N-able, Inc. (NABL) Earnings Call Transcript & Summary

Thanks for tuning into our fireside chat during Needham's Tech Week. I'm Mike Cikos, and my coverage spans across the infrastructure, analytics and security sectors. I'm pleased to introduce the N-able management team with us today, and we have CEO, John Pagliuca and CFO, Tim O'Brien. Just for some quick logistics. I have a list of questions that I prepared on my side. But if clients at any point, have questions for John or Tim, please submit them in the Q&A function. I'll be sure to get those in front of the team while we have them here. With that out of the way, John and Tim, thank you very much for joining us at the conference today. We really do appreciate it.

Mike, thanks for having us. It's been a rocking and day, you've loaded the calendar. So it's been -- the level of engagement has been fantastic. So thank you for hosting.

Absolutely. Absolutely. I'll have to make note of that to our sales reps who are busy on these schedules.

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Yes. Before jumping into the prepared Q&A, though, maybe for more of the newer listeners to the story here. I'd appreciate if you could just provide a quick overview of N-able and the pain point you're helping sell for your customers today.

Yes, sure. So for those not too familiar with N-able or maybe for those that are familiar, but need a little bit of a refresher. So N-able provides a purpose-built platform really targeted the MSP market, MSP, managed service providers. And if you're not familiar with that acronym with that term, it's really the outsourced IT, is really what it is. So we provide a platform that enables these MSPs to monitor, to manage and secure the digital assets of their customers. Who are their customers? Their customers are small, medium and sometimes quite large enterprises across the globe. And those small medium enterprises looking to the MSPs to make sure that they can be productive, to make sure they can be collaborative and to make sure that they can be secure in this hybrid world. So we provide this platform, Mike, it's a software platform and a bunch of business know-how as well to these 25,000 MSPs across the globe.

Terrific. And I know we're fresh on the heels following your Q3 earnings release last week. One of the things that I was struck by was N-able's ability to maintain the full year revenue guide for that 12% to 13% constant currency growth, right? So I'm curious, can you help us understand how MSPs and their SME customers are really responding in the current macro environment? Again, I know it touches on a number of themes with your platform, but just interested in what the customer behavior has been like?

Yes, sure. Thanks. And we had our earnings a week ago, which seems a lot longer to go at this point. But you're right, we exceeded the top -- the top end of our outlook and consensus. So we think we had a good performance on the top end. And we did a great job managing and focusing the business on expenses, and we beat EBITDA, and we're able to actually raise our EBITDA guide for the year and maintain our top line. And I think that's the cause of the strength, Mike, of 2 things. One, the N-able business model but two, the mission-critical nature of the platform that we provide but also the mission-critical service that MSPs provide, right? And so MSPs are making sure across a wide range of verticals in the SME market, a mission-critical service, again, they're effectively making sure that all these small medium enterprises can do their jobs productively and securely. And so really, when I look at the resilience in the model, I often take a step back and refer to these 3 wins that I always talk about, and Tim is probably sick of me talking about the 3 wins today. But for us, the wins are in no particular order, the movement to the cloud, more and more workloads and users are working in a hybrid nature, a hybrid nature multiple using clouds or SaaS applications and more and more workloads, whether it be M365 or others to the cloud. That's number one. Number two, security. As you know, Mike, there's no 1 magic pill to keep customers secure. They need a layered security approach. And third, the other win that is circulating is a labor of scarcity. And we know that's true in the SME market. We know that's true in the Fortune 1000 companies as well. And it's that combination really, the confluence of those 3 wins, but what I look at in some industries, those might be headwinds for the MSP community, those are tailwinds and it's kind of the coalescence of those 3 wins that have really maintained the level of momentum we've been able to do. And it's really the strengths of those 3 bids. And what we're seeing, Mike, is MSPs are continuing to grow their business and increase their profits and increase their top lines and making their goals by increasing wallet share at their SMEs. Long ago, when I got into the space, like 9 years ago, small medium enterprises looking at MSPs to help them with their printers and networks, right? And now they're really looking at them as a trusted security adviser. So MSPs have a much more strategic role in the small and medium enterprises. And with that responsibility, they're able to add additional mission-critical services and security services and increase their wallet share at these SMEs. So the MSPs are getting to their growth number by adding things like data protection, by adding things like endpoint security and EDR and DNS filtering is layered security approach. And in doing so, they're growing their revenue, they're keeping their customers safe. And because our business model is completely aligned with our customers who we call our partners, we grow, and we're expanding quite nicely as well.

