Hello, everyone, and welcome to the N-able Second Quarter 2021 Earnings Call. My name is Daisy, and I'll be coordinating this call. [Operator Instructions] I will now hand over to your host, Howard Ma, the Senior Director of Investor Relations from N-able to begin. Sir Howard, please go ahead. Howard Ma;Senior Director of Investor Relations: Great. Thank you, Daisy, and welcome, everyone, to N-able's Second Quarter 2021 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and Chief Financial Officer. 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. On our Investor Relations website, 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 expectations following the recently completed spin-off of our business from SolarWinds, 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 risks related to the spin-off transaction. 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. 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 the non-GAAP financial measure. A reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today's call are available in our earnings press release on our Investor Relations website. Finally, please note that the spin-off transaction was completed on July 19, after the end of our second quarter. Throughout our second quarter, we operated as part of SolarWinds and our financial results for the period have been prepared from SolarWinds' historical accounting records and presented on a stand-alone basis as if our business operations had been conducted independently from SolarWinds. While the allocations and estimates in these carve-out financials are based on assumptions that N-able's management believes are reasonable, the financial results presented for our second quarter may not be indicative of the financial position, results of operations and cash flows of N-able in the future or if N-able had been a separate stand-alone publicly traded entity during the periods presented. And now I will turn the call over to John.

Thanks, Howard. I want to thank everyone for joining today's call and for your interest in N-able. Given that this is our first earnings call as an independent company, I want to start off by highlighting some of the differentiated aspects of our business model before touching on second quarter performance, and then turning it over to Tim for more detail on our financial results and outlook. One year ago, SolarWinds announced the intent to spin off SolarWinds MSP, which we have rebranded as N-able. I'm delighted to say that we completed the spin-off and began trading as a stand-alone public company on July 20. This marks a significant milestone for our entire N-able organization, which is over 1,300 employees strong and services MSP partners in approximately 150 countries worldwide. I want to express my admiration for and gratitude to both the internal and external teams for their tremendous dedication, hard work and perseverance during the separation process. This has been a dynamic journey filled with valuable learnings that we believe enhances our ability to execute on our strategic initiatives and build a brand identity that aligns with our partner-centric mission. As we begin to write the next chapter at N-able, there are many factors that give me confidence in executing on our commitment to be the trusted partner for MSPs and deliver reliable IT management and security solutions for millions of small and medium enterprises around the world. For clarity, what other companies may refer to as their customers, we refer to as our partners, as their success drives our success, creating a unique and powerful business model. First, it all starts with our people. We added key members to the senior leadership team over the last year, including a Chief Technology and Product Officer, Chief Customer Officer, Chief…

Thanks, Tim. As we think about the future of N-able and how we can create more value for our partners, employees and shareholders, we will take a measured build, buy and partner approach to our platform expansion while targeting the Rule of 50. In the near to medium term, we are focused on a few key initiatives and investment areas. The first is in international sales, where we see opportunities to attract some larger MSPs and plant our flag in new accounts via channel partners. Second, we're investing more in partner success and support to further execute on our retain, land and expand strategy. Third is our investment in product and innovation. We will continue to invest to bring new solutions to market to meet the growing and evolving needs of the SME. Also, when MSPs choose their tech stack, they are increasingly mindful of the willingness and ability of vendors to invest in the security of their products. We're investing more in the security of our platform and our security processes, which is just as important to us as performance and extensibility. Finally, I want to conclude by thanking our employees, partners and stakeholders for their trust and their commitment to N-able. With that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Mike Cikos from Needham.

Congratulations on the beat and raise first quarter out of the gate. I had a question for John. I know in your closing remarks, you were talking about some of the near-term investment initiatives. And I thought that's probably a good place to start as people get ramped up on the story here. Can you explain between international, the partner success and support and then the R&D innovation which of these investments we should be looking to nearer term versus longer term, understanding that these are going to take some time to play out as you guys are putting those investments in place?

