MSP, Sales and marketing

Wall Street, MSPs Agree: Managed Services Market Momentum Continues Despite Recession Fears

The MSP market continues to show financial strength despite broader macro economic recession fears. The latest evidence: N-able announced strong quarterly financial results. Also, research from Service Leadership -- the benchmarking arm of ConnectWise -- finds that the MSP sector is not in recession.

Still, it's important to keep the story below in context: ChannelE2E, N-able and Service Leadership certainly are not suggesting that MSPs are recession-proof. But the MSP business model is now proven; demand for key services such as cloud and cybersecurity remain strong; and current MSP business conditions (as of November 11, 2022) appear good.

N-able Earnings: What MSPs Should Know

The evidence: N-able's Q3 2022 revenue was $93.5 million, up 6% compared to Q3 of 2021. That's not a big percentage growth rate in the MSP market -- where some rivals and market segments enjoy double-digit percentage growth rates. But N-able's overall financial performance, EBITDA margins and next-quarter forecast combined to impress Wall Street analysts and investors. Indeed, the company's stock ($NABL) jumped 16% on the earnings news, according to SeekingAlpha.

Tim O’Brien, CFO, N-able
Tim O'Brien, CFO, N-able
John Pagliuca, CEO, N-able

In a prepared statement about the Q3 2022 results, N-able CEO John Pagliuca said:

“We are proud of our third quarter results, which came in above the high end of our outlook for both revenue and profit. Just after the end of the third quarter we hosted many of our partners at our Empower conference with the theme ‘Own the Cloud’. Across the board we received validation that our strategy is on track and that we are helping our partners drive successful, recession-resilient businesses. Our offerings in RMM, data protection, and security are leaders in the market, and we are committed to innovating on the cutting edge as MSPs become even more mission-critical to SMEs globally. We are focused on helping our partners manage everything, secure everything, and accelerate their growth, and my fellow N-ablites are driven to fulfill this mission every day.”

N-able CFO Tim O'Brien pointed to particularly strong growth in the company's security and data protection offerings for MSPs.

We'll potentially share more thoughts from the N-able earnings call in the days ahead.

Service Leadership Q3 2022 Benchmark Findings: No MSP Recession

Peter Kujawa, VP, Service Leadership, a ConnectWise Solution

Meanwhile, Q3 2022 benchmarking research shows that the MSP sector is not in a recession, according to Service Leadership VP Peter Kujawa -- who shared anecdotal thoughts during ConnectWise IT Nation Connect 2022 this week in Orlando, Florida.

Kujawa was careful to put his economic thoughts into context: He doesn't know if the MSP sector will face a recession in 2023, but the current data for 2022 shows MSP market strength. Still, that doesn’t mean the rising managed services tide is lifting all boats. Among the areas of concern: More than 25% of MSPs are losing money, Service Leadership indicates. In stark contrast, the top quartile of MSPs are generating EBITDA profit margins of at least 18% or so, Kujawa told conference attendees.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.