N-able, Inc. Price & Performance (NABL)

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, 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 those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risk and uncertainties associated with them This highlight 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 our earnings press release on our Investor Relations website. And now, I will turn the call over to John Thank you, Griffin. And welcome to everyone joining us on the call. We closed 2024 in a position of strength and we believe we are poised for even greater success in 2025.

As our results demonstrate, our comprehensive software solutions encompassing security, data protection, and unified endpoint management are resonating in the market. Allowing SMB and mid market companies across the globe to keep the digital operations safe and functioning. Fourth quarter revenue grew In full year 2024 revenue grew 10% at constant currency. We exited fiscal year 2024 with ARR of $482,000,000 growing 10% at constant currency. Our adjusted EBITDA in the fourth quarter was $38,100,000 reflecting a 32.7% margin and $169,400,000 for the full year reflecting a 36.3% margin.

A year ago, we set three strategic objectives for the business. That if executed, would establish a foundation of lasting success First, we wanted to provide SMB and mid market businesses with leading security, and data protection solutions them the cyber resilience they need to run their businesses. Second, we set out to drive rapid innovation into our unified endpoint management or UEM Tech Stack. Providing customers the capability needed ensure their IT environments are productive and secure. And third, we want to double down on our engagement model. And deliver a differentiated level of service to our massive collective market. Looking back on the year, I'm pleased with the foundation we have created and the progress made on all three The successful launch of XDR headlined our security objective. Initially brought to market via our partnership with AdBlueman, our solution made a substantial splash in the industry and quickly became our fastest growing SKU and largest pipeline generator in fiscal year 'twenty four. As customers enthusiastically chose the offering, to better defend their environments, The partnership validated our belief in the solution and category Great. And we were thrilled to acquire Ed Lumen, and its cloud native AI powered XDR platform in the fourth quarter.

We are also delighted to welcome over 175 talented Adloom and colleagues to our team. We believe strategic acquisition creates multidimensional value for N-Able. From a technology standpoint, adding a movement to our portfolio allows us to deliver comprehensive cyber resilience to our customers by unifying security, endpoint management, and data protection in an integrated platform This is powerful. IT operations and security operations are converging within the SMB and mid market. And IT management software must seamlessly connect with security software. Silos and gaps create risk and additional unnecessary work. Enable's end to end portfolio closes gaps and distinctively addresses technician needs for visibility and control across their IT estate making them more effective, and efficient. We believe this cohesive approach positions us to lead and win in the new world of interconnected operations. The acquisition also accelerates our expansion beyond the MSP market. As Lumin primarily service the mid market to the reseller channel, while Enable focused on MSPs as a route to the SMB. These reseller relationships took years for Advloomin to develop and are valuable assets we now own. We are excited to leverage these resellers to further the adoption of our security solutions while also expanding the reach our data protection, and UEM products.

Early results are promising. Since the acquisition in mid November, as Lumen stands alongside Cove data protection, as one of our two highest booking products We also deepened our data protection capabilities. Here, we are sticking to our proven code playbook Improve ease of use, expand our workload coverage, strengthen our security posture, and lean into the power of superior architecture to deliver fast and reliable backup and recovery. The year was marked by significant innovation. Highlighted by the introduction of immutable backups that keep customers' data isolated and safe from attackers and enhanced restore through AI. Which delivers over 99% restore accuracy. The playbook is clearly working. Code protects over 180,000 businesses continues to outpace total company growth and is our largest revenue generating product. We also made significant strides our second objective, accelerating innovation in the highly strategic UEM category. Which includes our RMM products. Enhancements like new APIs and integrations expanded our Open Ecoverse While key innovations, including support for Microsoft Entre ID, and improvements in Apple device management equipped technicians to manage more assets with greater efficiency. We continue to break new ground and recently announced the launch of our AI powered developer portal that accelerates API integrations for faster IT, security service delivery.