Yes. Thanks, Mike. Appreciate the time and appreciate the comments and the interest in N-able. And actually, your question is perfectly framed because we do look at our investments in a laddered way. And as I think about the 3 areas of investment, it actually runs near term to midterm, I would say, in the order that we presented them. So we've already begun increasing our levels of investment in our international sales and marketing effort. And we've already begun to see some degree of success and return there. So that I expect to be measured in months and really starting to show up. Really, it's been showing up already. Our international traction, I think, is outpacing our North American one and we continue that to expand. We think the opportunity there is quite strong, in particular, in the high end of the market. So that's the shortest return. I often look at investments as like a J-curve, and that one has probably the steepest and shortest kind of curve, if you will. The second one, partner success. This is a continuation in our story here. We've always been big on partner success, but we're really increasing that investment and really making sure that we're touching the customer, the MSP, in a way that helps them grow. And we've been investing there. We have our new Chief Customer Officer there. We brought in a bunch of folks and really new teams to make sure the MSPs are touched right there. So when I go back to the J-curve there, that's a little bit more medium term. I expect that one to really start showing up towards the end of this year, beginning of next year. And then lastly, on the technology front. We brought on Mike Adler who's our new Chief Technology and Product Officer. And Mike has done a great job focusing on what's important, making sure that our products are the highest quality, but then also looking at ways that we can bring new solutions to market. And so as I mentioned in the prepared remarks, we'll have our DNSFilter available this year. We'll have other offerings beginning to line up in the second half, excuse me, in the first half of '22. But given the nature of our business, the fact that we have these, all of these MSPs, it takes what I refer to as our snowball. So those new products, those new solutions, take a little bit of time to accumulate in the subscription recurring revenue model. And so that J-curve will be a little bit of a longer slope and will get a return more in the midterm there.

That's very helpful and makes a ton of sense as far as those solutions ramping over time. And then just one other question, if I could, and I'll cede the floor. But I guess a lot of the feedback I've been getting from different clients, they're trying to discern, I guess, the criticality of the core RMM solution that you guys are bringing to your MSP partners. Can you kind of detail, I guess, that criticality level or the value of that asset to your partners? And maybe it would be helpful color as well, how many of these MSP partners are operating multiple RMM solutions or is it really they're going to just one RMM solution? Any color there would be helpful.

Yes. I'll start with, well, your second question because it will help answer your first question. So broadly speaking, an MSP has one RMM in their platform. Why? Because it's really their central nervous system to run their business. We often refer to it internally the RMM as the operating system for the MSP. Mike, it's effectively a fabric that allows the MSP to run all their technical services. So what do I mean? If an MSP is obviously monitoring and managing all of these devices and workstations leveraging the RMM, but then via our platform, think of the platform as this fabric where we're actually plugging in all these different offerings, whether they be monitoring or security. So this allows the MSP to properly patch, which you know is a fundamental part of any type of good security hygiene. It allows them to deploy efficiently and effectively in a rules-based way endpoint protection, whether it be traditional AV or EDR. It allows them to deploy backup and disaster recovery. So it becomes this conduit and this fabric for the MSP to really do everything they need to do remotely and efficiently. And it's really the secret sauce that led to this industry being what this industry is, allowing these MSPs to, one, create a recurring revenue stream in managed services. And really, the RMM is enabling them to do so efficiently and profitably. So it is the core bit. Our technicians, it's effectively a lifeline for these technicians.

Our next question comes from Edward Magi from Berenberg.

Congrats on a great first print following the spin-off. I'll start here on the security front. In the wake of the most recent headlining breach this past July 4th weekend, can you shed a little light on how conversations may have changed with your MSP partners and if they've shared the way their conversations with their customers have changed as well?

Yes. Great question, Edward. And again, appreciate your interest in N-able. So look, what happened to Kaseya is unfortunate. And as a member of the MSP community, we recognize that and it's unfortunate. Incidents that appear in the news are really the ones where the bad guys were successful. But there are numerous attacks that happen every day that aren't reported, right? And broadly speaking, my guidance to our MSPs, our conversations that we have internally, it's really along 3 areas and 3 topic points, right? One is, you need to make sure you're investing in technology security. Security that's really, I'm sorry, technology that's focused on the different surface areas along whatever vector that might be in a layered approach, number one. Number two, you need to have dedicated security personnel that's completely dedicated and focused on security initiatives. This is not a shared thing or something that people can do as a side priority or focus. It needs to be a dedicated focus. And third, and this is the one that's often I'd say, overlooked, you need to really adopt a cybersecurity culture. And look, that's something that we preach internally at N-able, and that's something that we preach on to the MSPs. We've been preaching this, frankly, for a number of years. And it resonates. I think the MSPs understand it. The evolution of the story, really, it went from an inconvenience maybe back 4 or 5 years ago to now folks are understanding that it can be an extinction event for a small and medium enterprise. So the MSPs are leading the charge. They're looking to us to help provide the counsel, the technology and an integrated platform for them to deploy this layered security approach efficiently and profitably. And so yes, I think it's getting a little bit more attention. I'm glad it's getting a lot more attention. We need to raise the awareness for the SME, for the small and medium enterprise, for the MSPs and really across the industry.

