Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- N-able Inc (NABL, Financial) exceeded the high end of their top and bottom-line guidance for the second quarter of 2024.
- Revenue grew approximately 13% year over year, reaching $119.4 million.
- The company achieved an adjusted EBITDA of $46.8 million, representing a margin of 39%.
- N-able Inc (NABL) has successfully transitioned approximately 40% of its revenue to long-term contracts, aiming for most revenue to be long-term committed by the end of the year.
- The company's security solutions, including MDR and EDR, are experiencing strong growth and adoption, with MDR being one of the fastest-growing SKUs.
Negative Points
- The shift to long-term contracts has resulted in some near-term negative financial impacts as customers optimize their estates before signing.
- The company faces headwinds from pricing and packaging changes, impacting net revenue retention.
- There is pressure from tight customer budgets and cost diligence among MSPs, affecting growth.
- The endpoint security space is maturing, which may weigh on future growth.
- Revenue recognition under ASC 606 has created lumpiness in revenue results, impacting future periods.
Q & A Highlights
Q: Can you discuss the customer optimization you're seeing and its impact on your product portfolio? Was this already considered in the guidance?
A: John Pagliuca, President and CEO, explained that the strategy aims to lock in customers for predictability and focus on expansion. The optimization is partly due to customers seeking pricing concessions for long-term commitments. The initiative has been ahead of expectations, indicating a more resilient revenue base.
Q: How did linearity shape up in the quarter, and did you notice any macroeconomic impacts?
A: John Pagliuca noted that bookings were up 20%, indicating strong market resonance. While demand remains high, customers are ensuring they receive the best value, particularly in endpoint security.
Q: How does the 20% increase in bookings reconcile with the guidance for under 10% growth in the second half?
A: Tim O'Brien, CFO, explained that transitory headwinds, such as pricing and packaging changes, are impacting year-over-year performance. These headwinds are expected to persist into early 2025, but the fundamentals remain strong.
Q: Are other vendors also shifting from monthly to annual contracts, and why wouldn't you see more in-period revenue recognition in the second half?
A: John Pagliuca confirmed that competitors are also moving to long-term contracts. Tim O'Brien added that the success in Q1 and Q2 pulled revenue forward, impacting Q3 and Q4, but they expect continued customer commitment.
Q: Can you provide more details on the net dollar retention rate headwinds and when it might normalize?
A: Tim O'Brien stated that headwinds from pricing and packaging changes will persist through the second half of 2024 and into early 2025. A more normalized retention rate is expected in the second half of 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
