Earnings Call Transcript - NABL Q4 2021

Operator, Operator

Good day, and welcome to N-able’s Fourth Quarter 2021 Earnings Call. My name is Brika, and I’ll be today’s event specialist. I would like to hand the call over to Howard Ma, Senior Director of Investor Relations. Sir Howard, please go ahead.

Howard Ma, Senior Director of Investor Relations

Thank you, Brika, and welcome, everyone, to N-able’s fourth quarter and full year 2021 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.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, our continued expectations following the spin-off of our business from SolarWinds in July 2021, 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 related to the spin-off transaction completed in July. 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 IR 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 the non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today’s call is available on our earnings press release on our IR website. And now, I will turn the call over to John.

John Pagliuca, President and CEO

Thanks, Howard, and thank you all for joining us today. About six weeks ago, we had our 2022 company-wide kickoff event. Our leadership team discussed the state of our industry, where N-able is on our journey, and why we feel confident about the future. I thought it would be useful to recap a few themes from our kickoff. In 2021, we rallied around the phrase, 'forward together' as we became a standalone company and laid the foundation for success in 2022. With our 2021 mission accomplished, we’ve turned our focus squarely to elevating and accelerating our business. Therefore, our rally cry this year is 'earn more N-able fans.' A fan is more than just a customer, what we call an MSP partner or our growing employee base of N-ablites. Fans also include prospects, strategic partners, industry analysts, media, investors, and more. Earning more fans has important implications because, in order to do so, we must execute on key objectives such as helping our partners solve their problems, better connect our brand to the market, and enhance the overall experience for MSP partners and N-ablite employees alike. As we continue to execute, a growing fan base will be another indicator of success. Two months into the New Year, the environment in 2022 in many ways still looks a lot like 2021. With the world learning to cope with what may become an endemic phase of COVID, the new normal for work doesn’t look like it’s going away. As such, our industry tailwinds, which include increased IT complexity, labor scarcity, and rising cyber threats, remain as strong as ever. I want to briefly touch on each of these. First, IT complexity is best captured by the concept of hybrid everything. In a work-from-anywhere world, SMEs rely on MSPs to manage IT workloads, digital assets, and identities across on-prem and public cloud environments. Second, labor scarcity limits SMEs from self-managing their own IT stacks and serves as a catalyst for outsourcing their IT management and security to MSPs. Increasingly, we are seeing large enterprises use MSPs to co-manage their IT assets. Not surprisingly, MSPs are struggling with labor scarcity too. They need to do more with less labor. And that’s where we add a lot of value. Third, given the proliferation of security threats, cyber threat management is now a core risk management function. Empowered by our security stack, MSPs have the capability to secure their end customer environments. We ended 2021 on a high note with new bookings in the fourth quarter at the highest level in 2021 and up year-over-year. Fourth quarter revenue grew 13% in constant currency and exceeded the high end of our outlook. Our data protection and security portfolios continue to deliver standout growth, driven by continued robust demand for our N-able Microsoft 365 cloud-to-cloud backup and N-able EDR solutions. In fact, our EDR offering, which is built on SentinelOne’s best-in-class technology and seamlessly integrated into our platform, now sits on over 1 million endpoints, while our Microsoft 365 backup offering protects over 25,000 end customer domains and over 900,000 Exchange mailboxes. During the fourth quarter, we appointed two new leaders to our data protection business: Chris Groot, an N-able veteran, who is promoted to General Manager of Data Protection, and the addition of Stefan Voss as VP of Data Protection, Product Management. Stefan joins us most recently from Dell, where he was Chief Product Owner of a portfolio of data protection products. As the market continues to shift toward cloud-native infrastructure, we’re excited about how our cloud-native data protection as a service solution is positioned. We provide complete protection for our customers across endpoint devices, servers, and Microsoft 365 via a unified console in a single pane of glass, built on our proprietary TrueDelta technology. Our backup and restore functionality allows for five times less storage for the same number of restore points compared to competing solutions, enabling a higher service level and lower cost. Data protection is a priority for us, and the up-leveling of leadership underscores our commitment to helping MSPs better protect both their businesses and those of their customers. Now, as I did in our last earnings call, I want to continue sharing notable customer wins. First, we won a six-figure ARR deal with a Belgium-based MSP that chose us for RMM, EDR, data protection, and password management, replacing a competitive RMM solution and two separate backup solutions from leading data protection vendors. Despite having invested in customizations built around their previous RMM vendor, this MSP ultimately chose N-able due to our tight integrations and easy-to-use interface, while our Automation Manager and NetPath network traffic analyzer