Reducing tasks from hours to seconds. We were recently recognized as the 2024 RMM Champion by Canalys for second year in a row. And are committed to leading in the category and helping keep our customers' IT systems running smoothly and securely. And lastly, our world class go to market team delivered In 2024, we transitioned the business from less than 10% of revenue from annual contracts to over 50%. We believe this will create stickier, stronger customer relationships and drive improved growth and net retention over time. We also expanded our routes to market. With a significant portion of SMB and mid market IT spending flowing through resellers in the broader channel, we invested in people, and programs to enhance our ability to bring our solutions to market these avenues We believe these investments will expand our serviceable addressable market and unlock significant growth potential. Reflecting on our progress in 2024, we broadened our portfolio, enhanced our technical moats, and expanded our routes to market. Building on this foundation in 2025, we aim to further evolve our highly effective business model with three key pillars.

First, expand our security leadership in servicing our SMB and mid market customers. Second, scale our go to market and replicate our success in the MSP community. With resellers in the broader channel And third, elevate the customer experience. With tailored support, service and connection. Let's first discuss security leadership. Security digital operations are imperative for modern business. And the need for cyber resilience is particularly acute for small to mid market organizations. The World Economic Forum's 2025 global cybersecurity outlook highlights that 35% of small organizations felt their cyber resilience was insufficient five times the rate, of larger organizations At Lumen XDR and MDR, underpin our confidence in meeting this customer need As Lumin is AI powered, built in the cloud, and winning. One key differentiator is our endpoint agnostic capabilities, We can ingest data from across the spectrum of endpoint security providers, while driving superior security outcomes for our customers. We can also decouple XDR software from MDR services One customer segment may want both XDR and MDR. While other segments, they want only XDR or MDR. We can meet the customers where they are and win in every segment. We believe these attributes are competitive moats that will be difficult for the competition to replicate and will serve to power our success in this category for years to come.

With this in mind, our dedicated sales teams are full speed ahead. Leveraging their expertise to put the powerful ad Lumen solution front of our large customer base. And it's working. Our biggest cross sell deal in the fourth quarter an AdLumen deal for over $250,000 of ARR.

The customer had service issues with their existing well known MDR provider, and our team delivered expertise [indiscernible] and service to win the deal. Security also permeates our UEM roadmap.

Put simply, a well managed IT asset a safe IT asset. We are building on our deep strengths in patch management and aiming to add vulnerability management, posture management, and other features to support our customers in playing the best defense. Data protection rounds out our layered approach to cyber resilience. One key initiative is developing anomaly detection technology to proactively flag indicators of compromise. The ability to not just recover from attacks, but help prevent them is the next frontier in data protection. And we intend for Cove to be at the forefront. We are also working to develop integrations with external ticketing systems security platforms, robotic process automation firms improve incident response and automate tasks. Having a team committed to delivering big picture headline capabilities like anomaly detection, while solving seemingly small use cases like exposing improved ticketing, is why technicians love Cove. And why we are excited about our roadmap.

All these initiatives further Co's reputation as a comprehensive solution. IT organization The takeaway is clear, Our customers' needs have evolved and enables investing help them stay ahead of the curve. Our security and data protection categories represent our TAM's largest and fastest growing accounting for over 70% of our fourth quarter bookings.

Protecting digital operations of the future of N-Able, and we are investing accordingly. Turning to our second pillar, we are investing to scale our go to market and expand our presence with resellers and other channel providers This unlocks significant opportunity Companies with internal IT teams that may not need the support services offered by MSPs often rely on trusted resellers and channel providers to guide their software purchasing.