That's great. That's great. And I think it's interesting to me, I talk about like a multipronged growth strategy for N-able, right? You have your MSPs that you sell to your MSPs, you sell through. They're almost like this extension of your sales force, right? And so in this current environment, I think -- and correct me if I'm wrong, but I think it's a fair characterization to say that maybe the MSPs are more focused on better servicing their existing customers versus going out and acquiring those new customers. And so again, I just want to punctuate this for folks. But like the fact that you guys are able to maintain this growth level whereas the growth algorithm seems to have changed at least near term because that customer acquisition machine might be shifting more towards the existing customers. And so if that is the case, I guess, how is it you guys are really making sure that you're driving this durable growth, right? Is it just becoming more strategic as a partner to those MSPs or what is it? Yes, I'm curious.

No. So, really good question. And the beauty of our model is it is a multipronged approach, right? Like traditional businesses. We land customers. We land MSPs, right? Just to make sure, especially for those that might not be too familiar with the property, we land these MSPs, those 25,000 MSPs. And then, Mike, what you were alluding to, they add SMEs. We have about 600,000 small medium enterprises that those 25,000 MSPs are managing. And those 600,000 SMEs represent about 8 million endpoints that are out there. And so the way that we grow is by having them add either end customers or services. And what you were alluding to, Mike, there's been a little bit of a shift in the MSP market, right? MSPs are saying, hey, John, we talk about these wins and labor scarcity is a reality for me too, as an MSP. And it's better for me and a little bit more profitable to me to expand my existing customer base and grow wallet share and add these security services that N-able provides them, and they're able to grow their top line, but also Mike, they're able to grow their EBITDA because, as you all know, cross-sell in the expand is more profitable than that CAC number than that new customer acquisition. So we're seeing, I'd say, a maturity, I would say, in the MSP market, where their growth algorithm has shifted slightly towards wallet share. What that means for us is that we need to make sure we're providing additional services, whether it be data protection services, cloud management services or security offerings to help them with their growth algorithm, which is a tremendous opportunity for N-able, but we can't forget the entire growth algorithm, Mike. And for us, we need to make sure that we're landing customers, landing those MSPs, helping them land their customers. And then, of course, we can lean into this what I'd call a delicious kind of cross-sell opportunity that we have in our basin and their base and adding additional services.

That's great. And I know you've already touched on a number of different, I guess, products that were launched this year, things that the company is really focusing in on. But let me just take 1 more step towards the go-to-market or messaging, right? So in this vein where MSPs are demonstrating with maturity, focusing on their profitability for, let's say, cross-sell or up-sell, do you find that there might be certain go-to-market messages that are resonating better today versus maybe where we were like 6, 12 months ago, has there in any way been a pivot in that messaging coming from you guys to strike a nerve or has it been relatively consistent?

