Ladies and gentlemen, thank you for standing by. Welcome to the N-able First Quarter 2024 Earnings Call. [Operator Instructions].

I would now like to hand the conference call over to our host, Griffin Gyr, Investor Relations Manager. Please go ahead. .

Thanks, everyone, and welcome, everyone, to N-able's First Quarter 2024 Earnings Call. With me today are John Pagliuca, N-able's President and CEO, and Tim O'Brien, EVP and CFO. 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 on n-able.com. There 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 and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions.

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 those highlighted in today's earnings released and our filings with the SEC..

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 non-GAAP financial measures.

A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website..

And now I'll turn the call over to John. .

Thanks, Griffin. Today I will discuss our strong first quarter performance, share observations and takeaways from Empower, our annual customer conference, and provide an update on the key 2024 company objectives we outlined in our previous call. Let's start with our first quarter performance.

We delivered robust results and made a steady macroeconomic backdrop. Revenue was $113.7 million, growing approximately 14% year-over-year on a reported and constant currency basis. And adjusted EBITDA was $39.6 million, representing an adjusted EBITDA margin of 35%..

Once again, we exceeded the high end of our top and bottom-line guidance. These results establish 2 critical points. First, we believe this shows that our product strategy is hitting the mark. Over the past 18 months, we have strategically expanded the depth and breadth of our product portfolio, driving our monthly per device opportunity to over $30.

First quarter results show that these expanded options and capabilities resonate with our customers..

Code data protection where we have made significant investments to deepen our capabilities was our fastest grower. The security product group, where we added new SKUs and considerably expanded our breadth followed as our second fastest grower.

And lastly, our IP monitoring and management platform saw steady demand and continues to serve as the primary entryway to N-able..

Growing the depth and breadth of our product portfolio is key to our strategy. Why? Well, small and medium enterprises are becoming increasingly digital. And the technology landscape is getting more complex. MSPs are relying on a more extensive set of advanced software tools to keep pace.

Broad based demand across our growing software stack gives us confidence that we're meeting these market needs..

Second, we're delivering this innovation profitably, simultaneously growing our bottom line and our product portfolio. And we believe this quarter is proof of our model's capability to deliver customer value in a profitable manner..

Switching gears, let's now discuss notable takeaways from our annual customer conference, Empower.

With hundreds of MSPs, vendors, distributors, and industry leaders in attendance, Empower is an opportunity for the MSP community to share best practices and an unparalleled forum for us to get direct insight and learn from our customers and industry peers..

One resounding takeaway from the event is that MSPs are optimistic about their prospects. MSPs told us that our elements of SME spend remain measured. They feel industry tailwinds continue to blow in their favor.

These discussions reinforced our belief and the economic resiliency of our customer base and the vital nature of our data protection, security, and IT management software solutions. Analysts echoed the durability of the MSP industry with Canalys forecasting total managed service revenue to grow by 12% in 2024..

This collective sentiment gives us the continued confidence in our strategy as we invest across our product set and scale our operations to capture the attractive industry TAM..

Another consistent theme we heard was that managing the cloud is enormous opportunity and a daunting challenge. Small and medium enterprises are moving operations to the cloud while maintaining on-premise capabilities. MSPs expressed excitement over this trend because it means the pie is growing.

The cloud is another vector MSPs can manage and monetize. However, technicians must have the necessary purpose-built software tools and expertise to manage hybrid IT environments..

This customer feedback validates the bet we placed by developing Cloud Commander. Our cloud management solution empowers MSPs to manage cloud workloads, cementing them as a trusted modern IT provider. At the same time, we maintain the ability for our partners to operate within on-premise environments..

This dual approach gives them the confidence to capitalize on the future of the cloud, while meeting their customers where they are in their digital journey. We serve both on-premises and cloud needs..

MSPs also clearly spoke about the ongoing changes in the security space. Both threat levels and regulatory and compliance requirements are rising, and the SME is squarely in the crosshairs.

The question is no longer, am I safe? The question is now, am I safe and am I compliant?.

This has a massive implication for both MSPs and SME operations.

We eagerly discussed with and educated MSPs about why we believe adding N-able Managed Detection and Response to our already broad security stack, deeply positions N-able as the answer to this urgent question giving them layers of software and human services available in a single motion.

All said, our dialogue at the event gave us confidence in our product development strategy in the mission critical security sector..

