Tim O’Brien: Yes. So that stat is a combination of a couple of things. You’re not wrong. We continue to add large MSPs, but the beauty in our model is we can also land in MSP giving us, let’s say, $12,000 of ACV. And then as they’re growing and adding more SMEs, they grow, but then as we were talking about with the previous question, then we’re adding in the additional services. So a lot of times, when we’re getting that increase in the numbers because an MSP is increasing their ACV to us via a successful cross-sell. So when they add data protection, when they add endpoint security, the LTV of the customer doubles and sometimes triples as they keep adding these important services to their business. So it really speaks to two things.
Our ability to win and we continue to do quite well at the high end of the market with our win rate there. But it really speaks to the success we have with our partnership in growing and as they add more services. And so it’s a combination of those two things and why we refer to it as a snowball and we’re growing as they’re growing. From a contribution margin, I’d say our cost to retain is much better than the industry because of the stickiness in our model because it’s a partner-led growth. A lot of our growth comes not from us selling into the MSP, but from them adding services and selling into the SME. In some ways, think about it this way, our 25,000 MSPs and the 250,000 technicians that are working for those MSPs effectively become our sales force.
So as we give them goodness like managed EDR and our other — our DNS filtering and help them package that, now they go off and sell to the SME these security services, add to their book of business with their existing customer base. And as a result, they trip over that $50,000 mark. So that’s an important number for us as it shows the health of the partnership and that snowball effect growing. Hopefully, that helps.
Brian Essex: Yes. No, super helpful makes a lot of sense. And I guess how do we think about the profitability given the, I guess, higher catch rates of those over $50,000 MSPs relative to what the rest of the customer base looks like?
Tim O’Brien: So I’m not sure there’s — so the shape of the higher ones, so they actually have a higher initial sale. The bigger MSPs have a higher sales. So I’d say the breakeven period to the larger MSPs is actually quicker than some of the smaller MSPs. Like N-sight customers that we talked about before, they come in usually with a lower ASP and their breakeven period has a little bit of a longer slope. But because of the power of the model, because of the way that the technology works, it really — whether they’re a small MSP or a large MSP, the unit economics are quite strong. And that’s given off the strength of our low cost to retain, which I think is evident in the fact that we have the 30% EBITDA margins, right?
John Pagliuca: Yes. And Brian, just to add, if you think like an LTV to CAC ratio on that customer base, it’s definitely more favorable than the lower end of the market. And also, if you look at retention rates, as you go up the stack in our customer base, gross retention rates are higher with our larger customers, they’re higher within that customer segment of $50,000 ARR and greater as well. So that obviously is a tailwind to that LTV to CAC ratio as well. So probably just some additional information there to kind of think about the longer-term profitability of those customers.