were big pluses too. Second, we sold a near six-figure ARR deal with a Connecticut-based MSP that included RMM, EDR, and data protection, also replacing a competitive RMM vendor and two data protection vendors. In this case, our powerful and cost-effective data protection offering for endpoints, Microsoft 365, and virtual machines led the win, while our seamless integration facilitated the multi-product land. Third, we landed a five-figure ARR standalone data protection deal with an Australian-based MSP, including both N-able backup for devices and Microsoft 365 backup. We believe this deal speaks to the increasing recognition of our fully cloud-based data protection portfolio as well as our international breadth. Finally, as a testament to the enterprise-grade quality of our solutions, in the quarter, we landed a $200,000 ARR direct deal with a Fortune 500 company. Now, to be clear, we don’t focus on internal IT departments, but we nonetheless receive inbound requests at times. In this case, we were invited to bid in an RFP process. This company was looking to consolidate its unified endpoint management solution onto one vendor. Not only did our RMM exceed their patch management and remote control needs, but our other out-of-the-box features like network topology, asset warranty tracking, automation manager, and report manager helped us secure this win. We also had some notable expansion deals in the quarter. First, a long-standing partner who already uses multiple N-able products added over $200,000 of EDR. This security-focused partner promotes four core pillars to its SME customers as part of essential security hygiene: managed cash management, managed EDR, a differentiated advantage backup solution, and multi-factor authentication. In making their decision, this partner valued the power of our EDR solution, seamless integration with our platform and other products, and our differentiated partner success and support. Second, we had a significant cross-sell data protection deal totaling over $200,000 of ARR, including N-able Microsoft 365 backup and recovery testing. This partner was using us only for a small number of RMM nodes before seeing our differentiated data protection portfolio. We believe this expansion deal is a testament to the technological prowess and value proposition of our data protection solutions. We also had several large additional EDR cross-sell deals as more of our existing partners acknowledge the need to upgrade to a best-in-class solution given the heightened risk environment. Our traction and expansion deals have been amplified by our continued investment in partner success resources, such as the MSP Institute, our Head Nerds program, MarketBuilder campaigns, and partner care and technical support teams. In 2021, N-able Head Nerds gave over 10,000 sessions of consultation to partners across boot camps and one-on-one training. We have set a goal to exceed over 15,000 consultations this year. Over the last several months, we’ve introduced more targeted efforts to increase partner engagement, including through quarterly strategic business reviews with partners, which lead to increased account retention and new opportunities. We continue to augment training for our PSMs so they are best equipped to identify and address MSP pain points. For MSPs that prefer a more hands-off approach, we will be introducing more self-guided onboarding and adoption programs throughout the course of this year. Now I want to turn to some fourth quarter product and go-to-market highlights. First, we started multiple private previews of products to be generally available in 2022. In much of 2021, we focused on product security and platform hardening, causing a delay in new product introductions. Earlier this month, we launched VGA DNS filtering, which is a cloud-based, AI-driven content filtering and threat protection service. Additionally, we continue to improve our data protection capabilities, including a 30% performance increase for virtual servers and Microsoft 365 data stores. As I look to the rest of this year and beyond, we are extending our core strength in monitoring to cloud and hybrid environments. We will continue to introduce key capabilities with our cloud-native data protection portfolio, and we are planning to introduce additional powerful yet easy-to-use security solutions. We are pleased to return to a more normal cadence of product launches this year, and are targeting multiple new offerings per year going forward. As organizations continue to adopt new and diverse solutions, including Windows 11, new versions of the Apple operating system, and new cloud capabilities, N-able’s portfolio will continue to expand capabilities to ensure MSPs can manage, monitor, and secure the broadest range of platforms. In addition, we will be enhancing our security and data protection offerings to ensure MSPs are able to provide the latest technologies and protection to SMEs across the globe. On the sales and marketing front, we improved the conversion rate on our website as we upgraded landing pages that better reflect the N-able brand value. We are seeing good progress in our channel expansion efforts as we continue to support our distribution partners around the globe with dedicated salespeople. In these situations, our salespeople bring a deeper level of knowledge about our products while the distribution partner is primarily responsible for account management and customer care. In fact, overall sales productivity has improved sequentially each year in 2021. Finally, we generated a 15% quarter-over-quarter increase in our total sales pipeline, which we believe is primarily attributable to more targeted customer acquisition efforts. I will circle back at the end with some closing thoughts, but now I will turn over the call to Tim to discuss our financial results and outlook.