A final update from Empower was the progression of the N-able Ecoverse. The Ecoverse is our ongoing transformation to an open ecosystem with integrations extending across the broad universe of technician workflows. Over the long term, the Ecoverse aims to make every single action and IT technician workflow available via trusted API..

This will help tame the inefficiency of tool sprawl for MSP, driving more efficient use of both the N-able tech stack and their other software solutions. The strategic rationale is simple, MSPs want to efficiently deliver a broad range of IT services to their SME customers. The Ecoverse positions us to meet this need.

And while we're in the early stages of this journey, we believe the potential of our Ecoverse vision is substantial..

With network effects driving customer value, we believe that Ecoverse can establish the N-able software platform as the control hub for MSPs everywhere. And that it will drive N-able as a long-term MSP market share consolidator..

We have made recent progress on this journey. Powerful new integrations with leading PSA and MSP automation vendors create immediate customer value. These partnerships significantly streamline MSP technician's workflows, allowing them to ticket and bill more efficiently, connect applications and operate complex IT environments better.

We look forward to further advancing our Ecoverse vision and providing updates along the way..

Reflecting on the many takeaways from Empower, we continue to have confidence the MSP market, N-able is positioning for short- and long-term success..

Let's now discuss the key quarterly highlights and updates on the 3 2024 focus areas. As a reminder, our immediate focus is on the following objectives. First, empowering MSPs with leading security and data protection solutions, that give themselves and their SME customers peace of mind they deserve.

Second, driving rapid innovation into RMM platforms, enabling MSPs to better manage hybrid digital environments at scale. And third, doubling down on our customer engagement model and delivering a differentiated level of service to the MSP community..

Looking first at our customer engagement model, we delivered exceptional progress along several dimensions. We leaned in, in our in-market presence, hosting 30 events across multiple continents. This in-person interaction is core to our DNA.

We also launched our MSP Horizons research, helping MSPs across the spectrum assess market trends and the best practices to drive their businesses forward..

Our efforts to give customers improved contract flexibility and pricing predictability are seeing traction, as customers adopt long-term contracts at a solid pace.

And as a testament to these customer engagement efforts, we were recognized with a premier 5-star rating in the 2024 CRM Partner Program Guide and a Gold Stevie Award for best customer service team. These are welcome acknowledgments of our deeply held belief that our MSP's success is our success..

We also continue to execute on our initiative to drive innovation in our platforms. We bolstered our powerful patch engine, and made meaningful improvements to the platform user experience. These efforts advance our strategy of delivering features that solve MSP use cases, all within an improved technician experience.

Past investments in the platform are also bearing fruit..

We continue to hear strong positive feedback about our new analytics feature, and new customer acquisitions on our flagship and central platform has increased in the past 2 quarters. We were excited to continue to invest in and further develop our powerful management platform..

We also made considerable progress on our initiative to give our MSPs the peace of mind they deserve with our security and data protection solutions. On the data protection front, the Cove team continues to deliver world-class execution..

Highlights in the quarter include the introduction of recoveries of VMware, the development of fortified copies, and increased restore accuracy and speed through the use of AI. These technical advancements solve real-world problems for our partners.

As Cove gains traction among larger MSPs and internal IT departments that often utilize VMware, we believe the ability for Cove to directly restore copies into a VMware environment broadens our appeal across the markets.

Our Fortified Copies functionality places data copies and locations inaccessible from Cove's management console, protecting data from a threat actor or a malicious insider..

And the integration of new AI restore techniques into Cove drive significant time savings in core IT technician workflows. This effectively lowers our customer's cost of ownership while improving the experience. The value creation is borne by our results.

Cove led our growth in the quarter, is moving up third-party rankings at industry publications such as G2 and is taking market share..

On the security front, our business resilience strategy is resonating. We provide layers of security that allow our partners to increase resiliency across their businesses and their customers' businesses. This approach is driving a steady drumbeat of demand across our security suite..

Our Managed Detection and Response solution is also generating interest across the spectrum. We are seeing Greenfield demand at the low end and repos at the high end with MDR also leading to multi-SKU deals..

A rip and replace of a well-known competitor illustrates these dynamics well. A current Cove customer was dissatisfied with their existing platform provider and started to dialogue with us centered on their MDR needs. Impressed by our MDR offering, they also evaluated our in-central platform.

And ultimately, they signed an over 6-figure ARR deal composed of MDR, EDR, and N-central..

Our 2024 plan calls for ambitious progress, and building on the great results we delivered in Q1, we believe we are on track to achieve the initiatives we laid out at the beginning of the year..

