

Especially, I can imagine that's even more relevant in the SMB space. 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 maybe where you're seeing that success?

Speaker 6

And is it competitive displacements?

Speaker 7

Or is it the case where they may be not using anything for VM in in in some of your customers?

Speaker 5

Sure. When when we surveyed our our managed service providers in particular, the the the two biggest areas of need were around, you know, security operations and XDR, MDR activity. And a close second was vulnerability management. Matt, I'd say it's a hybrid. Some have disparate tools that they were using.

Speaker 5

No one really had it in one unified platform inside their UEM. And so this definitely will be a differentiator in UEM for sure. We're starting with the scanning of endpoints in the applications. Then we're going to add to that and add on with scanning of networks and then to the cloud. And so I'd say it's a little bit of a hybrid in that.

Speaker 5

We'll probably be displacing some folks on at the first tranche or the first horizon with the endpoint, but that will be a little bit more of a greenfield or blue ocean, so to speak, 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 our MSPs for it, and it's showing up. Look, often refer to this as left hand, right hand clapping, right?

Speaker 5

You need to scan and understand what the vulnerabilities are, and then you need to patch. Our patching, we believe, is best in class. The level of automation, the level of policies that folks can do, it it all it all goes squarely right into our mission. Right? We're helping these MSPs be more secure and helping their customers be more secure and making sure they can

Speaker 2

do this effectively and efficiently.

Speaker 5

So this is right in the crosshairs of of really our mission. And and like I said, this was the number one of the top two priorities that MSPs were looking for. And and and it and it it really frankly is a gap in the industry. We we know that there's a lot of enterprise players, and some of our MSPs are forced to use some of those enterprise players. And it might be a little bit heavier than what an MSP needs.

Speaker 5

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. So we're really excited about it, and the reception has been great. We announced this in Berlin at our Empower event. And we had 500 plus attendees there, and the place went nuts.

Speaker 5

Literally, the audience started screaming when our CTO announced that this is going be included in Incentral and in Insight, both of our UEMs. 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.

Operator

Thank you. The next question is from Keith Bachman with BMO. Your line is open. Please go ahead. Hello, Keith.

Operator

Your line is open. Please go ahead.

Speaker 8

Yes. 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 FX?

Speaker 5

Hey, Keith. This is Tim.

Speaker 3

Primarily, we held our constant currency outlook for the year. So all increase on rev guide is related to FX for the year.

Speaker 8

Okay. Great. Then the second question is thank you. The second question is, sort of where Brian was digging in a little bit. You mentioned that there's more scrutiny on deals.

Speaker 8

Is the just to be clear though, is the pipe the same and but there's deal elongation or you're even seeing the deal elongation or sales cycle expanding? Is there any change in the cadence is really what

Speaker 5

Yes. This is John. What I mentioned is there are really more anecdotes that we're saying. But 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.

Speaker 5

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 from some of our channel checks, not necessarily what we're seeing in our direct business.

Speaker 8

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 8

And just wanted to maybe you could revisit on the EBITDA margin expectations as we go out. And what's interesting is your EBIT dollars are roughly consistent to what they were, say, in '23 and while the revenues expanded. So is the thesis that EBIT margins constant here or go up? Just give us a little remind us how either the EBIT margins will transition and or the dollars as you aspire to the larger ARR targets?

Speaker 3

Yes, Keith. Think looking at calendar 2025, we're squarely focused on growth reacceleration and a couple of key investment initiatives. One, on AdLumen, making AdLumen 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 channel adding points of growth to the overall business. So from 2025 standpoint, that's focused. I'd say we're staying conservative on EBITDA there with the number one focus on growth.

Speaker 3

As we look at '26, I would expect us to move back into the low 30s from an EBITDA perspective as we balance the investments between profit and growth in '26.

Speaker 8

Yes. That was really the spirit of the question was '26. Okay. It's working those margins return. Okay.

Speaker 8

Fair enough. That's it for me. So low 30s kind of margins as we conceptualize 26%? Yes. Okay.

Speaker 8

Perfect. Many thanks. That's it for me.

Speaker 2

Thanks, Keith.

Operator

Thank you. The next question is from Jason Ader with William Blair. Your line is open. Please go ahead.

Speaker 9

Thank you. Good morning, guys. First, I wanted to get a clarification. So the $2,600,000 beat versus the on the revenue side versus guidance you had $2,000,000 positive impact from FX. Just wanted to make sure those numbers are right and whether that was contemplated in the original guidance.

Speaker 9

In other words, if not for FX, you would have beaten by $600,000 Is that the right way to think about it? Or is it was it contemplated in the guidance?