Tim O’Brien, EVP and CFO

Thank you, John, and thanks to all of you for joining us on the call today. I want to start off by recognizing the significant contributions made by our team in 2021, whether it be building out our financials and G&A functions, increased investments in systems and security, and rebranding to N-able. I’m proud of what we have accomplished in 2021 and how the foundation we have laid sets us up well for success in 2022. Now I will review our full year and fourth quarter financial results and then discuss our financial outlook for 2022. We finished 2021 just ahead of our outlook with total revenue of $346.5 million, representing 14% year-over-year growth on a reported basis and 12% on a constant currency basis. Subscription revenue was $336.8 million, representing 97% of total revenue and grew 1 percentage point faster than total revenue on both a reported and constant currency basis. Total revenue in the fourth quarter was $89.5 million, representing 12% year-over-year reported growth or 13% on a constant currency basis. FX turned out to be roughly a percentage point of headwind versus roughly neutral when we gave our guidance in November. Subscription revenue was $87.3 million, representing approximately 13% year-over-year growth or 14% on a constant currency basis. Other revenue, which primarily represents maintenance revenue from our discontinued legacy license model, was $2.3 million, down 11% year-over-year and consistent with prior quarters. We ended the quarter with 1,678 partners that represent $50,000 or more of ARR, which is a 14% year-over-year increase. Partners with over $50,000 of ARR represent 47% of our total ARR, up from 42% a year ago. Our quarterly performance continued to be driven by our security and data protection solutions, particularly our N-able EDR and N-able Microsoft 365 cloud-to-cloud backup solutions. As John mentioned, new bookings in the fourth quarter were our best bookings quarter of the year. While we don’t comment on bookings every quarter, it’s noteworthy this time. Our bookings in Q4 surpassed those of Q4 of the previous year, which was prior to both the SolarWinds cyber incident and the rebrand to N-able, two events that hindered new customer acquisition for most of 2021. This is an encouraging sign and gives us confidence as we move into 2022. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was 110%. Our net revenue retention has been driven by a balanced mix of both cross-sell of additional services and device expansion, as well as consistent gross retention rates in the 86% to 87% range. 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. Also note that historical financials for all of 2020 and the period of 2021 prior to the effective spin-off date of July 2019 included operating expenses that were prepared using carve-out allocation methodology while we were still a part of SolarWinds. Therefore, our stand-alone financials are not directly comparable to those prepared prior to the effective spin-off date. Full year 2021 gross margin was 86.8% compared to 87.4% in 2020. Fourth quarter gross margin was 86.6% compared to 87.1% in the fourth quarter of 2020. Full year 2021 adjusted EBITDA was $113.3 million, which is at the midpoint of our financial outlook range and represents an adjusted EBITDA margin of 32.7%. Fourth quarter adjusted EBITDA was $27.8 million, representing a 31% EBITDA margin and reflects investments to drive revenue growth acceleration in 2022 and beyond. Unlevered free cash flow was approximately $43.5 million in the full year and $10.1 million in the fourth quarter. Unlevered free cash flow contains some non-recurring items, including elevated CapEx for office build-outs to support stand-alone operations and a couple of cash-neutral transfers between N-able and SolarWinds. Excluding these items, unlevered free cash flow in 2021 would have been over $70 million, representing approximately a 62% conversion from adjusted EBITDA. CapEx was $34.8 million or 10% of revenue for the full year and $12.5 million or 14% of revenue in the fourth quarter. Excluding the one-time office build-outs that I just mentioned, CapEx would have been approximately 8% of revenue for the full year. Non-GAAP earnings per share was $0.35 for the full year based on 169 million weighted average diluted shares and $0.07 in the fourth quarter based on 180 million weighted average diluted shares. We ended the year with approximately $67 million in cash and had an outstanding loan principal balance of $349 million, representing net leverage of approximately 2.5 times. Now I will provide our financial outlook for the first quarter and full year. For the first quarter of 2022, we expect total revenue in the range of $90.1 million to $90.6 million, representing approximately 9% year-over-year growth or approximately 11% growth on a constant currency basis. The expected deceleration in revenue growth in the first quarter is primarily due to a slowdown in new customer acquisition for most of 2021, following the disruptive impact of the SolarWinds cyber incident and rebranding to N-able, as well as delays in new product introductions in 2021. Accordingly, we expect adjusted EBITDA in the range of $26.5 million to $27 million, representing approximately 30% margin at the midpoint. For the full year 2022, we expect total revenue of $384 million to $388 million, representing 11% to 12% year-over-year growth on a reported basis or 13% to 14% growth on a constant currency basis. We expect full year adjusted EBITDA in the range of $118 million to $122 million or approximately 31% margin at the midpoint. Given that nearly half of our revenue is generated outside of North America, I want to provide some guidelines around the impact of FX movements. For both the first quarter and full year, we are assuming an exchange rate of 1.13 for the euro and 1.35 for the British pound. As a proxy, every cent of euro is about $900,000 of revenue impact, while every cent of the pound is about $300,000 of revenue impact for full year 2022. For example, given that the dollar has been appreciating, if we had used FX rates at the time we gave fourth quarter guidance in November, our full year revenue outlook would have been approximately $4 million higher. As implied in our full year outlook, on a constant currency basis, we expect year-over-year revenue growth to accelerate throughout the year. With respect to expenses and profit, while our revenue mix is approximately 50% international, our expenses are more heavily indexed to the U.S. Therefore, the FX impact on revenue is not perfectly offset by the FX impact on expenses. So based on current rates, we will experience a modest net headwind to adjusted EBITDA in 2022, primarily driven by the euro. In addition, our first quarter adjusted EBITDA margin outlook reflects hiring we made ahead of returns on go-to-market and product investments that we expect to realize in the back half of the year. Our first quarter and full year margin guidance implies that adjusted EBITDA margin will improve in the second half of the year. CapEx will normalize this year into the range of 4% to 5% of total revenue. We expect adjusted EBITDA conversion to unlevered free cash flow to be approximately 70% in 2022. We expect total weighted average diluted shares outstanding of approximately 180 million for the first quarter and approximately 181 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 25% in both the first quarter and the full year. Now I will turn it over to John for closing remarks.