So you know what, Mike, it's essentially been pretty consistent. We had our Empower event last quarter. We had about over 450 folks, whether it be MSPs themselves or sponsors attend the event. And when I sat there and talk to MSPs both either on stage or one-on-one or even in workstations -- sorry, in workshops that we had, most of them really are not feeling that much of a headwind from the macro environment. So what I see is that they're seeing an opportunity to expand their wallet share, right? And so I think that's probably the bigger bit. As far as messaging, look, we do 2 things, Mike. And for those listening at home or in their offices, we do 2 things. Number one, we help MSPs scale and grow their profitability. And we do so by giving them a powerful automation tool and a bunch of powerful purpose-built technology that they can grow their business at scale efficiently without having to add humans move, and we take the mundane tasks away from the MSPs. That's number one. Number two, we add services in our platform integrated so that they can then go take that service and sell it through to their end customer. And it's striking that balance that is the right equation both for us and for them. And so for -- when we take a look at our marketing message, we're finding MSPs are keen to understand how they can standardize, how they can automate and how they can add additional services. So what does that mean? That means when we come to market with our EDR technology, N-able EDR or our DNS filtering technology. And we're teaching the MSPs how to cross-sell and get more of that wallet share, they're really keen to understand that story. Where we're talking to them about our data protection story and how we have a cloud-first solution that's 60 times more efficient and cheaper than the next competing offering that they can save technician time and save software costs, they're paying very much attention to that because that's helping them maintain and retain their team, their technicians, grow their EBITDA and standardize the name of the game to get that profitability like the standardization and automation. So those 2 stories have been tried and true, frankly, as long as I've been in the industry. I'd say in the last maybe year or so, there's a little bit more of an affinity or willingness to standardize and automate because the industry continues to mature. And with that maturity comes more of a desire to get that certain level of EBITDA.

That makes a ton of sense. And if I could just come back to it, those tailwinds that you're talking about, where MSPs may be focusing more on existing customers, but really that maturation and thought process and strategy to focus on profitability to provide longer-term flexibility is -- that message resonates in today's environment, right? And you were talking earlier about that mission criticality coming from you guys for their MSPs and from the MSPs for their SMEs, sorry for the alphabet soup. But it makes a world of sense in the current demand environment. It really does. And 1 final thing, but you were kind of touching on it, and this is something I was going to touch on later, but while we're on the topic, the idea of standardization. So it does at least sound at the margin like you are finding MSPs who are more willing to standardize to a specific platform or a vendor in this current market. Is that a fair characterization? And I guess, does that come back to maybe some of that maturity of the MSP market that we were talking to earlier? Or is there something else behind that?

No, I think so. I think it speaks to the maturity of the MSP community. I also frankly think it speaks to the maturity of the vendors, companies like N-able and providing them a platform that's scalable and that can satisfy their needs, right? And so Mike, I think it's important to know on the sell-through part, what does an MSP walk into? And MSP might have 500 SME customers that they're servicing, okay? 500 different enterprises across their book of business. And if you look at -- let's just pick a business, let's pick endpoint securities. And they might inherit a customer, let's say, a dentist office or a regional hospital or a law firm that has Symantec or traditional AV pickup against the antivirus or an EDR offering. And what that leaves them with is 2, 3, 7, 10 different endpoint security technology that the technicians need to understand that they're trying to manage -- managing all of these vendors. And frankly, it's a mass and it's inefficient. And our message to the MSP is you standardize on a platform, you leverage the RMM to provision that. So you're driving that efficiency, that automation. And then you trust a company like N-able to provide them with EDR. We partner with SentinelOne, which is a best-in-class EDR technology and standardize across those 500 customers, 1 endpoint technology solution. It helps with your scale, it helps with your technician time. It drives that profitability up. And you're giving your end customer enterprise-grade, best-in-class security. And so that story resonates. So we're seeing it really resonate in security and endpoint security. We're seeing it really resonate in data protection and even on our M365 backup and it makes sense, Mike. So it's -- frankly, it's good old-fashioned business as these MSPs scale. And as they have, I'd say, a little bit more to stand on to tell their customers, No, no, this is the tech stack that we will go with, right? SMEs are trusting MSPs on their tech stack. Now that MSPs are more mature, the -- we referred to it, we said it in the script on our last quarter, it's more of a tail than a cell. They're not selling endpoint security to their SMEs. They're telling they're small, medium enterprise. You trust me, I'm your security trusted adviser. This is what you need for MFA. This is what you need for a backup and data protection. This is what you need for endpoint. And this is the prescription. And when they do that and they leverage that 1 powerful vendor like N-able, they get the economics, they get the efficiencies on their labor and they're just driving an upper quartile type of MSP business.

