BURLINGTON, Mass.–(BUSINESS WIRE)–N-able, Inc. (NYSE:NABL), a global software company helping IT services providers deliver remote monitoring and management, data protection as-a-service, and security solutions, today reported results for its third quarter ended September 30, 2023.
“As the Age of the MSP advances, the IT outsourcing market remains strong,” said N-able president and CEO John Pagliuca. “Compelling market trends are driving MSP growth, including the fast-moving shift to consolidate and modernize their environments, the movement upmarket, and increasing security standards – all centered on the need to support the expanding small and medium enterprise IT ecosystem. We added new capabilities in the third quarter to meet these evolving market needs, including exciting developments to our security suite. As we move forward, our vision is clear, and we are invigorated by the opportunity to elevate our standing as a vendor of choice for MSPs.”
“Our third quarter results were strong, exceeding our guidance on the top and bottom lines,” added N-able executive vice president and CFO Tim O’Brien. “Looking ahead, we believe we are uniquely positioned to benefit from an appealing market opportunity. We intend to continue to invest in product innovation that advances our strategy of empowering MSPs with purpose-built technology while maintaining cost discipline across other areas of the business.”
Third quarter 2023 financial highlights:
- Total revenue of $107.6 million, representing approximately 15.0% year-over-year growth, or approximately 12.9% year-over-year growth on a constant currency basis.
- Subscription revenue of $105.2 million, representing approximately 15.3% year-over-year growth, or approximately 13.2% year-over-year growth on a constant currency basis.
- GAAP gross margin of 83.9% and non-GAAP gross margin of 84.6%.
- GAAP net income of $6.0 million, or $0.03 per diluted share, and non-GAAP net income of $17.2 million, or $0.09 per diluted share.
- Adjusted EBITDA of $36.6 million, up approximately 27% year-over-year, representing an adjusted EBITDA margin of 34.0%.
For a reconciliation of our GAAP to non-GAAP results, please see the tables below.
Additional highlights for the third quarter of 2023 include:
- N-able secured #1 RMM provider for the third year running in CRN’s 2023 annual report card (ARC) awards. CRN’s ARC Awards— considered one of the most prestigious honors in the IT industry—are based on research conducted by The Channel Company with an invitation-only survey. In this year’s survey, 3,300 solution providers across North America rated 68 vendor partners on four criteria: product innovation, support, partnership, and managed cloud services. N-able was also ranked first by solution providers in support, partnership, and product innovation.
- N-able deepened relationship with SentinelOne to empower MSPs with enterprise-grade security solutions. N-able announced an enhanced integration of N-able EDR and launched N-able Attack Surface Management powered by SentinelOne.
- N-able was recognized by Comparably – a leading workplace culture and corporate brand reputation platform – with three awards in the third quarter, Best Employee Compensation, Happiest Employees, and Best Company Perks & Benefits.
Balance Sheet
At September 30, 2023, total cash and cash equivalents were $127.4 million and total debt, net of debt issuance costs, was $335.5 million.
The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until N-able files its quarterly report on Form 10-Q for the period. Information about N-able’s use of non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”
Financial Outlook
As of November 13, 2023, N-able is providing its financial outlook for the fourth quarter of 2023 and full-year 2023. The financial information below represents forward-looking non-GAAP financial information, including adjusted EBITDA. These non-GAAP financial measures exclude, among other items mentioned below, amortization of acquired intangible assets and developed technology, depreciation expense, income tax expense, interest expense, net, unrealized foreign currency losses (gains), acquisition related costs, spin-off costs, stock-based compensation expense and related employer-paid payroll taxes and restructuring and other costs. We have not reconciled our estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
The financial outlook provided below reflects N-able’s expectations, as of the date of this release, regarding the impact on its business of changing foreign exchange rates and current macroeconomic dynamics.
Financial Outlook for the Fourth Quarter of 2023
N-able management currently expects to achieve the following results for the fourth quarter of 2023:
- Total revenue in the range of $106.5 to $107.0 million, representing approximately 11% to 12% year-over-year growth, or approximately 10% to 11% growth on a constant currency basis.
- Adjusted EBITDA in the range of $35.0 to $35.5 million, representing approximately 33% of total revenue.
Financial Outlook for Full-Year 2023
N-able management currently expects to achieve the following results for the full-year 2023:
- Total revenue in the range of $420.0 to $420.5 million, representing approximately 13% year-over-year growth on both a reported and constant currency basis.
- Adjusted EBITDA in the range of $139.2 to $139.7 million, representing approximately 33% of total revenue.
Additional details on the company’s outlook will be provided on the conference call.
- Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes associated with our employees’ participation in N-able’s stock-based incentive compensation plans. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock-based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, and does not necessarily correlate to the core operation of our business. Because of these unique characteristics of stock-based compensation and related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance.
- Amortization of Acquired Technologies and Intangible Assets. We provide non-GAAP information that excludes expenses related to purchased technologies and intangible assets associated with our acquisitions. We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired technologies and intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.
- Acquisition Related Costs. We exclude certain expense items resulting from acquisitions, such as legal, accounting and advisory fees, changes in fair value of contingent consideration, costs related to integrating the acquired businesses, deferred compensation, severance and retention expense. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, acquisitions result in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude acquisition related costs allows investors to better review and understand the historical and current results of our continuing operations and also facilitates comparisons to our historical results and results of less acquisitive peer companies, both with and without such adjustments.
- Spin-off Costs. We exclude certain expense items resulting from the spin-off into a newly created and separately traded public company. These costs include legal, accounting and advisory fees, system implementation costs and other incremental costs incurred by us related to the separation from SolarWinds. The spin-off transaction results in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
- Restructuring Costs and Other. We provide non-GAAP information that excludes restructuring costs such as severance, certain employee relocation costs, and the estimated costs of exiting and terminating facility lease commitments, as they relate to our corporate restructuring and exit activities. These costs are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these costs for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
About N-able
N-able fuels IT services providers with powerful software solutions to monitor, manage, and secure their customers’ systems, data, and networks. Built on a scalable platform, we offer secure infrastructure and tools to simplify complex ecosystems, as well as resources to navigate evolving IT needs. We help partners excel at every stage of growth, protect their customers, and expand their offerings with an ever-increasing, flexible portfolio of integrations from leading technology providers. n-able.com