Great. That's really helpful. And like you guys said, you guys have been preaching the importance of security. Just a follow-up here. Some competitors have mentioned stronger adoption of some parts of their platform in the wake of the breach. I wanted to get a sense. I know it's quite early, but I wanted to get a sense of how you guys may have seen some sort of demand change or increase in adoption of your RMM tools or any of the riders on it?

Yes. Tim and I, I think, touched on it briefly in the prepared remarks, but I'll go into a little bit further detail. We're seeing MSPs taking a little bit more holistic approach across their entire SME estate. And we're also seeing the SME, I think, that they're understanding the need to invest in this layered security approach. So what does that mean for us? That means we're seeing backup and disaster recovery, continuity solutions. Our cloud-to-cloud backup offering has gotten significant traction. Endpoint protection continues to outpace our growth. We have our traditional antivirus offering, but we also have our N-able EDR offering. And that, I would say, is also outpacing our overall growth. So it's top of mind for the MSPs. We have a password management offering that we have. And because for the MSP, the surface area is twofold, right? It's their own environment. And we have offerings that we give them like our password management to help them with their own environment. But then it's also the environment of their customers, of course. And so really, we're seeing anything to do with security and along the lines of protection, anything really in this framework really, right? Anything that's along the protection, detection and the ability to recover, we're seeing kind of be more top of mind for both the MSP and the SME.

Great, really helpful. I'll cede the floor and hop back in queue.

Our next question comes from Matt Hedberg from RBC Capital Markets.

John, I just wanted to drill in a little bit on kind of the health of your end markets. What are some of the signs that you're seeing in your business that could point to an acceleration here? And I guess, importantly, how do you think about SMEs increasingly leveraging technology that you offer in a post-COVID world where everybody is really going through these digital transformations. It's not just the large enterprises.

Yes. Thanks, Matt. Nice to hear from you again. Look, I actually refer to the digital transformation as the digital evolution. Because for me, it's not a beginning and an end. It's a continuation. What COVID did really, it didn't change our thesis. I don't think it actually even changed the thesis of the SME. What it did is it effectively accelerated elements of the need for the SME. The difference a couple of years ago to today, an SME needs to embrace technology on all fronts. I often say, people ask me, oh, is there a focus in the verticals for MSPs? I said, well, yes. If the SME has a customer, they need IT. And if you don't have a customer, you're really not in business, right? So whether it be protecting your own, if you're the SME, if you're protecting your own data, protecting your customers' data, helping with the productivity of your staff, of your teams, corresponding with your customers, it is the bloodline. It went from a differentiator in the SME market to absolutely table stakes in any vertical. I can't think of a vertical that doesn't require IT. So with that as a backdrop, we're seeing the SMEs adopting SaaS applications, pushing more to the cloud. And we're there helping the MSPs with this evolution. And that's our job, right? Our mission is to empower these MSPs. Our vision is to enable the digital evolution for the SME. And as more and more of these SMEs are adopting SaaS applications, pushing their workloads to the cloud, pushing more and more of their data to the cloud, we're there to make sure the MSPs are there and able to do so efficiently and to make sure that all those data is being able to be protected and secured. So we're seeing the SME embracing this on all fronts. I think most notably in the short term, we're seeing an uptick, as I mentioned with the last call, in security. We're also seeing it in collaboration, in a bunch of different areas.

Got it. That's super helpful. And then maybe one for Tim. You guys grew 16% in the quarter and this being your first, I guess, post-spin call, you guided Q3 and the full year to 13% to 14% growth. I just wanted to get sort of an idea of what the assumptions that you had and embedded in that guide coming off of really a strong quarter. Just kind of trying to understand what's embedded in that kind of full year guide. Tim O?Brien: Yes. Yes. Looking back into 2020 from a year-over-year compare standpoint for Q2, Q2 was the most impacted quarter last year from the COVID pandemic, which is driving, I would say, a more favorable year-over-year compare. And the other piece of the equation is that any FX tailwinds is most pronounced in Q2 from a year-over-year perspective as well, more so in the first half of 2021 versus the second half.

[Operator Instructions] Our next question comes from Keith Bachman from the Bank of Montreal.

This is Adam on for Keith. So maybe for John. As everyone gets ramped up on the story, I was wondering if you can describe the main differences between N-able and competitors, including Datto. And what do you guys have that help set you apart from those competitors?

