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N-able Earnings Provide MSP Software Market Reality Check


N-able's Q2 2022 earnings, released today, provide a timely reality check for the portions of the MSP software market. In some ways, N-able is now the solo bellwether stock ($NABL) for the MSP software industry. The other former bellwether stock, Datto ($MSP), was taken private by Kaseya in July 2022.

N-able spun off from SolarWinds in 2021. The resulting standalone business is not a hyper-growth company. Instead, the software business continues to show steady, predictable growth -- which reflects continued MSP demand for RMM (remote monitoring and management), cloud-based data protection and cybersecurity software. Moreover, N-able as a solo company has more freedom to acquire pure-play MSP software businesses -- which should help the company to further accelerate revenue growth down the road.

Among the key takeaways from N-able's Q2 2022 results, released on August 11, 2022:

  • Total revenue was $91.6 million, up 7% from Q2 of 2021.
  • GAAP net income was $4.3 million, showing that properly managed MSP software companies truly generate real profits. That's an important point at a time when so many SaaS startups are trying to pivot from hyper growth to profit generation.
  • The figures generally beat Wall Steet's expectations, according to SeekingAlpha.

N-able's MSP Software Portfolio, Spinpanel Acquisition

In some ways, N-able is best-known for its two RMM software platforms. But the company also is gaining in the cloud-driven data protection and cybersecurity markets. If I had to guess, N-able (like many of its rivals) is facing somewhat slower growth in the maturing RMM market, while newer backup and endpoint protection product lines are fueling faster areas of growth.

Recent N-able moves include launching Cove Data protection -- the next generation of the company's backup and disaster recovery (BDR) platform. Instead of forcing MSPs to run Cove with N-able's own RMM platform, the company has positioned Cove for all MSPs -- regardless of their third-party RMM systems.

John Pagliuca, CEO, N-able
John Pagliuca, CEO, N-able

On the M&A front, N-able acquired Spinpanel in July 2022. The deal armed N-able with a Microsoft 365 and Azure cloud management and automation platform for MSPs. The Spinpanel deal arrived at a key time for N-able and the MSP market. In addition to reselling Microsoft 365, MSPs have been striving to wrap more managed services around the SaaS platform as well as Azure infrastructure services. Moreover, MSPs may need more automation capabilities to more effectively navigate the new Microsoft Cloud Partner Program.

In a prepared statement about the earnings, N-able CEO John Pagliuca said:

“As we celebrate N-able’s one-year anniversary as an independent public company, our second quarter results once again beat our expectations, and our reputation as the software provider who helps solve the challenges our partners face continues to strengthen. We are beginning to see the benefit of the strategic initiatives we set in place, and we are getting an enthusiastic reception across the market to the power of our platform and the differentiation of our services and partner success resources. As we enter the second half of 2022, we will continue to work closely with our MSP partners to help them standardize on our holistic suite of tools and the exciting new products yet to come.”

MSP Software Market Growth: Additional Anecdotes

Still, it's difficult to put N-able's overall business performance into proper context since so many of the company's head-on rivals are privately held -- and therefore don't release quarterly financial results.

Among some of the anecdotal points to consider: Rival Datto was growing about 18% year-over-year ahead of its sale to Kaseya in mid-2022. And ConnectWise, I suspect, is generating double-digit percentage revenue growth as the company begins to evaluate next-generation ownership models -- with a next-step move potentially arriving in 2023 or so, I suspect. (Note: Both ConnectWise and N-able are owned by private equity firm Thoma Bravo, though ConnectWise is privately held and N-able is publicly held.) Other key rivals include NinjaOne and a lengthy list of startups.

In some ways, it's also difficult to pinpoint the overall managed IT services market growth rate. While demand for some basic MSP services is growing 7% to 9% per year, demand for other services like managed detection and response (MDR) is growing 15% or more per year. Bottom line: The MSP market remains healthy. And N-able is striving to leverage its recent freedom from SolarWinds to further accelerate its own growth -- albeit in a profitable way.

Stay tuned: We will check out N-able's earnings call for additional viewpoints from the company. Check back for potential updates to this blog.

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.