We want to ensure Enable's products are Windows reseller conversations. Are powerful, multi tenanted products coupled with our focus on partnership have propelled us to a leadership position in the MSP community. And we are confident these factors will serve as a successful blueprint for channel expansion. In fiscal year 'twenty five, we are specifically focused on leveraging the robust North American reseller channel we acquired via the AdBlueman acquisition and further expanding our mid market channel presence We will also look to add our data protection and UEM products reseller channels in North America and also plan to replicate this channel motion in attractive international markets such as The UK, Dock and Australia. This considerably widens the strike zone and we expect growth in the reseller portion of our business to outpace the growth of our MSP business in the coming years. Our final pillar is to elevate our customer experience. We have an extensive product suite that is purpose built to meet the needs of our customers. And an approximately $2,500,000,000 cross sell opportunity within our base. As our customers grow increasingly diverse in size, product and geography, We are scaling our tailored strategy that delivers a higher touch, for higher value accounts.

This ensures our resources align with the service Customer success is part of our DNA. And we believe this is a core differentiator for Enable. While many companies talk about servicing smaller mid market businesses, we've successfully done it for twenty plus years With that, I will turn the call over to our CFO, Tim O'Brien. To discuss our financial results and outlook And then I'll circle back to some closing remarks Tim?

Thank you, John. And thank you all for joining us today. We made considerable progress across the business in 2024.

Our product and go to market teams executed critical initiatives and we once again operated above the rule of 40.

We also executed the strategic acquisition The addition of Abloomin expands the aperture of our business The purchase brings N-Able a new growth avenue in the high demand security market. Establish reseller and channel relationships and greatly enhances our product Sweet. With that looming in the fold, and strong progress across our broader business, we are excited about the firepower we have the scale enabled to New Heights.

Let's review our 2024 results discuss our 2025 outlook, and key strategic and operational initiatives as we move forward. Total revenue in the fourth quarter was $116,500,000 representing 7% year over year growth on a reported and constant currency basis Subscription revenue was $115,000,000 representing approximately 8% year over year growth on a reported and constant currency basis. Other revenue, which primarily represents maintenance revenue, from our discontinued perpetual license model, was $1,500,000 We ended the quarter with 2,349 up approximately 7% year over year.

Customers with over $50,000 of ARR now represent 57% of our total ARR up from 56% a year ago. Dollar based net revenue retention which is calculated on a trailing twelve month basis, was approximately 103% on both a reported and currency basis, For the full year, we finished 2024 ahead of our outlook with total revenue of $466,000,000 representing year over year growth of 10%. On both a reported and constant currency basis Subscription revenue was $459,000,000 growing approximately 11% year over year.

On both a reported and constant currency basis. Given the impact of ASC six zero six related revenue recognition timing, resulting from our long term contract initiative we will now begin providing annualized recurring revenue.

ARR as of 12/31/2024 was $482,000,000 growing at 9% year over year on a reported basis and 10% on a constant currency basis inclusive of the impact of the AdLumin acquisition.

On a pro form a basis, our 2024 year over year constant currency ARR growth was approximately 7%. 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. Fourth quarter adjusted EBITDA was $38,100,000 representing a 32.7% adjusted EBITDA margin. Full year 2024 adjusted EBITDA was $169,400,000 representing an adjusted EBITDA margin of 36.3%.

Fourth quarter gross margin was 82.3% compared to 84.5% in the fourth quarter of twenty twenty three. Full year 2024 gross margin was 83.8% compared to 84.6% in 2023.

Unlevered free cash flow was $98,700,000 in 2024. And $29,000,000 in the fourth quarter CapEx was $23,700,000 inclusive of $6,200,000 of capitalized software development costs or 5.1% of revenue.

For the full year. CapEx was $8,100,000 inclusive of $1,000,000 of capitalized software development costs or 7% of revenue in the fourth quarter Non GAAP earnings per share was dollars in the fourth quarter based on 188,000,000 weighted average diluted shares. And $0.48 for the full year based on 188,000,000 weighted average diluted shares. We ended the year with $85,000,000 of cash and equivalents and had an outstanding loan principal balance of $339,000,000 representing net leverage based on trailing twelve month EBITDA.