John Pagliuca, President and CEO

Thank you, Tim. I want to remind everyone of our three key investment areas going into 2022: bolstering our partner success resources, expanding our multipronged go-to-market approach, and bringing powerful and secure products to market faster. While each of these investments has different return horizons, we are realizing progress on all fronts. As a result, we’re seeing steady improvement in sales rep productivity, our partner success managers have been uncovering new opportunities, and we’re happy to reinstitute a regular cadence of product launches with expected multiple new offerings per year going forward. I don’t think we’re alone in noting that the last couple of years have been difficult across the board for a variety of reasons. However, from where I sit, I can honestly say I’m overwhelmed by the energy, excitement, and resilience of my fellow N-ablites and the optimism and confidence of our MSP partners as we head into 2022. The industry tailwinds we are seeing indicate strength for MSPs across the globe, and we are excited to continue to execute and execute well for our partners and earn more fans in 2022. With that, operator, we are ready to take questions.

Operator, Operator

Thank you. The first question we have from the phone lines comes from Jason Ader of William Blair. Jason, please go ahead.

Jason Ader, Analyst

Yes. Thank you. Good morning, guys. So just two quick ones. First, just on the macro. Does it feel like we’re back to pre-COVID levels of demand? And then secondly, as you think about the top line outlook for this year and beyond, what really gets you guys back to kind of a mid- to high teens type of top line growth? What are the kind of one or two key catalysts that get you there?