Great. All great data points there. I did want to just take it 1 step from like a parallel perspective because I know we're talking about the maturity of the market here. I think everyone wants to get a snip of like how the demand environment is maybe different today versus where we were during COVID, right? What's the potential overlap just so we can kind of size what that impact on demand is, especially if you were talking about that Empower then in October, right? And the fact that it seems like most of these folks are seeing -- I don't want to say business as usual, but they are finding ways to tackle what this global economic environment is bringing them. So is there any overlap with what we experienced during COVID or -- how do you think about that?

Yes. And the folks attending the conference have been asking me similar questions. And it's an interesting parallel, right? So let's just remind the folks what happened during COVID. During that, what I referred to as that COVID quarter in Q1 of '20, what did the MSPs do? What they did is they focused on their existing customer base. And overnight, they had to prepare this law firm, this logistics company, this regional hospital to work in a remote environment. So our MSPs focus on their existing customer base, adding security and data protection offerings. So what we saw as N-able is our data protection and security offerings fly off the shelf, so to speak, that path has really continued. What we thought MSP is doing is they stopped or slowed down adding new customers because their focus was on hardening or preparing their existing customer base. I often say, Mike, at COVID, there was a lot of heroes in that pandemic during that lockdown and there was a lot of frontline, right, whether it be logistics companies or regional hospitals or even doctors' offices, but behind that front line with the MSPs making sure that their systems and their computers and their data was able to do that. And so our MSP is held proud, and we're very much keeping that global economy going. What that meant, though, for N-able is we saw a slowdown in them adding new customers. And we also saw MSPs slowing down, they themselves switching platforms. So we saw NCA, new customer acquisition slowdown in that COVID quarter. Fast forward to today, data protection and security continues to be white hot, Mike. People need layer security approach. Cyber insurance is a big driver. Compliance is a big driver, ransomware is still on the rise and extinction events are a big driver. So they need to continue to spend and protect themselves there. So it continues to be white hot. But new customer acquisition for us as we add new customers is stronger than what it was last year and definitely stronger than what it was in COVID. We recently came to market with a new offering. We have 2 RM offerings for the audience. We have in N-central. That's where the more of the high end, we'll call it, we have N-sight for the low end. We like and puns. And for N-sight, we repackaged that earlier this year, and I'm happy to report we have over 30% year-over-year better new customer acquisition on the low end of the market there. So we're doing something right there. On our high end, we're also stronger with our new customer acquisition. And Mike, I know you know, but for the audience, we rebranded and repositioned our data protection and backup offering. We traditionally were using backup as do you want fries with that as a cross-sell type of motion. And it's such a great platform and such a great technology, we begin going with more of a new customer acquisition motion, and that's also better than what it's been last year. So our demand, new customer acquisition is strong. The 1 part that we see a little bit of macro softening or a little bit more of a nebulous view, is on devices and how fast our MSPs are adding devices. And I think we all know the macro situation there where we're seeing PC shipments flat year-over-year. So we're seeing that manifest itself a little bit in the MSP space, but we're not seeing as many device adds as we historically adding. It's still growing, but it's maybe not necessarily at the same clip that we've seen historically.

That's great. And maybe 1 other thing on the device count and I did want to just clarify this because I know it came up on the 2Q call, we spoke about it on the 3Q call. But again, just given the results that you guys posted, it sounds like you're finding ways to navigate this. So my interpretation from the device count and correct me if I'm wrong, is that not that it's necessarily gotten worse from a quarter-to-quarter basis, it sounds like it's more just a consistent or persistent headwind, but you guys are finding ways to navigate around it as all your MSPs?

I think you categorized it. Right. Yes, that's right.