Approximately 45% of our revenue was outside of North America in the quarter, and 46% for the full year Before turning to our 2025 outlook, I will give commentary on our results Fourth quarter revenue and adjusted EBITDA were once again above our guidance.

We continue to execute see steady demand in our markets, and maintain disciplined cost management.

The fourth quarter also includes the impact of the Adloomin acquisition closed November 20, This brings us to our first quarter and full year 2025 guidance. I want to outline a few key assumptions.

First, we anticipate FX rates will be slightly lower on average versus 2024 and our assuming FX rates of 1.04 for the euro and 1.25 for the pound the remainder of 2025. As a reminder, in 2025, every point on the euro represents approximately $1,200,000 of annual revenue impact while every point on the pound represents approximately $400,000 Second, we guidance incorporates the acquisition of Abloomint, At the time, of acquisition in November of twenty twenty four, as Lumen represented approximately $21,000,000 of ARR, growing healthily above market rates We aim to continue this strong velocity [indiscernible] developing a new customer acquisition motion We primarily use AdLumin as a cross sell motion in the partnership model and see a substantial opportunity to land new customers including Greenfield deals in the exciting security operations market. Two, bring our data protection and UEM products to the established AdLumen North American channel and three, the Adloomin portfolio to N-Able strong international customer base. We also wanted to provide color on the impact of ASC six zero six revenue recognition. Due to the timing of our long term contract initiative, we anticipate We expect revenue recognition dynamics to drive an approximate 5% year over year revenue growth rate headwind in the first quarter of twenty twenty five and a 4% year over year revenue growth rate headwind the full year, 2025, As stated previously, due to these mechanics, we are introducing ARR, as a new top line velocity measure and we anticipate ARR dollar growth to build throughout the year as we integrate the Abdomen acquisition.

Turning to the bottom line, we expect 2025 adjusted EBITDA margin to be below our target model as we integrate AdBlue into the business, invest in a new development site in India and realize the impact of the timing of our long term contract initiative We expect Q1 margin to be a low point due to these factors coupled with seasonality, We expect to return adjusted EBITDA margin to north of 30% in 2026. Now I will provide our financial outlook for the first quarter and full year 2025. For the first quarter of twenty twenty five, we expect total revenue in the range of $115,000,000 to 100 and representing approximately 1% to 2% year over year growth or 3% to 4% on a constant currency basis We expect first quarter adjusted EBITDA in the range of $27,500,000 to $28,500,000 representing an approximately 24% to 25% margin. For the full year 2025, we expect total revenue of $486,500,000 to $492,500,000 representing 4% to 6% year over year growth or 6% to 8% growth on a constant currency basis We expect full year ARR in the range of $514,000,000 to $522,000,000 representing 7% to 8% year over year growth or 7% to 9% on a constant currency basis.

Our 2025 ARR guide represents pro form a constant currency growth acceleration. We expect full year adjusted EBITDA in the range hundred and $32,000,000 to $138,000,000 representing an approximately 27% to 28% margin. For the full year 2025, we expect CapEx which includes capitalized software development costs, to be approximately 6% of revenue [indiscernible] adjusted EBITDA conversion to unlevered free cash flow to be approximately 65%. As a reminder, our debt is floating and currently fixed to silver. In 2025, we anticipate approximately $27,000,000 in interest expense for the full year. Which assumed an effective interest rate of approximately 7.5%. Expect total weighted average diluted shares outstanding of approximately $189,000,000 to 190,000,000 for the first quarter and approximately $191,000,000 for the full year. Finally, we expect our non GAAP tax rate to be approximately 0.2529% in both the first quarter and the full year We are entering 2025 with energy and confidence As a proven leader in UEM, we build the foundation of trust and excellence. Cove is a jewel in a high growth cloud first data protection market while the addition of AppLumin's MDR and XDR represent our next frontier. Addressing the critical security needs of digital first SMBs in mid market companies.