John Pagliuca, President and CEO

Sure. Thanks, Jason. Nice to hear from you again. Look, we intentionally in our prepared remarks, talked a little bit about bookings. For us – and we also gave a reference point that it predates the cyber incident, the rebrand, and a couple of other things. For me, it’s a good leading indicator across our geographies and our product portfolio that the demand is back and that the MSP community is thriving and growing. So across the entire portfolio, we do see a strong level of demand, and I think that’s indicative of what we did from our bookings in Q4. To your second question, we always think about the business and the business model from a point of view of land, expand, and retain. For us to get back to those high teens and even beyond that level, it’s imperative that we continue to execute and progress as we have along those three dimensions. We’ve done a good amount on the retained part. We’ve invested in customer success, and we’re seeing gross retention and better opportunities from that part of it. So that’s been steady progress. I think the two key things that we’re seeing now are the return back to new product introduction for a couple of different reasons. We didn’t have a new product introduction last year, right? The fact that we’re out of the gate as early as we are with already a new product introduction brings an additional offering for our MSPs to sell to keep their end customers secure. It gives another opportunity for our partner success folks to have conversations, and our sales teams to sell another important SKU in the labor security mix. We believe we will continue to introduce new products throughout the year, which will help with that expansion story, which will boost our net retention story and push us to that higher growth level. That, coupled with a better view of demand, should get our new customer motion continuing to trend upward, and the coupling of all three of those factors gives us that belief. You can see that in our guidance as well.

Jason Ader, Analyst

And then where do you see NRR going?

John Pagliuca, President and CEO

Sorry, Jason, can you repeat that?

Jason Ader, Analyst

Yes. Where do you see net retention rates going for the first?

John Pagliuca, President and CEO

Sorry, yes. We’ve held steady on net retention. It is comprised of the expand part and the retained part. I think the retention part will hold steady, and we should see some slight improvement there. When we introduce these new products, that’s when we expect the net retention numbers to be better than where they were this year.

Operator, Operator

Thank you. We now have our next question on the line from Sterling Auty of JPMorgan. Sterling, please go ahead.

Sterling Auty, Analyst

Yes. Thanks. Hi, guys. So thank you for the comments around the deceleration expected in the first quarter, but I want to dig a little deeper on that. Plenty of commentary about the strength in bookings and demand in the fourth quarter. I’m wondering how long it takes for that strength to translate or how much consistency in that strength you need to really reaccelerate because you mentioned the lower customer acquisitions throughout 2021, but you finished strong. Is this a multi-quarter phenomenon that needs to occur before we see significant revenue growth?

John Pagliuca, President and CEO

Sterling, thanks for the question. I’m happy to give some more color. Yes. The nature of the business model caters to it taking a couple of quarters for that strong performance that we talked about in Q4 bookings to permeate into the business, as a lot of the deals are set to ramp over a three- or four-month period. If you look at Q1 guidance compared to the full-year guidance, you kind of see that permeating through in the implied acceleration on the top line when you look at Q1 versus the full-year guidance. That is part of it, and it’s also due to the lack of NPIs, no new products released in 2021, and we do have a new one that just came out in Q1 here as well, so that’s going to be part of the story as we accelerate through the year.

Sterling Auty, Analyst

Got it. I have one other follow-up question. I didn’t catch in your commentary, the gross margins were down more than I would have expected and more than what we’ve seen seasonally. What in particular in the fourth quarter weighed on the gross margins?

John Pagliuca, President and CEO

Yes. It was primarily just data center costs, and those will fluctuate from time to time, but we expect margins to hold steady from a gross margin standpoint as we go forward.

Operator, Operator

Thank you. We now have another question from the line from Matt Hedberg of RBC Capital Markets. Please go ahead when you’re ready, Matt.

Matt Hedberg, Analyst

Thanks for the questions. John, I guess going back to the new booking strength in Q4, which is great to hear. It’s probably hard for you to decipher how much of that is N-able specific versus improving MSP trends, but I guess I’ll ask the question. How much of it do you think is specific to what you guys have done building up close to the spin versus just moving back to some pre-COVID MSP demand trends?