Sure. Thanks, Keith. Look, a lot of the difference is in our origins, right? We were born as this remote monitoring and management platform, and we cover the entire industry. We cover the low end in the MSP market. We cover the high end of the MSP market. And that's important because even on the low end, as they grow, we grow. So number one, we cover the entire market. Number two, the fact that we're born in RMM, we really focus on where it's the messiest for the MSP. A lot of the competitors talk about a single pane of glass, and that's important because of efficiency. Where we believe that efficiency needs to play in is being able to integrate all these different operating systems, all these different environments for the SME. The challenge for the MSP is that they're managing 10, 12, 200, 500 different small and medium enterprises with a proliferation of different devices and different network configurations and SaaS applications. So the challenge there is how you pull this all in, and that's one of the parts of our secret sauce. With our integrations with Microsoft via Intune, the work that we do with Apple and the Cisco -- excuse me, the Apple, ability to monitor and manage Apple devices, our partnership with Cisco, giving them the ability to effectively and efficiently manage Cisco types of devices. It allows our MSPs to aggregate all of this in, in one single screen so they can monitor and manage this stuff efficiently. And that's where our focus has been. That, coupled with, we believe we have the broadest set of security offerings in the market that are integrated with the platform. Again, there's that integrated and platform word again. Why that's important again is that an MSP can deploy endpoint protection, can deploy our backup disaster recovery via this one powerful console. And so it becomes that effectively that central nervous system for them. So that's where we're focused is how to make it efficient for these MSPs. And when I think about the landscape and how this world is going to continue to evolve and get more and more complicated, it's in that area. What's going on with cloud, how the environment continues to get more and more proliferated, these networks get more and more challenging, the verticals get a little bit more different. Our job is to help simplify for the MSP, make sure that they can do so securely and efficiently, and that's where our focus is in. And so that's where I believe we stack up and are head and shoulders above our competitors from that view and the ability to integrate and blend in all these different technologies and networks and devices.

We have a follow-up question from Edward Magi from Berenberg.

In the prepared remarks, you made note of the strength in Apple, and you also just made it in the last question as well. We've seen great strength from players in this market this past quarter. Can you just expand on how we can think about N-able's future as you look to tap into this growing Apple device market?

Yes, it's multipronged is what I would say, Edward, right? And so when we think about the future and where we're pushing and where we believe the growth is for our MSP partners and the challenges for the SMEs, it's along a couple of different lines. One, it's really focusing a lot on cloud monitoring and management, right? More and more workloads are going to the cloud. We need to make sure that we're right there and enabling these MSPs to help monitor. Right now today, we have tens of thousands of Azure instances that we're helping MSPs monitor and manage today. And that's a new challenge for them. It's a new challenge for monitoring and management. It's also a new challenge for security. And so we're pushing and focusing our investment area around cloud monitoring and management, number one. Number two, we'll continue to look at security solutions. I mentioned DNSFiltering. The bad news about security is not one magic pill or solution that makes you secure. You need to employ a layered security approach. And as we think about the future environment as more and more workloads push to the cloud, we're taking a look at different ways that we can help MSPs understand the risk and manage the risk, whether it be vulnerability scanning and vulnerability management and different types of different security tools and offerings along that environment. So that's really a lot of our focus area. As it relates to Apple, yes, this is one of our differentiators. It's not a homogeneous network. My guess is you have an Apple device and a Microsoft laptop you're working on now. That presents a unique problem for the MSPs. And one of the things that sets us apart is our ability to allow these MSPs to manage a Windows device, a Google device, an Apple device. And I believe the investment that we're making with our Mac team and what they're able to do to allow MSPs not only just to monitor and manage Mac devices, Apple devices, but also to enable them to secure, and if necessary, back up some of these devices. So we're going to continue to push there to get closer because it's very much a hybrid world in a bunch of different fronts. And for the MSP, the small and medium enterprise is looking for the MSP to manage all of it, right? They're the single neck to choke, so to speak, for these small and medium enterprises. It doesn't matter if it's an Apple device, a Windows device, a Linux box. Their job is to monitor it, manage it and secure it and that's where we stand, and that's where we'll continue to invest on all the different operating systems to make sure that we can be there to help them in this kind of hybrid proliferated world.

Great. It's helpful. You're right on with the Apple phone and Microsoft-powered laptop, nothing further on that.

We have no further questions. So thank you, everyone, for joining. You may now disconnect your lines and have a lovely day.

Thank you all. Tim O?Brien: Thank you.