Our go to market is scaling. And our end markets remain strong as we sit at the intersection of powerful secular tailwinds in cybersecurity data growth, [indiscernible] digital transformation, The opportunity is clear. And we are investing to seize this opportunity and scale Enable to New Heights. Now, I will hand it back over to John John? Thanks, Tim. We entered 2025 leadership kickoff a few weeks ago. And I wanted to close today with the same message I shared with our Enableight team. Enable is focused on growth, Our high conviction bet on XDR and MDR gives us a powerful horse and the race for security dollars and enhances our end to end platform. By investing more in the channel, the N-Able name be injected in the conversation of billions of dollars of potential spending. These are growth opportunities. We are playing offense I'm very excited about 2025 and the road ahead for Enable. Our guide calls for over $500,000,000 of ARR and strong profit margins. We are executing at scale with a durable business model and high ambitions. Every day, we are pushing the envelope give our customers the solutions they need to protect and drive the success of small and mid market companies across the globe, and we are determined to deliver.

We look forward to further discussing the opportunity for Enable at our Investor Day on March 13, and encourage you to join via live webcast. And with that, operator, we will turn it over for questions. Thank you. Our first question is from Mike Kiekos from Needham.

Your line is now open. Please go ahead.

Great. Thanks for taking the questions here guys. I just wanted to start with AdLumen and the acquisition here. Can you help us think through what was the revenue contribution from MadLoom in Q4? And what is embedded in the calendar 2025 guide here when we look at the ARR revenue that you guys are guiding to? Hey, Mike. Thanks for the question. Q4 contribution was from the acquisition data November 20. The end of the year, it was in the range of about $2,500,000 of of contribution on Q4. And then at the time of acquisition, adLumen was approximately $21,000,000 in ARR. We're not breaking down the contributions in the 2025 guide. But as you kind of think through year over year kind of compares, I think that's a good baseline to leverage as to kind of what the starting point was. With that part of the business. Thanks for that. And I know you've obviously had this this longer term initiative and moving customers to annual. Contracts out for the last year, now north of 50% Is there an expected headwind or benefit like if we think about we're north of 50% today, are you guys trying to drive that to 70% in this coming year?

Is there any way to we should be thinking about that initiative? Initiative will continue. I would expect any [indiscernible] all new business coming in is generally 90% or so plus in committed contracts going forward. So would expect more of a natural blend up over time. I wouldn't expect another significant uptick like we had in 2024. As we go forward. So I would say generally the mix will just kind of uptick in probably mid to high single digit range annually for the next few years. Terrific. Thank you. Our next question is from Brian Essex from JPMorgan.

Your line is now open. Please go ahead.

Hi, good morning and thank you for taking the question. I guess maybe John for you, just to start, would love to understand how conversations with AdLumin's reseller and partnership arrangements like reseller mid market partners are, How has engagement been on the partner side for AdLumen? And and what what needs to happen for you to be fully engaged both for AdLum and like legacy N-Able? Good morning, Brian. Thanks for the question. So I've personally been involved in a handful of some of the bigger resellers. The interesting thing here, right, so they're both the MSP, the managed service provider and these resellers they're both advisors to the small medium business and to the mid market. With different flavors, right? The managed service provider is actually a little bit more hands on driving some of the operations for these mid market or small medium businesses. The reseller is more of that like procurement guide and helping them survey the landscape. So when we were walking into the conversations, these resellers are actually quite enthusiastic that the acquisition happened. Because one, now we have it's the backing of a publicly traded company. And all the rigor that's related to public company.