John Pagliuca, President and CEO

Thanks. We had some headwinds that were unique to N-able as well, right? We had the SolarWinds breach and the rebrand, which provided some company-specific headwinds last year. As those dissipate and as we continue to build our brand, we’re seeing performance pick up and those micro-unique headwinds decrease. The advancements we’ve made in our product, particularly in security hardening, and the continuing development of our offerings, especially with our data protection offering and our integration with Microsoft, has strengthened our performance and conversion rates are also improving as we’re winning more. We’re particularly seeing higher win rates in the market consolidation where MSPs are getting more sophisticated and rolling up companies.

Matt Hedberg, Analyst

Got it. That’s helpful. And then maybe one for Tim, can you give a bit more color on the components that are pressuring your 2022 EBITDA guide versus the Street? I understand FX, but is it also front-end loaded hiring? A little bit more detail on where that spend is focused?

Tim O’Brien, EVP and CFO

Yes. Sure, Matt. A little bit of color there. It’s on both fronts. On the sales front, it’s really driving and expanding our go-to-market approach more so from a channel-led motion in some regions where we traditionally had only sold directly. So there are some bigger investments in sales that will lead prior to the return. On the R&D front, on the product side of things, we’re driving multiple new product offerings for the year. We have one that just came out in Q1 and others slated for the rest of the year. Those are the key areas of investment driving margin a little bit lower in the first half of the year compared to where we expect to see it in the second half.

Operator, Operator

Thank you. We now have Mike Cikos of Needham and Company. So, Mike, please go ahead when you’re ready.

Mike Cikos, Analyst

Hey, guys. Thanks for taking the questions. I wanted to ask about the deceleration we’ve spoken to in Q1. I would have thought understandable given the SolarWinds and the pause on demand generation and the rebrand, but I want to know when we’re moving away from that. Can you help us think about how much of an overhang that should dissipate as we’re walking through calendar 2022? And my follow-up question for Tim, do you have constant currency growth rates by quarter for calendar 2021, just to help us level set expectations, are you willing to reiterate the 15% to 17% medium-term revenue growth rates that you articulated for the calendar 2023-2024 timeframe?

John Pagliuca, President and CEO

Mike, this is John. Tim, I’ll start maybe and then you can add a little more color if that’s okay.

Tim O’Brien, EVP and CFO

Sure.

John Pagliuca, President and CEO

Mike, just to help reconcile: there are probably two statements that need some reconciliation. On one hand, we’re saying bookings in Q4 are strong and the best in quite some time; on the other hand, we’re saying that new customer acquisition is creating a little bit of a headwind in the revenue growth. The reality is, our booking number in Q4 doesn’t really manifest itself much in revenue in the quarter. I often refer to our business as a snowball business. Those bookings begin to manifest themselves and grow over that cohort. So really, what the revenue growth in Q4 is a manifestation of the lower bookings and new customer acquisition performance in Q1 and Q2 of last year. As we build beyond that and add better cohorts, you’ll see the impact dissipate and that acceleration begin to kick in. Once we bring on these customers, they represent a great opportunity to cross-sell our breadth and depth of offerings, which will help on the expansion front. Tim, sorry, I didn’t mean to cut you off, but you can add and answer Mike’s second question.

Tim O’Brien, EVP and CFO

Yes. I would add that if you think about when the impact started, it takes a full four quarters to grow over some of that impact. That’s kind of what we’re seeing here in Q1, where we expect to bottom out from a growth perspective. We really felt the impact of the cyber incident and the rebrand the very back half of the first quarter of 2021, but more so in Q2, Q3, and Q4. As we grow over that four-quarter period in Q2 and the rest of the year, we expect to see that acceleration after kind of this Q1 metric on the new customer acquisition impact. Regarding constant currency, last quarter, we gained 14% growth, Q4 was 13% growth, and the full year was 12% constant currency growth, with the first half closer to about a 10% constant currency growth rate.

Mike Cikos, Analyst

That’s great. Thank you. I know you’ve also spoken about this return towards more normal new product introductions, which is great to hear. Can you give us a flavor of the more typical cadence for new product introductions? Is there anything incremental you can share?