Okay. Okay. And I know, one of the other things, too, that struck me from the 3Q call, but it sounded like you guys, again, just had a pretty solid pipeline when thinking about what the -- what year-end holds for you guys. Can you provide some guardrails or some maybe qualitative comments as far as how Q3 played out from a -- from a linearity perspective, were things relatively consistent through the quarter? Or was there more strength at the starter end of the quarter? And then the second comment would be around bookings activity. How did bookings track in Q3 versus maybe what you guys had previously anticipated coming into the quarter?

Yes, sure, Mike. So the -- our growth algorithm has a couple of different components, as you know, right? So we have a new customer acquisition. We have new SKUs that we're actually actively selling. And then we have this beautiful partner-enabled expansion part of the model where our 25,000 MSPs effectively become our sales force and they sell through to those 600,000 small medium enterprises. Some of that is our sales activity and we categorize as bookings. And then some of that is really just our partner-enabled expansion that allows us to get that 30-plus percent EBITDA story as we continue to use that flywheel. We have product-led growth. It's part -- its consumption, but then we have this partner enabled growth that propels that consumption forward, right? So on the first 2, on new customer acquisition and new SKU, if I look at that as my sales activity measuring my sales number, that's the bookings number. We don't really talk about the numerically what the bookings number is because it's frankly, it can somewhat mislead the investor community a little bit. But what I will tell you is Q3, I mentioned this, I think, in Q2, and where I said it was our best bookings quarter of the year and for quite some time. I'm happy to report Q3 was even better. So Q3, bookings were stronger quarter-over-quarter and much better year-over-year. So from our new customer and new SKU motions with our sales, we continue to see good performance, good results and the level of efficiency there. So I'd say that we're pleased with how we're doing our new customers. That kind of give you some color on the insight and some of those bits. But even in our cross-sell, EDR continues to move along. Our M365 offering, Mike, we're about 1.2 million devices. And we mentioned when we clipped over 1 million not too long ago, so you can see the velocity of that snowball going where, Tim, keep me honest I think we're like 1.2 million endpoints for EDR as well. So that has a nice velocity. We continue to expand and cross-sell. And the message is resonating with our MSP and more importantly, they're able to package it and get to their growth algorithm and get to their profit number and keep most importantly, their customers secure. So it's been -- I'm pleased overall with the way we've performed in Q3.

That's great to hear. And I know like we were talking about a number of the products, and we are going to get there, I promise. But I did just want to come back to N-sight real quick. And 1 of the things that's striking to me is like that uptick that you're seeing based on how the product is being brought to market today. Can you just remind folks like what is it you guys did specifically around an N-sight to help drive that growth that you guys are currently experiencing today?

Sure, sure. And I think it's important to know, so we have 25,000 MSPs, okay? They range from a 2-person shop, maybe living in their parents' basement to MSPs that are $1 billion in revenue. And Mike, everything in between, okay? And so that 2 or 3 person shop up to that maybe 1,000-person shop or even larger, they have different needs. They operate differently. And many of our competitors have 1 RM, 1 user experience, the 1 level of depth of sophistication, right? So if you're a novice, if you're early on or if you're emerging and growing or if you're $1 billion revenue, they're expecting you to behave the same way. We don't believe that's the right approach at N-able. We have 2 RM offerings, 1 that's focused on the low end, that's the N-sight offering and 1 that's being N-central offering. With the N-sight offering, what we did, Mike, is we combined a bunch of other tools and capabilities and made the user experience much easier for that persona, right? We allowed them in 1 tool, the ability to do -- have a ticketing solution like a PSA light for them that fits their persona and their needs so ticketing solution, a remote control solution, things like TeamViewer or LogMeIn type of applications, our own IP and then this monitoring bit. We put that together, we enhanced the workflow, and we gave it a more of a, frankly, a friendlier pricing and packaging. So that -- and that's a great entry point because Mike -- and you did a great job in this in 1 of your previous pieces that covered us, we land with that remote monitoring bit, that node. And that's let's call it anywhere from $1 to $3 per device. But the real opportunity there is once we land that account on RM, then we can expand and sell back up in data protection and endpoint security and other types of security layers, right? And then doing so, that $1 or $2 opportunity can grow 10x that opportunity as we get that cross-sell motion in there. So that's why we did it. That was a strategy behind it. And it's resonating with the MSPs. They like the ease of use. They like the all-in. They like the friendlier pricing and packaging. And as a result, we're getting 30% better year-over-year lands at least year-to-date so far.