But also they now have a partner that can give them in one stop shop cove data protection our UEM offerings and even EDR. And so they've now inherited a with a little bit more of a little bit more of optionality in the portfolio, which will allow us to scale. The AdLumen reseller channel was actually pretty much exclusively focused on North America. Built a fantastic channel. We're going to leverage that, but we're going to scale that in 2025. And as we mentioned in the prepared remarks, we're going to bring that same recipe internationally in The UK, Doc and Australia. But obviously worldwide. So these are conversations that I think are have been very warmly received on the reseller side. And even on the MSP side, they're very much leaning in and leveraging now the Avoom and XDR offering as well. So far so good. That's super helpful. Maybe just a follow-up. There are a lot of XDR, MDR options out there. Maybe help us understand like who does Adloomin typically see competitively And what does that conversation like? Is it mostly kind of like they have some level of product differentiation on the mid market SMB side that sets them apart?

Or how should we think about their ability to penetrate that market? Sure. So the number one ask from our managed service providers two years back was saying, hey, we need help in understanding the threats. We need help in looking at all the logs across the network And there's a bunch of competitors out there, but they're not scratching the itch. And we founded Lumen and as you know, we first started doing the partnership via in OEM. Why we selected them is why we acquired them and why they're winning in the market. First, it's born in the cloud. It's current generation leveraging both AI and agenTec AI technology so that people can do things or that the system can do things that are not autonomous way. Why that's important, Brian, is because it helps the margins. It's much more of a software type of play. It also allows us to democratize the pricing to mid market in small medium enterprises so that they can deploy this everywhere. Number one. Number two it's endpoint agnostic. So what does that mean? That means unlike some of the other players in the space like some big companies like CrowdStrike or these other folks, they're more tied to their endpoint.

At Lumen can ingest data from a collective of different endpoints, whether it be Microsoft Defender or or Sensitive One or Bitdefender or CrowdStrike, it doesn't matter. In particular for the MSP community, that's important because we know they have a heterogeneous type of network. So the fact that they're endpoint agnostic the fact that it's built cloud native and an AI allows [indiscernible] Then the third part, it allows MSPs or mid market to separate the software from the service. A lot of the competitors like the folks that you we bump into whether it be an Arctic Wolf or some of these other shops they're providing more of like a black box service and providing an answer. What EdLumen does is it separates the software. So the technician at a mid market or an MSP can actually see the software, can see what's going on and they can choose to use it as software only via an XDR deployment or a Black Box service say, hey, yes, we just want the MDR or a hybrid where our SOC analyst are helping their team. And that extra level of visibility [indiscernible] some help. And so we're not a black box MDR service.

It's very much an XDR plat [indiscernible] and that's the reason why it's winning so well in both the mid market the MSP community. That makes a lot of sense. It's super helpful color. Thank you.

Thank you. Our next question is from Matt Hed from RBC. Your line is now open. Please go ahead.

Great. Thanks for taking my questions guys. I wanted to just maybe just a little clarification first, but so it sounds like at the midpoint of your 2025 revenue guide, you're calling for 7% constant currency growth. I just it sounded like if we normalize that for I think you said some revenue lumpiness that it looks more like 11% would be more of like a that's an inorganic N-Able. But is that kind of the right way to think about that? That would be correct. Yes, Matt. Six zero six impact on the revenue growth rate in 2025 for the full year is approximately 4%. Okay. And then I just as a related question, I know you're not guiding to ARR, but just conceptually should ARR on, I think you said it should build throughout the year, but conceptually should would you expect ARR to exit At a double digit growth rate or maybe even above revenue? Just trying to get a sense for sort of optically how we should think about ARR growth in '20 Hey, Matt, we actually did guide exit ARR for 2025. On a constant currency basis, that was 7% to 9%. And on a pro form a basis, between 20 And pro form a basis exiting '24 was 7%, [indiscernible] we are expecting acceleration on the ARR line as we go through twenty twenty twenty twenty five.

