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N-able Announces Second Quarter 2023 Results

Exceeded $100 Million Quarterly Revenue Milestone with Q2 Revenue of $106.1 Million

Raised Full-Year 2023 Revenue Outlook to $419.5 - $421.0 Million

Raised Full-Year 2023 Adjusted EBITDA Outlook to $135.5 - $137.0 Million with Adjusted EBITDA Margin of 32% to 33%

TTM Dollar-Based Net Retention Rate of 105%, 109% on a Constant Currency Basis

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 second quarter ended June 30, 2023.

“Our strong second quarter highlights the power of our model, the differentiation of our offerings, and our relentless focus on empowering our MSPs,” said N-able president and CEO John Pagliuca. “The positive relationship we have with our partners allows us to innovate to meet their needs and ensures we are investing to give MSPs the tools and support to provide mission-critical IT services over the long term. By staying focused on creating value for our stakeholders, we are able to realize the potential of our business model.”

“Surpassing $100 million in revenue for the second quarter is a culmination of strategic investments we have made in R&D, brand-building, our customer success teams, and creating a purpose-driven culture focused on enabling our MSPs' businesses,” added N-able executive vice president and CFO Tim O’Brien. “As we enter the back half of the year, we are focused on operational excellence, disciplined cost management, and executing on initiatives that advance our strategy of efficiently delivering enterprise-grade technology to MSPs.”

Second quarter 2023 financial highlights:

  • Total revenue of $106.1 million, representing approximately 16% year-over-year growth, or approximately 17% year-over-year growth on a constant currency basis.
  • Subscription revenue of $103.4 million, representing approximately 16% year-over-year growth, or approximately 17% year-over-year growth on a constant currency basis.
  • GAAP gross margin of 84.0% and non-GAAP gross margin of 84.8%.
  • GAAP net income of $4.5 million, or $0.02 per diluted share, and non-GAAP net income of $16.3 million, or $0.09 per diluted share.
  • Adjusted EBITDA of $34.9 million, up approximately 26% year-over-year, representing an adjusted EBITDA margin of 32.9%.

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

Additional highlights for the second quarter of 2023 include:

  • N-able introduced disaster recovery as a service (DRaaS) with the addition of Standby Image recovery in Microsoft Azure. This new feature delivers expanded continuity capabilities, helping MSPs and IT professionals provide a full range of recovery services—from fast, straightforward file-level restore to flexible, affordable disaster recovery, now including recovery in Microsoft Azure.
  • N-able was recognized by Comparably, a leading workplace culture and corporate brand reputation platform, with a ‘Best Career Growth’ award for the second consecutive year.
  • N-able strengthened its Diversity, Equality, and Belonging commitment by signing the CEO Action for Diversity and Inclusion Pledge. The CEO Action for Diversity & Inclusion was founded in 2017 and is the largest CEO-driven business commitment to advance diversity and inclusion in the workplace, with more than 2,400 CEOs pledging to create more inclusive cultures.

Balance Sheet

At June 30, 2023, total cash and cash equivalents were $109.2 million and total debt, net of debt issuance costs, was $336.0 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 August 10, 2023, N-able is providing its financial outlook for the third 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 FX rates and current macroeconomic dynamics.

Financial Outlook for the Third Quarter of 2023

N-able management currently expects to achieve the following results for the third quarter of 2023:

  • Total revenue in the range of $106.5 to $107.0 million, representing approximately 14% year-over-year growth, or approximately 12% to 13% growth on a constant currency basis.
  • Adjusted EBITDA in the range of $34.5 to $35.0 million, representing approximately 32% to 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 $419.5 to $421.0 million, representing approximately 13% year-over-year growth on both a reported and constant currency basis.
  • Adjusted EBITDA in the range of $135.5 to $137.0 million, representing approximately 32% to 33% of total revenue.

Additional details on the company's outlook will be provided on the conference call.

Conference Call and Webcast

In conjunction with this announcement, N-able will host a conference call today to discuss its financial results, business and business outlook at 8:30 a.m. ET on August 10, 2023. A live webcast of the call will be available on the N-able Investor Relations website at http://investors.n-able.com. A replay of the webcast will be available on a temporary basis shortly after the event on the N-able Investor Relations website.