With that, I would like to turn the call over to Tim to discuss our financial results and outlook. Then I'll circle back for some closing remarks.

Tim?.

Thank you, John, and thank you all for joining us today. We delivered another strong quarter, again exceeding our guidance on the top and bottom line. There are encouraging indicators, that our expanded product portfolio is resonating with customers, and we continue to innovate while delivering robust profitability..

For our first quarter results, total revenue was $113.7 million, representing approximately 14% year-over-year growth on a reported and constant currency basis. Subscription revenue was $111.5 million, also representing approximately 14% year-over-year growth on a reported and constant currency basis..

Other revenue, which consists primarily of revenue from the sale of maintenance services associated with the historical sales of perpetual licenses and revenue from professional services was $2.2 million, declining approximately 6% year-over-year..

We ended the quarter with 2,187 partners that contribute $50,000 or more of ARR, which is up approximately 13% year-over-year. Partners with over $50,000 of ARR now represent approximately 56% of our total ARR, up from approximately 52% a year ago..

Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 111% or 110% on a constant currency basis. As a reminder, the impact of our pricing and packaging changes in 2023 will affect net revenue retention starting in Q2 this year..

Turning to profit and margins, note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis, and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. First quarter gross margin was 84.7% compared to 84.6% in the same period in 2023..

First quarter adjusted EBITDA was $39.6 million, up approximately 21% year-over-year, representing approximately 35% adjusted EBITDA margin. Unlevered free cash flow was $7.3 million in the first quarter..

As a reminder, due to the timing of cash outlays throughout the year, Q1 is generally our lowest free cash flow quarter. CapEx inclusive of $1.7 million of capitalized software development costs was $5.1 million or 4.5% of revenue. Non-GAAP earnings per share was $0.11 in the quarter based on 187 million weighted average diluted shares..

We ended the quarter with approximately $139 million of cash and an outstanding loan principal balance of approximately $341 million, representing net leverage of approximately 1.3x. Approximately 46% of our revenue was outside of North America in the quarter.

Before turning to our financial outlook, I will give commentary on our first quarter results..

First quarter revenue was above the high end of our guidance range. This outperformance was attributable to strong demand, led by Cove data protection and success with our long-term contract initiatives..

Turning to our financial outlook, our guidance accounts for the following elements. First, we are assuming FX rates of 1.07 for the euro and 1.24 for the pound for the remainder of 2024. Along with updates to other currencies, to more closely reflect the current rate environment.

These updated rates drive approximately $800,000 of negative revenue impact for the remainder of 2024 relative to our FX assumptions during our February call..

Second, our guidance accounts for the negative impact from the larger-than-normal 2023 pricing and packaging changes. As our pricing and packaging changes are effective annually starting in April, the second quarter is when this impact will start to be realized..

Third, while we have previously touched on slower device growth due to the macro environment and some price sensitivity following our pricing changes in 2023. Several indicators across our business and market give us the confidence to raise the midpoint of our constant currency revenue and adjusted EBITDA full year guidance..

With that in mind, for the second quarter of 2024 we expect total revenue in the range of $116.5 million to $117 million, representing approximately 10% year-over-year growth or approximately 10% to 11% on a constant currency basis.

We expect second quarter adjusted EBITDA in the range of $41 million to $41.5 million, representing an adjusted EBITDA margin of approximately 35%..

For the full year 2024, we now expect total revenue of $462 million to $465 million, representing approximately 10% year-over-year growth, or approximately 10% to 11% on a constant currency basis..

We are raising our adjusted EBITDA outlook, and now expect full year adjusted EBITDA of $162 million to $165 million, up approximately 14% year-over-year at the midpoint and representing an approximately 35% adjusted EBITDA margin..

We reiterate that we expect CapEx, which includes capitalized software development costs, will be approximately 5% of total revenue for 2024. We also expect adjusted EBITDA conversion to unlevered free cash flow to be approximately 67% for the full year.

We expect total weighted average diluted shares outstanding of approximately $187 million to $188 million for the second quarter and $188 million to $189 million for the full year..

Finally, we expect our non-GAAP tax rate to be approximately 26% in the second quarter and for the full year..

Now I will turn it over to John for closing remarks. .

Thank you, Tim. It was a strong start to the year. We delivered strong performance and advanced important initiatives across the business. I would like to thank our 1,600 N-able employees, for their ongoing dedication to serving the approximately 25,000 MSPs we partner with globally.

With a focused operating plan, a clear long-term vision, and a resilient market, we are excited for the rest of the year..