That's great. That's great. And I know another big focus for -- I think probably the biggest focus from my perspective on the outside looking in for N-able has been spinning up the new product introductions, right? So let's talk about Cove as an example. Company's specifically exciting strength from the Cove Data Protection business. Can you help investors think about what are the key differentiators for Cove in addition to benefits that you guys have mentioned like -- I know we spoke about through Delta or storage, right? So how does this play into that? And again, in the context of solving more for your MSPs. Can you package that up for the audience here today?

Yes, sure. So Cove is our data protection offering. And I think for the audience, it's important to know, this is a unified multi-tenant management console. What does that mean? That means in 1 view, an MSP can look at 1 customer, 1 user, 1 virtual machine or look at their entire estate and get a good sense of what's going on, whether it be a workstation, a server, a VM, a virtual machine, Office 365 backup and most of the competition does not have that. They have disparate consoles. That means more eyeball time, lack of efficiency for the MSP. So number one, it's that. Secondly, and probably most important, Mike, our approach is cloud first, right? Some of our other competitors and older tech, frankly, using appliance, as a piece of hardware, I think like typewriter and encyclopedia as you remember those. So they use a piece of hardware to do a local backup first and then they push it to the cloud. We're cloud first. So that's -- it's, in my opinion, more of a secure approach because no attack vector with that appliance potentially could be. It's more efficient. And most importantly, for the MSP, it's less eyeball time. It's less time that their technicians have to go look at their console. So it's a cheaper solution for them. It's more efficient, less storage and less human labor involved. And so it's a win-win. It's priced disruptively. And frankly, Mike, it's probably 1 of our best kept secrets. And we're letting the secret out. We went high and wide in loud with our Cove offering. It's resonating. It's resonating in the MSP space. It's also resonating in the internal IT space as well because it's a very similar kind of use case. So -- and by the way, yell at me if I didn't mention, Mike, it's also integrated into RM, right? So then from that 1 console, you can kick off a bunch of the power that Cove has to offer. So we find it to be a differentiator. We believe that data protection has long legs, and it continues to be 1 of our growth vectors. Cove overall is outpacing our overall growth. Our net retention is stronger there. It's a stickier product. And then we can layer in our cloud-based offerings to have that nice expand, and we're bringing on more of a disaster recovery as a service offering. We began to skew that up earlier this year, Mike, and we'll continue to do that in '23, which will then just open up our ability to service our MSPs the right way.

That's great. That's great. And I know 1 of the things that came out again on the earnings call last week, but based on the success that you guys are seeing here, and I just want to put this in perspective for the audience, but you guys have or had General Manager, Chris Groot, right? And you still have him today, that's great. But based on the success that you saw with that leadership structure, you actually decided, hey, why don't we do the same thing over for RMM. So you announced that now Mike Cullen is the GM for RMM. And I just wanted to see, again, from the outside looking in, but can you put some maybe qualitative commentary around the success those intangible benefits that you're seeing by having that GM structure?