Got it. Okay. Just as a reminder, I'm sorry, I missed the '24 has the full impact of Abloomin in it. So compares don't really have the inorganic impact. Got it. Great. And then, I mean, I guess, John, I guess thinking just and I assume this might be a part of your Analyst Day, which we're looking forward to. To. If we sort of sit back, you've got you outlined a number of drivers at Lumen, Cove, just expanding MSP relationships. What do you think the single biggest factor is getting you guys back? I think we still think you guys can grow mid teens. What do you think the single biggest factor is to get kind of back to that level of growth that you guys were previously? Yes, as do we Matt, right. And so we will walk through the a little bit on Analyst Day. If you think about it from like like the metadata or the structure of a business model, and compare where we were a couple of years ago to where we are today, today we have this XDR platform that's a brand new NCA motion for us as well and a much bigger cross sell opportunity. [indiscernible] And then the second bit we think about the SMB the trillions of dollars of spend that's at the SMB, We've been really focusing only on the MSP route which is just really a smaller subset of that market.

And so now leaning in and leveraging the channel that Illumina having. And by the way, we started to invest organically prior to the EdLumon acquisition in this channel as well because we've been seeing the pull from this part of the market. So if you think about it from a business model point of view, those are the two brand new levers that we're bringing in. We actually set that foundation in 2024 and we're going to scale those two levers in 2025. So again, it's using security in the XDR platform as not just a cross sell, but now in NCA, which platform, right? That's a big bit. And now the second lever is going direct to these resellers and channel partners. So from a model point of view, those are two significant levers. Again, we planted them in 2024. Scaling them in 2025. Got it. Thanks a lot. Thank you. Our next question is from Keith Bachman from BMO.

Your line is now open. Please go ahead.

Yes. Thanks very much. I wanted to to ask some similar questions. So On the revenues you're guiding the $7,000,000 on the midpoint, but some of the six zero six items, it's 11. But if you take out the ad lumen contribution, you're sort of mid to low single digit revenue growth. And I know we have to guess a little bit on ad lumen And I'm just trying to understand what are the variables and I know just say it again on ARR, you're guiding, call it, eight at the midpoint. That also has Adloomin in the ARR And so so, if we back out Ad Loomin from that growth rate and also call it mid to to low single digits. So I'm just trying to understand what is impacting organic growth here even if I normalize for six zero six in M and A, and A, you talk about on the slide that the market's grown at 14%, you think or your TAM rather has grown at 14% As we look out through the next couple of years, I'm trying to bridge the delta on what's impacting growth in particular in '25 And maybe if you can zero in on Just give us some color on what the net retention rate or gross retention rates, I know it was down a little bit to the 85%, I think this year Maybe you could just flush out a little bit how you're thinking about those two metrics gross and net retention as we just try to reconcile what the organic growth rate is coming what you're guiding the organic growth rate in 2025 is?

Thank you. Yes. Maybe I'll start now, Tim, to jump in. So a couple of things, and Tim touched on this on the last call as well. For the first half of the year, there's definitely some headwinds as we kind of we'll call it, growing over on some of those long term commitment contracts, right? When we talk about GRR or NRR, on a trailing twelve month basis and that that's going to impact both those KPIs, but also our growth rate for the first half of the year. And then we would expect to see that [indiscernible] we're super enthusiastic and very bullish about the Abduman acquisition. That being said, it's a new acquisition. They've been with us for less than ninety days and there's definitely a level of prudence that we've baked in to how that the trajectory of that line of our model will go into the back half of the year. So So we expect to continue to perform and as we do, then we'll gain a little bit more confidence. But we wanted to provide a guide that you and both the sell side and the buy side had confidence in and that really reflects more of the current acceleration.

And as we gain momentum there, then we'll take a different look. So there's definitely a level of prudence [indiscernible] So just making sure that that's clear with you and the folks. Anything else to Yes. I think just on that kind of normalized rates, Keith, I would say it's it's more higher single digits versus kind of the lower single digits to mid single digits that you referenced. If you look at the ARR guide, constant currency 7% to 9%. [indiscernible] includes 2024 includes the adloom and exit ARR. As is 2025. So there's not a full inorganic impact in that number to reconcile if that makes sense. So [indiscernible] [indiscernible] Go ahead. Yes. So we in the prepared remarks, we commented that 2024 pro form a ARR growth was approximately 7% Exiting 2024, and that's relative to the guide of 7% to 9%. So the guide assumes acceleration from exit 2024 to all things equal.