Forward-Looking Statements

This press release contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the second quarter and full year 2023 and the impact of macroeconomic conditions on our business. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be signified by terms such as “aim,” “anticipate,” “believe,” “continue,” “expect,” “feel,” “intend,” “estimate,” “seek,” “plan,” “may,” “can,” “could,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially and adversely different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) risks related to our spin-off from SolarWinds into a newly created and separately-traded public company, including that the spin-off could disrupt or adversely affect our business, results of operations and financial condition, that the spin-off may not achieve some or all of any anticipated benefits with respect to our business; that the distribution, together with certain related transactions, may not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, which could result in N-able incurring significant tax liabilities, and, in certain circumstances, requiring us to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement; (b) the possibility that a worsening of the global COVID-19 pandemic or a new pandemic or other public health crisis may adversely affect our business, results of operations and financial condition or that the impact of such occurrences could negatively affect the global economy or the business operations and financial conditions of our customers, their end customers and our prospective customers; (c) the impact of adverse economic conditions; (d) our ability to sell subscriptions to new managed service provider (“MSP”) partners, to sell additional solutions to our existing MSP partners and to increase the usage of our solutions by our existing MSP partners, as well as our ability to generate and maintain MSP partner loyalty; (e) any decline in our renewal or net retention rates; (f) the possibility that general economic conditions or uncertainty may cause information technology spending to be reduced or purchasing decisions to be delayed, including as a result of the COVID-19 pandemic, inflation, actions taken by central banks to counter inflation, rising interest rates, the impact of bank failures and related financial services industry uncertainty, war and political unrest, military conflict (including between Russia and Ukraine), terrorism, sanctions or other geopolitical events globally, or that such factors may otherwise harm our business, financial condition or results of operations; (g) any inability to generate significant volumes of high quality sales leads from our digital marketing initiatives and convert such leads into new business at acceptable conversion rates; (h) any inability to successfully identify, complete and integrate acquisitions and manage our growth effectively; (i) risks associated with our international operations including, but not limited to, regulatory, political, tax and labor conditions; (j) foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; (k) risks that cyberattacks, including the cyberattack on SolarWinds’ Orion Software Platform and internal systems announced by SolarWinds in December 2020, or the Cyber Incident, and other security incidents may result in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ environments, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ security, the theft or misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business; (l) our status as a controlled company; (m) our ability to attract and retain qualified employees and key personnel as a standalone public company; (n) the timing and success of new product introductions and product upgrades by us or our competitors; (o) our ability to protect and defend our intellectual property and not infringe upon others’ intellectual property; (p) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (q) our indebtedness, including increased borrowing costs resulting from rising interest rates, potential restrictions on our operations and the impact of events of default; (r) our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States; (s) increased costs associated with the loss of emerging growth company status; and (t) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in N-able’s Annual Report on Form 10-K for the year ended December 31, 2022, that N-able filed with the SEC on March 14, 2023. All information provided in this release is as of the date hereof and N-able undertakes no duty to update this information except as required by law.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business.

N-able also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non-GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income.

N-able's management and board of directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Set forth in the tables below are the corresponding GAAP financial measures for each non-GAAP financial measure presented. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.

Non-GAAP Gross Margin, Non-GAAP Operating Income and Non-GAAP Operating Margin. We provide non-GAAP total cost of revenue, non-GAAP gross margin, non-GAAP operating expense and non-GAAP operating income and related non-GAAP gross and operating margins excluding such items as stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangible assets, acquisition related costs, spin-off costs and restructuring costs and other. We define non-GAAP gross and operating margins as non-GAAP gross profit and operating income divided by total revenue. Management believes these measures are useful for the following reasons:

  • 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.

Non-GAAP Net Income and Non-GAAP Net Income Per Diluted Share. We believe that the use of non-GAAP net income and non-GAAP net income per diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income is calculated as net income excluding the adjustments to non-GAAP gross profit and non-GAAP operating income and the income tax effect of the non-GAAP exclusions. We define non-GAAP net income per diluted share as non-GAAP net income divided by the weighted average outstanding common shares.

Adjusted EBITDA and Adjusted EBITDA Margin. We regularly monitor adjusted EBITDA and adjusted EBITDA margin, as they are measures we use to assess our operating performance. We define adjusted EBITDA as net income or loss, excluding 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 define adjusted EBITDA margin as adjusted EBITDA divided by total revenue. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include: although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our related party debt; adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Non-GAAP Revenue on a Constant Currency Basis. We provide non-GAAP revenue on a constant currency basis to provide a framework for assessing our performance excluding the effect of foreign currency rate fluctuations. To present this information, current period results for revenue contracts denominated in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect during the corresponding prior period presented. We believe that providing non-GAAP revenue on a constant currency basis facilitates the comparison of non-GAAP revenue to prior periods.

Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate cash flow from operations, after the deduction of capital expenditures and prior to the impact of our capital structure, acquisition-related costs, restructuring costs, spin-off costs, employer-paid payroll taxes on stock awards and other one-time items, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

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

© 2023 N-able, Inc. All rights reserved.

Source: N-able, Inc.

Category: Financial

N-able, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

June 30,

 

December 31,

 

 

2023

 

 

 

2022

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

109,190

 

 

$

98,847

 

Accounts receivable, net of allowances of $1,259 and $1,330 as of June 30, 2023 and December 31, 2022, respectively

 

40,164

 

 

 

34,798

 

Income tax receivable

 

15,738

 

 

 

7,814

 

Prepaid and other current assets

 

18,545

 

 

 

12,697

 

Total current assets

 

183,637

 

 

 

154,156

 

Property and equipment, net

 

38,302

 

 

 

37,404

 

Operating lease right-of-use assets

 

29,561

 

 

 

31,752

 

Deferred taxes

 

1,566

 

 

 

795

 

Goodwill

 

831,666

 

 

 

828,795

 

Intangible assets, net

 

7,499

 

 

 

8,873

 

Other assets, net

 

20,810

 

 

 

17,082

 

Total assets

$

1,113,041

 

 

$

1,078,857

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

5,600

 

 

$

3,544

 

Accrued liabilities and other

 

39,507

 

 

 

35,630

 

Current operating lease liabilities

 

5,816

 

 

 

5,771

 

Income taxes payable

 

7,657

 

 

 

1,629

 

Current portion of deferred revenue

 

11,543

 

 

 

11,740

 

Current debt obligation

 

3,500

 

 

 

3,500

 

Total current liabilities

 

73,623

 

 

 

61,814

 

Long-term liabilities:

 

 

 

Deferred revenue, net of current portion

 

171

 

 

 

387

 

Non-current deferred taxes

 

1,986

 

 

 

2,783

 

Non-current operating lease liabilities

 

30,690

 

 

 

33,110

 

Long-term debt, net of current portion

 

332,450

 

 

 

333,488

 

Other long-term liabilities

 

5,214

 

 

 

5,204

 

Total liabilities

 

444,134

 

 

 

436,786

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value: 550,000,000 shares authorized and 182,471,083 and 180,849,537 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

182

 

 

 

181

 

Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

Additional paid-in capital

 

647,188

 

 

 

632,871

 

Accumulated other comprehensive loss

 

(3,345

)

 

 

(7,815

)

Retained earnings

 

24,882

 

 

 

16,834

 

Total stockholders' equity

 

668,907

 

 

 

642,071

 

Total liabilities and stockholders' equity

$

1,113,041

 

 

$

1,078,857

 

N-able, Inc.

Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

Subscription and other revenue

$

106,080

 

 

$

91,627

 

 

$

205,898

 

 

$

182,487

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue

 

16,559

 

 

 

13,624

 

 

 

32,312

 

 

 

26,905

 

Amortization of acquired technologies

 

463

 

 

 

545

 

 

 

919

 

 

 

1,527

 

Total cost of revenue

 

17,022

 

 

 

14,169

 

 

 

33,231

 

 

 

28,432

 

Gross profit

 

89,058

 

 

 

77,458

 

 

 

172,667

 

 

 

154,055

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

34,889

 

 

 

32,020

 

 

 

67,452

 

 

 

63,074

 

Research and development

 

20,234

 

 

 

15,241

 

 

 

39,044

 

 

 

30,626

 

General and administrative

 

18,091

 

 

 

18,440

 

 

 

35,439

 

 

 

36,069

 

Amortization of acquired intangibles

 

10

 

 

 

1,460

 

 

 

574

 

 

 

2,921

 

Total operating expenses

 

73,224

 

 

 

67,161

 

 

 

142,509

 

 

 

132,690

 

Operating income

 

15,834

 

 

 

10,297

 

 

 

30,158

 

 

 

21,365

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

 

(7,530

)

 

 

(3,845

)

 

 

(14,730

)

 

 

(7,371

)

Other income, net

 

1,004

 

 

 

175

 

 

 

1,992

 

 

 

1,234

 

Total other expense

 

(6,526

)

 

 

(3,670

)

 

 

(12,738

)

 

 

(6,137

)

Income before income taxes

 

9,308

 

 

 

6,627

 

 

 

17,420

 

 

 

15,228

 

Income tax expense

 

4,799

 

 

 

2,300

 

 

 

9,372

 

 

 

5,800

 

Net income

$

4,509

 

 

$

4,327

 

 

$

8,048

 

 

$

9,428

 

Net income per share:

 

 

 

 

 

 

 

Basic earnings per share

$

0.02

 

