N-able, a leading provider of cloud-based software solutions for Managed Service Providers (MSPs), recently released its first-quarter earnings for 2024. The results were strong, exceeding expectations on both the top and bottom lines. Analysts, understandably, focused on the headline numbers: 14% year-over-year revenue growth, robust adjusted EBITDA of $39.6 million, and an impressive 35% adjusted EBITDA margin.

But buried within the transcript, a seemingly innocuous detail hints at a potentially explosive growth trajectory for N-able: the uptick in new customer acquisition, specifically for the N-central platform. While the company has always enjoyed strong customer loyalty and consistent cross-selling, this surge in new customers, particularly those choosing the more robust N-central platform, signifies a shift in the market dynamics and a potentially potent catalyst for future growth.

N-central, designed for larger MSPs, serves as the foundation for N-able's comprehensive software suite. Landing a new customer on N-central is akin to planting a seed with immense growth potential. These customers, typically managing larger and more complex IT environments, are prime candidates for adopting additional products like Cove Data Protection, EDR, and MDR.

The transcript reveals a compelling trend: N-able's strategy of expanding its product portfolio, particularly in the security realm, is paying dividends. Cove Data Protection, bolstered by strategic investments, emerged as the fastest-growing product, followed closely by the security product group. This expanded product portfolio has fueled N-able's average monthly per device revenue opportunity to over $30, up significantly from the low 20s in early 2022.

N-able's Revenue Growth Drivers

With over 8 million devices under management, this translates to a staggering $2 billion cross-sell opportunity within the existing customer base. But the influx of new N-central customers, coupled with the stickiness of the platform, effectively amplifies this opportunity, creating a fertile ground for explosive future revenue growth.

The uptick in N-central adoption is driven by several factors. First, N-able's reputation for excellence in RMM and its deep understanding of MSP needs has solidified its position as a trusted partner. Second, the company's strategic focus on developing purpose-built solutions that address emerging market trends, like cloud management and enhanced security services, resonates with MSPs seeking to differentiate their offerings and accelerate growth.

"The transcript highlights a compelling customer win: a Cove Data Protection customer, initially seeking an MDR solution, was so impressed with N-able's offerings that they ultimately signed a six-figure ARR deal encompassing MDR, EDR, and N-central. This anecdote perfectly encapsulates the synergistic effect of N-able's expanded product portfolio and its ability to land and expand within its customer base."

Hypothetical Projection of N-able's Revenue Growth

The following chart is a hypothetical projection of N-able's revenue, illustrating the potential impact of new customer acquisition and cross-selling on future growth.

Let's delve into the numbers. While the transcript doesn't explicitly quantify the N-central new customer growth, a compelling data point emerges: the 2023 new customer revenue cohort was the highest in six years. Assuming a conservative estimate of a 10% year-over-year increase in N-central new customer acquisition, this cohort could represent a substantial portion of that growth.

Furthermore, N-able's impressive dollar-based net revenue retention (DBNRR) of approximately 111% suggests a strong ability to not only retain existing customers but also expand their spending over time. While this metric is calculated on a trailing 12-month basis, the uptick in new customer acquisition, particularly for N-central, could contribute to an even stronger DBNRR in the coming quarters.

The transcript reveals a strategic shift in N-able's go-to-market approach, focusing on facilitating engagement and driving positive customer outcomes. The company's recently launched customer platform, embraced by over 20,000 IT technicians, further enhances this effort. This commitment to customer engagement, coupled with the growing adoption of longer-term contracts, should further solidify N-able's ability to not only acquire but also retain customers, bolstering its long-term growth prospects.

"Fun Fact: Did you know that N-able was born from a spin-off from SolarWinds in 2021? This strategic move allowed N-able to sharpen its focus on the MSP market, resulting in significant product innovation and a streamlined go-to-market strategy."

N-able's first-quarter earnings paint a compelling picture: a company firing on all cylinders, capitalizing on a resilient market and executing a well-defined growth strategy. While the headline numbers are impressive, the hidden gem lies in the surge of new N-central customers. This seemingly subtle detail, overlooked by many analysts, could be the harbinger of an explosive growth trajectory for N-able, positioning it for long-term success in the dynamic and rapidly evolving MSP market.