And with that, operator, we'll open the line for questions. .

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

Great quarter. Just wanted to circle up. I know we're in this -- the macro remains challenging out there, right? And I think you guys even acknowledge, hello, the SMEs and device count is still constrained, but you guys are obviously executing strongly and do have that confidence to take up the guide here.

Can you provide a little bit more color as far as what are some of those early indicators you're seeing? I know you spoke about Empower and what you're seeing on Cove, but some incremental color there would be beneficial as far as what you're seeing from a boots on the ground perspective. .

Mike, this is John. Thanks for the question. Look, we do, as Tim mentioned, with the confidence in our guide and for the rest of the year, we continue to see strong indicators. Most notably, our new customer acquisition bookings in customer lands have been up -- they're up year-over-year.

That's -- if I think about the almost somewhat to be the future enterprise value of the business, as we bring on these MSPs, and we keep winning in the market, that's when we can get in and begin to start landing and expanding and helping them expand in their SME base..

So that's probably the primary most solid indicator is this new customer acquisition uptick, in particular in our in N-central platform, which is for a reminder for the group is the platform where more of our larger MSPs tend to deploy their other software on..

So the fact that we're winning at that end of the market at a pace that's better than historically, especially year-over-year, is probably the best indicator. .

And then, Brien, just a quick follow-up here. I know we talked about some of the fluctuations from a cash flow perspective. It looks like cash flow from ops was down year-on-year, primarily related to accrued liabilities.

Is that just -- is that a timing thing? Is there anything else to call out there? And then the second piece is the sequential decline to MSPs with ARO over 50,000. I think we've run into that before. But is that entirely FX related? I guess those are the 2 cleanup questions I had, but I'd appreciate it. .

Yes. Thanks for the question, Mike. On the cash flow bit, it's timing. The primary drivers there are just timing of some prepaid taxes as well as just timing of the year of cash outlays for bonuses and things like that within the model.

But no change to the outlook on cash flow conversion from EBITDA that we stated back in February, really just timing throughout the year on the cash flow front. And then on your second question on the customers over 50k of ARR, primarily FX driven. We would have been up slightly FX neutral..

And then another part of the equation is that John touched on, we're succeeding with new customer acquisitions. And generally, our new customers, the vast majority of our new customers are coming in below that 50k threshold, and then we work to cross-sell the portfolio and bring them up above that.

But those are kind of the 2 contributing factors of -- we're seeing stronger mix of new coming new coming in the door and there was some negative FX impact on that metric in the quarter. .

The next question comes from the line of Jason Ader of William Blair. .

Couple of things. First, you talked about the new customer acquisition uptick with N-central. Can you just talk about when you were winning those deals, is it a displacement? Is these customers where you maybe were selling certain things in, and that you've added more elements to the package that you're selling them.

Just a little more background on those types of deals, and when you're winning and who you're displacing and why you're winning. That would be helpful thanks. .

This is John again. So a couple of things. Historically, and I know you know this from following the space, we were known as an RMM offering with 2 solutions for the lower and the high end.

And that was the primary on-ramp onto the business, right? With Cove and with that platform and the fact that that's really just a disruptive technology, at a disruptive price..

We're now bringing customers in there. And so we're getting Cove customers to walk in the doors. So now people are on-ramping to N-able with Cove. How that's manifesting itself in our RM category, is a significant amount of our Cove customers are now being cross-sold into the N-central or even into the N-sight platform..

So that cross-sell in that pattern is somewhat new for us, but it's accretive -- so we're getting that combination where historically, backup was more of a -- data protection was more of a cross-sell. We're now landing with Cove and going from there. You asked a question about like rip and replace.

Look, primarily at the high end, it is a rip and replace. I would say the vast majority at the high end. On the low end, you have some Greenfield and you also have some ancillary folks getting involved..

So MSSPs, so security providers now need a monitoring and management platform as well. We're seeing a good amount of internal IT departments now needing a platform that looks and behaves a lot like RRM, -- it has the patching and take control and monitoring capability..

So in the classic high-end MSP, it's rip and replace. In the internal IT department, it's actually a little bit more of a Greenfield, because the combination of these offerings are new to an internal IT department and the collection of them are new.

Not that the individual solutions are different, but it's the collection, and at the low end they're new..

And then lastly, we are having progress with -- right out of the gate, especially with some of our -- actually across the spectrum of small customers and large customers, where we're coming to them. Now that the line between monitoring and security is effectively gone for the MSP.