Okay. Can you talk okay.

Yes, I just assume that at Loomin, if you Well, there was acceleration through the year so it would impact the AR, but let's leave that Can you comment a little bit on just some directional barometers on how you're thinking about gross and net retention? Yes, I would say, we're expecting both lines to improve as we go through 2025. From a trailing twelve month basis, I would expect it to bottom out in the first quarter. But from there, on a trailing twelve month basis, I would expect it to improve from Q2 Onward. Okay.

Okay.

All right. Thank you.

Thank you. Our next question is from Joe Van Derik from Scotiabank. Your line is now open. Please go ahead.

All right. Good morning and thanks for taking my questions. John, maybe for you. I know Cove is the largest recurring revenue product group You mentioned that the last two quarters So for customers, they're leveraging code for their backup solution, but maybe not using other enabled products what's the playbook to target these And can you talk about if you've had any success there.

Hey Joe, thanks for the question. Yes, and look, Q4 was a very strong quarter, right? Our bookings some of the booking best bookings we've had in years actually. And a lot of that is off the strength of now having both Cove as an NCA a new customer acquisition path and XDR as a new customer acquisition path And so we're landing those customers with Cove. And now that really the playbook is now we can introduce the customers. They're getting the experience of Enable Howard, more than just a software provider, we're helping them with their business, we're helping them positioning in the way that they package it back to their SMB. Their mid market customer we're now showing them the power of an integrated platform. So we now being able to walk them through and say, hey, look, you have Cove, look at our UEM offering, right, look at in central, and understand that you can gain more efficiencies and a more secure environment if you're integrating those bits. We're also looking at ways to integrate and provide a little bit more of a data share between Cove and our XDR platform. Again sharing those bits to give MSPs the complete view across their entire estate.

So as we now have completed this picture with our XDR offering, our data protection offering and our UEM offering, we believe we're really the one, if not the only one of the best complete from management to monitoring to data recovery and security platform that's there. That's going to make the MSPs in the mid market customers more efficient and more effective at what they're doing. And that story is beginning to resonate. So we're now starting to see folks that started with Cove adding on UEM. We're starting to see folks that started with XDR adding EDR. We're starting to see customers that began and been with us for years leveraging in central one of our UEM offerings and now going to add Bumin because they understand that complete picture makes them more efficient and more effective. So like I said, we planted the seed in 2024. We're going to scale that and have more of that kind of cross sell in 2025.

Got it.

Makes sense. Okay. And then maybe one for [indiscernible] How much is Enable exposed to The U. S. Federal government and that's either directly or indirectly through MSPs that service government agencies [indiscernible] how should we be thinking about that end market in 2025?

We don't have We don't have a direct visibility into the end customer of the MSPs, but anecdotally, we're very diversified from the end markets that they serve. And I wouldn't expect our business to be impacted in any any different way from [indiscernible] compared to just the general mix from that perspective. So I wouldn't expect too much impact from anything there at this point. We haven't heard anything anecdotal from our customers. Yes. And Joe, remember, so nearly half of our revenue is outside of The U. S. As well.

So we have a diverse revenue base just from a geography. Which is part of our strength. And then as Tim mentioned, it's a very, very diverse customer base and the industries that the MSPs are servicing.

Thank you, guys.

Thank you. We currently have no further questions. So I'll hand back to John for closing remarks.

Great. Thank you all for your time and your questions today. Looking forward to talking with you all Analyst Day here in another ten days or so.

This concludes today's call. You for joining us. You may now disconnect