Yes, Mike, you know what, it's focused on agility, really, right? And so what Chris did, who's the GM of data production, along with Stefan Voss who is an industry expert who leads the product team, they've applied a lot more focus, right? And so before with backup being, do you want fries with that, do you want to cross-sell, now we're saying, no, let's go head-to-head and rip and replace. We don't need to use it as a cross-sell motion. And with that, you need a little bit more of an understanding of the competitive landscape and so the GM is working a lot with our product marketing folks and with our sales folks, making sure that they're enabled, making sure that they understand the value prop and the TCO, so total cost of ownership. A lot of our vendors in the backup space, Mike, can you cover the space, you know they'll have software. But what's not included is the storage or the hardware required. We're cloud first, where we include storage. And so just making sharpening up our value prop, sharpening up why we win, sharpening up our road map and the strategy behind that and adding more of an accelerated focused approach has been -- I wish I don't mainly regret is I haven't done it sooner. I didn't do it sooner, right? And so you're right, we replicated that with RM -- with Mike Cullen. Mike Cullen has been in the industry for 20-plus years. If there was a mount rush more of the MSP space, I always say his head would be on there. And Mike is doing the same thing with a couple of other leaders. We also might have done it with security as well. And that wasn't part of the script, but we announced that also spoiler alert. You see that in the next a bit. But Trolls, who runs our security offering, and again, he's focusing on, okay, here's the security landscape. What are the new security offerings that we can bring to market and what is that MSP and that SME need? And it's that level of focus that we're seeing a little bit more of, I'd say, an accelerated road map and frankly, just a more agile business as we get more and more focused on as we get to scale.

That's great. And if I could just take it 1 step further. I know when we first were talking about Cove, we were talking about having that cloud-first offering versus maybe some competitors being appliance-based in nature, right? And just for the audience to put this in perspective, but the reason that you want to have a cloud-based offering is because the malicious actors, the cyber threat attackers understand if you have an appliance, there's a limited amount of space on the appliance. So they might know that your appliance only has 3 weeks of storage that it can track and so it will sit late like quite in that appliance for 3 weeks, just sucking everything up and then turn you off, knowing that now when you go to call on that appliance to back up, all that has already been compromised as well. So it just shows the cat and mouse game here, but that is why the cloud-based offering makes a world of sense especially versus an appliance-based offering in today's [indiscernible].

Really well said. You want to join our product marketing team? It's perfectly said, look, at the simplest level, right? Bad guys look for surface area to attack, right? And the appliance add surface area in a vulnerable service area to attack. And so with the cloud-based fit, we don't have that. And so you're exactly right, the way you articulated is right. And the other bit because of that true Delta technology, it is more efficient. So we're able to push the cloud and back up to the cloud and also have a less of the storage footprint, which helps us keep maintain our costs and also helps our customers on some of their costs as well. And again, the throughput time at our Glass time it's a real disruptive piece of technology, and we're happy that we're leaning in and investing in it for sure.

That's great. That's great. And I did want to -- I guess, I know we've been talking about a lot of the pieces towards the growth algorithm on the top line. It just as important and I don't want to lose track of this, especially in the current environment, but you guys are executing with a 30%, 31% EBITDA margin currently right? And I think what struck me was your ability to drive that efficiency, again, especially in the face of some of these more difficult macro headwinds that the community is facing on a broader scale. So can you help us think through where that efficiency is coming from? How is it you guys are ensuring that profitability that you guys are holding so near and dear to your hearts?