What's an enticing package is we're walking in the door and saying, hello, we have this powerful world-class EDR technology, coupled with the RM that's integrated, that's also helping the land..

So we are getting that one-2 punch of monitoring and security right out of the gate in NCA. So it's a collection of all those bits that's really driving it. .

And then, Tim, just on the model and the guidance that you gave for the full year, trying to understand the second half because it looks like, at least in my model, sequentially, revenue would be flat from Q2 into Q3 and Q4 as well. Just if I use the midpoint of your annual guidance.

So can you talk about why there would not be sequential growth in the second half relative to where you guided things in Q2?.

Yes, absolutely, Jason. When we think about the second half, I'd say we're continuing to be prudent just with the outlook, mostly due to the macro environment that we're kind of hearing and seeing across the board.

And then the other part of our equation is related to our long-term, our long-term contract strategy that we put in place here for 2024 as it relates to that strategy for our pricing and packaging changes for '24 versus '23. That's where we'll start to feel that impact on the year-over-year spectrum starting here in Q2.

So it's a combination of those things, that's kind of how we've set kind of the rest of the full year guide..

We did bring up the midpoint slightly, but I would say just continuing to be prudent until we kind of see how kind of the macro plays out over the course of the rest of the year. .

And what's the quantification of those mechanics around the pricing and packaging change? Like how much impact did it have in Q1 and Q2? It sounds like the second half is not going to have year-over-year positive impact. But what -- I guess I'm not super familiar with the -- how to think about those mechanics. .

Yes. We touched on the impact in last call in the range of 2 to 2.5 points for the full year. No real impact in Q1, the impact is really centered in Q2, Q3 and Q4 from a year-over-year perspective. So it's probably more in that 2.5%, 3% range for those 3 quarters, specifically in that 2% to 2.5% range for the full year.

Just from the timing as it was effective as of April in '23, and that's when that grow-over impact is starting to be felt on a year-over-year perspective. .

So you get the step up in Q2 and then it sort of the way you're thinking about it is sort of it steps up and then it doesn't go up a lot once it steps up, at least in the second half?.

Right. .

The next question comes from the line of Brian Essex of JPMorgan Chase & Co. .

Nice set of results this quarter. John, I had a follow-up, you noted a nice rip out of a competitor in your prepared remarks.

And I'm just kind of curious, particularly in your over 50,000 customers, can you quantify or give us a sense of the co-penetration? And is this a consistent theme where that's leading to a lot of expansion within your customer base once they get a sense of the platform and what it can do?.

The -- so I think we've mentioned this on a call or 2, but we have about 10,000 or so customers using our Cove offering. The one thing I'll caution folks on is when we think about penetration, it's in our business, again, because of the sell-through nature of our business, there's 2 levels of adoption.

First, it's the MSPs, and that's that 10,000 number. But then it's what level of penetration do those MSPs are using at their SME level..

And we believe with Cove, we're very much in early innings and early levels of penetration there, because unlike RMM, the RMM is effectively an enterprise-wide decision for the MSP. They really just usually have 1 RMM. With the data protection offering, they might inherit 1 to 7, 11 different backup offerings.

And so we're happy that we have 10,000 MSPs using Cove. We're not satisfied with the level of penetration we have with the SME. And the fact that we've made all these improvements in the offerings, in particular with our recovery set, in particular with our disaster recovery and our M365. Now we can really go to the MSPs and win that entire estate.

It's a huge white space opportunity inside of our base, let's say, data protection and security are 1 and 2 as far as the white space opportunity within the base..

So that's how we think about it. And now with our MDR offering, we actually can now expand that white space offering. We can also land those customers.

The example I gave in the script is interesting, and we try to give you guys nuggets that show where the model and where the business strategy is heading, in that we won and that customer, not a very big customer, is actually now using our MDR offering, which we believe to be best-in-class, our in N-central offering and the EDR.

And so it's that powerful combination of the monitoring and security that we think is a one in one..

Obviously, data protection is a part of in this framework. It's a part of the security stack and coupling those in is the right combination for our MSPs. So we continue to see good traction there.

You might -- I'm sorry, you made at a second part of your question that I'm not sure I addressed, if you could just remind me what that was?.

Yes, I think I would love to get your sense of -- so is Cove typically the tip of the spear of that expansion strategy, as opposed to maybe the other way around or maybe they have EDR and then they're kind of back into Cove?.

You know what? It really depends on where the MSP is in their journey. I'd say if it's either going to be Cove or security. And it's -- for us it frankly, it really doesn't matter. We want to show them the breadth and depth of our portfolio.

