CORRECTION - Service Leadership Q2 Data Report Reveals Slowing Managed Service Revenue Growth Worldwide, but MSP Profitability Remains Strong
06 Agosto 2024 - 2:06PM
In a press release published earlier today under the same headline
by ConnectWise, Inc. please note that a sentence was unfinished at
the end of the sixth paragraph. It has been completed in the
corrected release. The corrected release follows:
Service Leadership, Inc.®,
a ConnectWise solution and the leading source of
empirical data on IT solution provider (TSP) performance worldwide,
today released the latest Service Leadership Data Report for the
second quarter. The report unveiled significant insights into the
global managed service provider (MSP) industry and has determined
that managed service revenue growth has slowed down to pre-Covid
levels, but MSP profitability has remained at historic highs.
According to the report, managed service revenue
growth experienced a slowdown worldwide. The decline was first
observed in North America, with the peak occurring in Q3 2022. In
Europe, the peak was later, in Q2 2023, and has been declining for
four consecutive quarters. Australia/New Zealand witnessed its peak
in Q1 2024 and is expected to follow the same pattern.
Despite the deceleration in revenue growth, MSP
profitability has shown resilience. The average adjusted EBITDA for
MSPs worldwide increased to 14.1%, the highest in eight quarters.
Private equity (PE) backed MSPs also achieved their highest level
in eight quarters, with an impressive 18.7% adjusted EBITDA.
Notably, PE-backed MSPs demonstrated faster
revenue growth, primarily driven by strategic acquisitions. In Q2,
these MSPs grew total revenue approximately four times faster than
non-private equity backed counterparts.
Furthermore, the report highlights a positive
trend of fewer MSPs operating at a loss. In Q2, 16% of MSPs
reported a loss, down from 19% in Q1 2024.
MSPs have been enhancing their profitability by
improving gross margins on services and products. The average
product gross margin reached 26.3%, the highest in eight quarters.
Additionally, the average managed service gross margin rose to
46.2%, the highest in over a year. However, project/professional
services gross margin experienced a decline, dropping to 19.4% from
24.6% in Q1, likely due to lower growth in project/professional
services revenue during Q2.
In addition to the MSP segment, the report also
sheds light on interesting data for value-added resellers (VARs).
Total revenue for VARs experienced a positive quarter, growing by
3.5% after two consecutive quarters of negative growth. However,
revenue growth varied significantly across different VARs. The
best-in-class and median profitability VARs both achieved total
revenue growth of over 7%, while the bottom quartile VARs saw a
decline of -7.3%.
VAR revenue growth
benefited from a 4% increase in Q2, following two consecutive
declining quarters. However, project/professional services revenue
for VARs dropped by 4.3%, marking the third consecutive quarterly
decline.
"The Q2 Service
Leadership Data offers invaluable insights into the dynamic
landscape of the MSP and VAR industries," said Peter Kujawa, VP
& GM at Service Leadership. "These findings serve as a compass
for industry professionals, empowering them to make informed
decisions and fuel growth within their businesses. Despite the
current slowdown, it is noteworthy that MSPs, particularly those
backed by private equity, continue to achieve record-breaking
profitability."
For more information and to access the complete
Q2 Service Leadership Data Report, please click here.
About Service
Leadership, Inc.
Service Leadership,
Inc.®, a ConnectWise solution, is dedicated to providing
total profit solutions for IT solution providers (TSPs), directly
and through industry consultants and global technology vendors. The
company publishes the leading vendor-neutral, TSP financial and
operational benchmark: Service Leadership Index®. This includes
private diagnostic benchmarks for individual TSPs and their
business coaches and consultants. The company also publishes SLIQ™,
the exclusive web application for partner owners and executives to
drive financial improvements by confidentially assessing and
driving their Operational Maturity Level™. For more information,
visit service-leadership.com.
Media Contact:
Kaileigh Higgins
Email: ConnectWise@Inkhouse.com