Yes. Look, and it's not too much of a quantum shift from how we've been running it. But Mike, part of this is also where we are in our journey, right? And so in 2021, N-able didn't exist. Well, it existed, but the brand itself didn't really exist. So in 2021, as part of the spin out, we really had to spend a lot on top of the funnel, building brand awareness on what N-able is, what we believe, what our value prop is, why we win, right? We were starting with nothing. We've done a great job in 2021. In 2022, what did we do? We wanted to build a new brand and build the Cove brand into market. So we spend a lot of brand awareness in the first half of 2022. There and also with that N-sight offering that you and I were talking about earlier. Now as we take a step back, we know we see that there's a little bit of a tightening going on. And when we look at our marketing spend, Mike, we look at it in 3 dimensions, and I'll go quick some mindful of the time. But we look at it at by motion, top of the funnel, middle of the funnel, bottom of the funnel. We look at it by geo, right, different geos in different markets. And we also look at it by product. And what we really took a hard look at really in the beginning half of the second half to the beginning part of Q3 as we look at those dimensions, they have all of different payback periods and different LTV to cap type ratios. And we found that some were just not really that efficient, right? So top of the funnel is going to be less efficient than medium to the bottom part of the funnel. New geos that you're trying to build that brand and maybe the MSP market is really not that mature yet. You're not going to get that return. Our low LTV products, by definition, you're not going to get that return. So we focused and I think the wrong way to interpret it was like a pullback on spend. I'm looking at it as more of a concentration or focus of our spend, where our high LTV products can return -- Cove, N-sight, N-central and markets that have a strong return, and that's where we're getting a good lead. The other part is, Mike, as we build this bigger base and as we bring new products to market, cross-sell is much cheaper than NCA, right, the new customer acquisition. So marketing to our customer base with our PSMs, we've invested a ton of money, Mike, into our partner success teams. That's bearing fruit because now they're having real conversations like old school, human conversations as face-to-face, you can get as face-to-face as you and I are having and they're having that and we were able to cross-sell into that base. So we're beginning to get scale from that cross-sell of our customer base. So that's how we're able to get it. As we look to the future, Mike, I see us continuing to lean in into R&D. We are a technology company. So we'll continue to lean in, in R&D and that will probably outpace some of our be at revenue growth or maybe a little bit beyond revenue growth. But our G&A, our sales and marketing, we're at scale. We're getting, I'd say, where we are in our journey. We're able to lean in where we want to and then appreciate where we might not have a good return and continue to have that balanced rule of 50 approach. I know there's a -- I know profit isn't back in vogue. For Tim and I, it never went out of style, Mike. We've been driving a balanced profitability and growth story for 9 years that we've been in this business. And for us is the only way to run a business. And so for us, we always are looking at what's giving us that return, what's the right environment, where we should lean in. And if we think for a couple of more points of EBITDA, we can get a stronger growth, we'll do that. And when the market and the macro is receptive to that, we'll do that and where it's not, we have the ability to pull back and make sure that we're always balancing that rule of 50 or the aspirational rule of 50 I should say.

Great. Great. And I think probably 2 more things is a lay of time for with the time we have left. But the first, I did just want to touch on the Spinpanel acquisition. And so I know that in that vein, you guys had announced on the earnings call again that now the Spinpanel has been integrated and is being used, I guess, as a component or an underlying piece for your cloud user hub, which is currently in beta. I would be curious what the initial feedback or response has been like? And then maybe a broader comment independent of Spinpanel, but how do you guys think about that acquisition strategy longer term?

Yes, sure. So look, what is Spinpanel for the audience, so we acquired a piece of strategic technology and really a platform of a nature that enables MSPs to better manage M365. And so being able to provision onboard, off-board their customers, their customers' employees in an efficient way. So Spinpanel has a fantastic level of automation to it that just really drives a bunch of efficiency there. It's a major pain point for MSPs. It's a major pain point for even internal IT departments, but more so for MSPs because they have those 500 customers, Mike, right, in all those different instances. And so we know that the itch is there. When we talk to our people at Empower, the demand is very much there. We released the beta in August 16. In 72 hours, we had 300 people raising their hands saying, hey, we want to trial that. So we're talking to our customers. We like to talk and listen to our customers, Mike, and so we're getting them in that beta, we're learning to see what's working, what's not working, making sure it's the right level of automation. And I look to that to really be going to more GA to the beginning part of next year, and that's the beginning. And where this is going, Mike said, we'll help them with M365, we'll also help them with managing their Ntune devices and then other SaaS and cloud environments because as we know, all of those workloads of moving to the cloud. Our job is to help them take the complexity out of their environment and make it more simple and scalable for them to manage and monitor and secure assets. And if they're in the cloud, that's where we need to help them meet that challenge.

That's great. Thanks a lot, John and Tim. Really appreciate it. And with that, I think we're unfortunately going to have to call it quits. But thank you to everyone for tuning in today. If you have any follow-up questions, feel free to reach out to myself. I know John and Tim are more than willing to make themselves available. And thank you again for joining us. Thanks guys.

Great conference. Thanks, Mike.

Bye.