Speaker 3

No. The what was contemplated in the guide was the rates that we stated back in Feb. So there was some FX upside on Q1 results. The other part on the revenue side, Jason, is we had some, I would say, some impact from six zero six to the positive, which doesn't carry through, for the full year, in Q1 as well.

Speaker 9

Okay. Very helpful. Okay. Good. And then on the customer expansion side, can you just talk about, I don't know, any anything that you didn't talk about in the prepared remarks in terms of some of the things you're working on, bundling or other initiatives, go to market initiatives?

Speaker 9

And then specifically, like what metrics should we be looking at going forward to check on the success of some of those initiatives?

Speaker 5

Hey, Jason. This is John. Yes, look, so one of the things that the ILLUMIN acquisition afforded us is if you think about the economic stack that we bring to market, that's now $30 per user per month, right? And which the Lumin ASP by itself was anywhere from $5 to $12 So it's a substantial uptick in our economic stack. And that allows us the ability to do a little bit more of a bundling and packaging, which will help our customers, both the mid market customers and the MSPs.

Speaker 5

What we believe is that at the mid market and 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

Speaker 2

kind of

Speaker 5

platform, end customer is getting the benefit of that. And so we're going to package that up. That should drive that will drive our ASPs up. What you can look to for proof points there, an acceleration in ARR, an uptick in NRR as well as we go through because we should get some of that upsell or excuse me, cross sell as we go through. And we tried to give a little bit of an example of that in the prepared remarks.

Speaker 5

I mentioned that 300 employee health care organization, right? And that's a high 5 figure ARR deal. Before at Lumen, that might have been more like a 12,000 to 14 thousand dollars ACV type of deal, it was just UEM or one of our offerings. But now bundling that together, we're getting four or five times, six times the ACV for a 300 person organization or a 300 device MSP. So the bundling and packaging, I expect to actually have benefit both on the low end and the high end, but maybe even an overweight impact on the lower end of the market because that's really where they can drive some of the economic benefit for themselves, but more importantly drive the efficiency for the technicians that those organizations are frankly a little bit overstretched if they're using more of a siloed approach.

Speaker 9

Is that where you've seen on the end market side, is that where you've seen most of the success for maybe some of your competitors, like in the low end of the MSP market, just some of that kind of full platform?

Speaker 5

Yes. So let me split that answer up because it's important. The AdLumen automated SOC, that's resonating on the low end, that's resonating in the middle, that's resonating in the high end, that's resonating in the mid market. Like that remains our fastest growing SKU and the cross sell has been really, really strong across all the entire spectrum. The bundling yes, the bundling, I'd

Speaker 2

say the success is a

Speaker 5

little bit more on the middle to the lower end.

Speaker 9

Very good. Thank you.

Speaker 5

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 9

Thanks.

Speaker 2

Yes, good question.

Operator

Thank you. The next question is from Joe Fandrich with Scotiabank. Your line is open. Please go ahead.

Speaker 10

Yep. Thanks for the question. John, if you could talk about, you know, traction you're having with the Bloomin. Remind us what's the catalyst for greenfield adoption. Is it typically a breach, someone trying to get cyber insurance, maybe some other reason?

Speaker 10

Really just trying to understand why this market is poised to take off now.

Speaker 5

Sure. Thanks, Joe. Based on our research, but also research of analysts in the space, I call it the XDRMDR is really a blue ocean type of market for the MSPs. 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.

Speaker 5

What's driving that? You kind of hit it all. I'd say it's like hitting for the cycle, right? Yes, if somebody has a cyber breach or an incident, that's a catalyst if it's a need for insurance. Or hopefully, it's also SMBs, mid market companies and MSPs being proactive saying that they can't handle threats that are needed.

Speaker 5

They can't handle it. They shouldn't be building a SOC. It's millions of dollars for a lot of these managed service providers or mid market companies to build a SOC. So if they can rely on a company that's leveraging AI to help them in much more automated way, search for threats and thwart the threats. And the biggest part of the Abooman solution that we believe is a differentiator is what we refer to as Big R and that we remediate.

Speaker 5

So before a customer can even be they can be sleeping and we'll already take action and remediate. One of the more interesting things, and I mentioned this in the prepared remarks, we're also went we also went to market with Microsoft three sixty five Breach Prevention. Right? So, you know, we were at RSA last week, the first time Enable was ever an exhibitor at at the at the cybersecurity event in San Francisco last week, and one of the big themes is identity. And M365 really is one of those bits that's effectively completely automated.

Speaker 5

And we're seeing any anomalous behavior with the signing in or just the logging in or a user or an identity under M365, which you can imagine covers a large part of my base, we can actually shut down that access. And so whether it be a mid market company or an MSP, they could still be sleeping, and we'll take action for them on their behalf, making sure that there's no lateral movement, making sure that that person no longer has access to their information. So what might have taken hours before in prior technologies is now taking minutes for us to detect and then respond and go from there. And that's resonating in the market. It's a differentiated approach.