John Pagliuca, President and CEO

Sure. First, let’s cover the areas. We continue to reference these three macro trends and tailwinds: labor scarcity, digital transformation, and the increased risk around cyber threats. These are the tailwinds along with the demands of our MSP partners in the community and those SMEs. We take the needs and demands from our MSPs and their customers to build our roadmap accordingly. You’ll see us bring products to market that assist in these areas. We expect to bring solutions that help MSPs with cloud management, infrastructure management, and SaaS parts of the cloud. We also plan to introduce powerful yet easy-to-use security offerings for MSPs to deploy at a scalable and repeatable scale across their customer base. Additionally, we will help MSPs manage everything in an automated manner, driving their efficiency in this labor-scarce world. As for cadence, Mike, it depends on the complexity of what we’re bringing to market. I expect there to be a few. We need to be mindful that many offerings we have are in sell-through capacity. We bring offerings to market and help the MSP with the marketing, education, collateral, and packaging to sell to their end customers. We need to avoid overwhelming the MSP community, allowing time for them to process, digest, and sell. Typically, I expect us to introduce about two to four offerings per year.

Mike Cikos, Analyst

Very helpful. Thank you, guys.

Operator, Operator

Thank you. We now have a final question on the line from Edward Magi of Berenberg Asset Management. Sir, Edward, please go ahead when you’re ready.

Edward Magi, Analyst

Thanks for taking my questions and congrats on a strong cap in 2021. First question here, some of the notable wins included MSPs based in foreign countries. A large portion of your total revenue comes from outside of the U.S. today. Can you give a little deeper international strategy, why it’s working and why we could view it as a key strength for N-able moving forward?

John Pagliuca, President and CEO

Sure. We have had a strong presence in Europe via our local teams in the UK and the Netherlands, along with key distribution partners. Our hybrid or multipronged approach involves coupling our own sales teams with these distributors to penetrate deeper into their base. This allows us to help distributors win bigger accounts, specifically targeting larger MSPs with more complex needs. Additionally, we bring our security and data protection expertise to the distributor, helping them service their customers effectively. This approach has proven beneficial, allowing us to maintain a strong market presence internationally.

Edward Magi, Analyst

Really helpful. Just one more for me. You’ve demonstrated many times the strength of the partnership with SentinelOne, which has stuck out in some key cross-sell cases. Can you quickly walk us through how you evaluate product introductions, weighing new partnerships versus acquiring companies and developing technologies yourselves?

John Pagliuca, President and CEO

Great question. We start with the demand that I mentioned earlier and then evaluate the best way to service the MSPs, which is our North Star. We have three methods: building technology ourselves, partnering with industry leaders like SentinelOne, or exploring potential acquisitions. Our offered solutions include our own proprietary technology like our data protection suite, patch management suite, email security suite, and password management suite. We will also partner when we see a superior technology outside. For example, we took SentinelOne’s powerful stack, integrated it seamlessly into our platform, and made it user-friendly for MSPs. Lastly, we will look into ways of bringing in new offerings through inorganic means. This is a muscle that we did not flex in 2021, but now, having cleared the spin, we are focused on elevating and accelerating our business, and expect to leverage that muscle in 2022.

Operator, Operator

Thank you for that, Edward. We now have another question on the line from Mike Cikos of Needham and Company. Sir, please go ahead when you’re ready.

Mike Cikos, Analyst

Hey guys, thank you for getting me on real quick for this follow-up. I know earlier I had asked a pretty long-winded question, so I apologize upfront for that. I wanted to highlight something from the earlier conversation. You mentioned at the time of the spin the 15% to 17% revenue target over the medium term for calendar 2023-2024. Are you willing to reiterate that?

John Pagliuca, President and CEO

Yes. Mike, nothing has changed on that front. If you look back at our statements, we are focused on getting new customer acquisition normalized, returning to new product introductions, and investing in our partner success team strategy to drive higher retention rates. We still feel confident in that mid-term range of 15% to 17% that you mentioned.

Tim O’Brien, EVP and CFO

Yes, Mike. Just to clarify, looking at our performance of the last quarter, we’re right on course. We’re pleased with what we’ve accomplished and feel that we are in the exact position we anticipated for accelerating the business.

Operator, Operator

Thank you. As we have no further questions registered, I’d like to hand it back to John for some closing remarks.

John Pagliuca, President and CEO

Thank you, operator, and thank you all for attending this conference. I look forward to discussing our progress with you again in 90 days.

Operator, Operator

Thank you. That does conclude today’s call. Thank you again for joining. You may now disconnect your lines.