And the fact that these are all integrated into our platform is really the compelling story for the MSPs because it drives that level of efficiency. So in the example that we gave, that was actually a Cove customer, and we expanded them into these other bits..

But to my previous statement to Jason, what we're doing now in a lot of our cases is we're bundling up an EDR offering along with our RM offering or we're bundling up our MDR and EDR together. And so providing that type of benefit to the MSP route of the gate is resonating with customers, both in the low end and the high end of the spectrum. .

Maybe just one quick follow-up for Tim. Just looking at some quick math in terms of OpEx seems to have moderated pretty well in the quarter, helping with the performance on the operating margin and EBITDA side. And it looks like a lot of it came from G&A.

How do we think about that as we kind of like model this out for the rest of the year, and try and assess what kind of operating leverage you have in the business?.

Yes, absolutely. We've continued to get leverage on the G&A front. I would expect us to continue to get leverage there as we move forward.

We really built out the G&A functions for scale when we spun the business off a couple of years ago and continue to optimize our spend there and making sure it's pointed at higher ROI type areas, whether it be engineering or sales and marketing..

We'll -- we've continued to kind of operate with that balanced approach between growth and profit as we kind of march towards that sustained rule of 50 as our kind of medium- to long-term goal here as an operating model. There's additional leverage to get, I would say, in all parts of the business. We'll take that in a very measured fashion.

Our path to 50 desire is to get there via revenue growth acceleration. That being said, there's leverage in the model to get there different ways if we need to. And kind of stack ranking – I think I've gone through this before, but kind of stack ranking where that opportunity lies. It's probably #1 in G&A, 2 in sales and marketing; and 3 in R&D.

We'll continue to want to innovate over the years and continue to drive innovation to kind of feed that top line. .

I guess maybe just real quick. It looks like, I don't know if my math is right because I'm remote today. But did it go down sequentially? And if so, where did some of the cost rationalization come from? I'm looking at a non-GAAP….

Did overall spend go down?.

…announcement -- yes. .

Yes. On a non-GAAP basis, it was about flat quarter-over-quarter looking at Q4 versus Q1, it was up year-over-year. But no, I think spend overall from a non-GAAP OpEx perspective was flat sequentially. .

[Operator Instructions] The next question comes from the line of Matthew Hedberg of RBC Capital Markets. .

It's Mike Richards on for Matt. Maybe just going back to MDR.

I was just wondering how that's tracked relative to your expectations, now that we have over a quarter under our belt, and sort of what you're seeing on the top end of the market versus the lower end of the market, and any competitive dynamics there that were maybe different from what you expected?.

Thanks for the question, Mike. So MDR, it's early days. We really kicked this off in the U.S. in Jan -- we had some pre activity a little bit in Q4, and then we went worldwide later on in the first quarter. And it's been exceeding expectations, both on the level of bookings and even more so on the number of lands..

And it's been encouraging. On the low end, we're finding a lot of Greenfield, right? And we're really allowing a smaller MSP to now provide security services that are acquired at the SME.

And so if you're a small shop, a 5 or 10 person managed service provider and you're trying to stay up with larger MSPs or really even just trying to service your existing customer base. You need a level of security offering and someone that can help you with the 24/7 in keeping an eye on all the threats that are out there..

And so we're finding it to be a welcome new offering, combining technology and human services at the low end that allows them to keep their customers safe, but also frankly presents as a much larger capability as an organization..

At the high end, we're finding Greenfield. We're also finding some rip-and-replace. There are some legacy vendors in there that are not necessarily bespoke for an MSP. And what I mean by that is our offering is unique in that we provide eyes on glass for MSPs..

Some MDR services, it's like a black box service, right? The MSP just kind of gets the output of that, we provide a level of transparency for our managed service providers, which they love because now they can see the same thing that our stock analysts are looking at. And as a result, it's more transparency they can better inform their customers..

So it's -- I'll call it a rip and replace, but I actually believe it's more of a next-gen offering that we're providing at the high end, and that's why it's been resonating..

So we're quite bullish on it. Again, it's early days, but it's an offering that it's being well received at the low end and the high end. .

As there are no additional questions waiting at this time, I'd like to hand the conference back over to John Pagliuca for closing remarks. .

Thank you all for joining us today and your continued interest in N-able and look forward to seeing you again in the future. .

Ladies and gentlemen, thank you for joining today's call. You may now disconnect your lines..