Speaker 5

It's it's very much an AI powered automated SOC, and and and it seems to be really resonating.

Speaker 10

That makes a lot of sense. Okay. And you've also talked a lot about the value of selling the entire platform. I think I heard the word platformization. So I'm I'm curious.

Speaker 10

Is is there an effort to, like, integrate all the offerings together into, like, a single pane of glass? And does that add further value? And and where are you on that journey?

Speaker 5

Sure. When you think about the technicians' need, it's really about the workflows. You know, that that culminates or people speak to it as a single pane of glass. But the 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 UEM offerings, and the Lumen offering.

Speaker 5

So best in class. So if a mid market company or an MSP has a need for one of those three offerings, they can consume that. And then, frankly, we we do pitch and do believe that it is a better together story. It makes the MSPs or the technicians more efficient. It makes the solution more effective.

Speaker 5

And why? It's because the workflows. They don't need to log on. They don't need to manage up the the the The roles based account controls and all the access is there, pushing and pulling of the data. We can automate things.

Speaker 5

We can make the offerings more secure by looking at the if there was any anomalous detection. So I'll give you an example. We actually had a customer that was using both Cove and at Lumen and a breach was detected. So that breach was remediated. And just for belt and suspenders approach, because they had Cove, they were able to go back and recover from the previous day just to make sure that there was no threat actors in their environment, none of their data was corrupted.

Speaker 5

And so that's a good example of the cyber resiliency platform where we're detecting, we're remediating, and then we can recover just to make sure that the environment is clean. And we believe that having that complete resiliency story is differentiated both for Enable, both for the MSPs we serve and the mid market companies that are dealing with the threats.

Operator

Thank you. We have a follow-up question from Mike Sikos with Needham. Your line is open. Please go ahead.

Speaker 4

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. We just wanted to make sure we were being thorough here.

Speaker 4

If I go back a quarter ago, management said that they expected a five point headwind to 1Q revenue and a four point headwind to calendar twenty five from ASC six zero six. So did that five point headwind to 1Q play out as expected? And are we still maintaining that four point headwind to calendar twenty twenty five from these the rev rec dynamics?

Speaker 3

Mike, yes, we saw things come in very close to 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 06/2006, that headwind for the year is still consistent.

Speaker 4

Okay. And for an update as well, what percent of the customers today are on longer term contracts versus monthly?

Speaker 3

That's north of 50%. It's in the mid-50s from LTC committed contract ARR standpoint.

Speaker 4

Great. And final follow-up. But on the unlevered free cash flow conversion, fact that we're bumping up by three points today, is it fair to assume that's really being driven by the lower tax rate assumption for the year? And then secondarily, why is the tax rate coming down by four points now?

Speaker 3

Yes. That's primarily the driver on the change in the conversion. And the key driver on the lower tax rate is due to some of the benefit we're getting from the AdLumen acquisition. We're able to realize a little bit more benefit than we originally expected there.

Speaker 4

That's great. Thank you, guys.

Speaker 3

Thanks, Mike.

Operator

Thank you. We currently have no further questions. So I hand back to John for closing remarks.

Speaker 5

Thank you, operator. And thank you everyone for checking in with us today and spending time with Enable.

Operator

Thank you, John. This concludes today's call. Thank you all for joining. You may now disconnect your lines.

Powered by Quartr

Key Takeaways

  • Q1 financial outperformance: ARR increased 11% y-o-y in constant currency, with $118.2 M revenue and $31.6 M adjusted EBITDA (27% margin) both surpassing guidance, leading to raised full-year revenue and EBITDA outlook.
  • New security offerings: Released breach prevention for Microsoft 365 and integrated vulnerability management into Unified Endpoint Management, enabling customers to detect and remediate threats and patch endpoints via a single platform.
  • AI-driven SOC differentiation: AdLumin’s automated security operations center now automates 70% of incident remediation and earned MDR leadership awards, driving significant six-figure ARR wins after thwarting multiple breaches in trials.
  • Expanded channel strategy: Added global resellers and revamped the partner portal, earned a five-star CRN Partner Program rating for the fourth consecutive year, and committed to CMMC 2.0 readiness to penetrate regulated sectors.
  • Cross-sell and platformization: Leveraging a multi-product cyber resilience suite to capture an estimated $2.5 B in expansion opportunity within the existing customer base, with large multi-product deals demonstrating platform stickiness.
A.I. generated. May contain errors.
Earnings Conference Call
N-able Q1 2025
00:00 / 00:00