 

$

0.02

 

 

$

0.04

 

 

$

0.05

 

Diluted earnings per share

$

0.02

 

 

$

0.02

 

 

$

0.04

 

 

$

0.05

 

Weighted-average shares used to compute net income per share:

 

 

 

 

 

 

 

Shares used in computation of basic earnings per share:

 

182,249

 

 

 

180,034

 

 

 

181,843

 

 

 

179,948

 

Shares used in computation of diluted earnings per share:

 

185,643

 

 

 

180,504

 

 

 

184,732

 

 

 

180,675

 

N-able, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

4,509

 

 

$

4,327

 

 

$

8,048

 

 

$

9,428

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

5,146

 

 

 

5,895

 

 

 

10,813

 

 

 

12,233

 

Provision for (benefit from) doubtful accounts

 

20

 

 

 

(56

)

 

 

(71

)

 

 

(73

)

Stock-based compensation expense

 

11,745

 

 

 

9,797

 

 

 

21,595

 

 

 

17,966

 

Deferred taxes

 

6

 

 

 

(135

)

 

 

14

 

 

 

345

 

Amortization of debt issuance costs

 

398

 

 

 

416

 

 

 

792

 

 

 

814

 

Operating lease right-of-use assets, net

 

(402

)

 

 

468

 

 

 

(512

)

 

 

(424

)

Loss (gain) on foreign currency exchange rates

 

530

 

 

 

228

 

 

 

555

 

 

 

(597

)

Gain on contingent consideration

 

(567

)

 

 

 

 

 

(327

)

 

 

 

Other non-cash expenses

 

97

 

 

 

4

 

 

 

128

 

 

 

43

 

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:

 

 

 

 

 

 

 

Accounts receivable

 

(4,513

)

 

 

(415

)

 

 

(5,906

)

 

 

(1,512

)

Income tax receivable

 

(2,103

)

 

 

(912

)

 

 

(7,919

)

 

 

(1,884

)

Prepaid expenses and other assets

 

(3,633

)

 

 

276

 

 

 

(5,814

)

 

 

217

 

Accounts payable

 

1,142

 

 

 

1,204

 

 

 

872

 

 

 

(839

)

Due to and from affiliates

 

 

 

 

(69

)

 

 

 

 

 

(463

)

Accrued liabilities and other

 

8,234

 

 

 

3,123

 

 

 

4,397

 

 

 

(1,822

)

Income taxes payable

 

684

 

 

 

(1,398

)

 

 

5,981

 

 

 

1,965

 

Deferred revenue

 

(924

)

 

 

(315

)

 

 

(415

)

 

 

358

 

Other long-term assets

 

357

 

 

 

299

 

 

 

(918

)

 

 

112

 

Other long-term liabilities

 

 

 

 

 

 

 

44

 

 

 

 

Net cash provided by operating activities

 

20,726

 

 

 

22,737

 

 

 

31,357

 

 

 

35,867

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(3,565

)

 

 

(2,723

)

 

 

(6,969

)

 

 

(5,427

)

Purchases of intangible assets

 

(2,458

)

 

 

(1,215

)

 

 

(4,669

)

 

 

(2,356

)

Net cash used in investing activities

 

(6,023

)

 

 

(3,938

)

 

 

(11,638

)

 

 

(7,783

)

Cash flows from financing activities

 

 

 

 

 

 

 

Payments of tax withholding obligations related to restricted stock units

 

(2,402

)

 

 

(990

)

 

 

(8,240

)

 

 

(5,543

)

Exercise of stock options

 

5

 

 

 

11

 

 

 

26

 

 

 

27

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

771

 

 

 

568

 

Repayments of borrowings from Credit Agreement

 

(875

)

 

 

(875

)

 

 

(1,750

)

 

 

(1,750

)

Net cash used in financing activities

 

(3,272

)

 

 

(1,854

)

 

 

(9,193

)

 

 

(6,698

)

Effect of exchange rate changes on cash and cash equivalents

 

(321

)

 

 

(766

)

 

 

(183

)

 

 

(1,504

)

Net increase in cash and cash equivalents

 

11,110

 

 

 

16,179

 

 

 

10,343

 

 

 

19,882

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

98,080

 

 

 

70,439

 

 

 

98,847

 

 

 

66,736

 

End of period

$

109,190

 

 

$

86,618

 

 

$

109,190

 

 

$

86,618

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

$

7,014

 

 

$

3,126

 

 

$

13,703

 

 

$

6,183

 

Cash paid for income taxes

$

5,225

 

 

$

3,122

 

 

$

9,890

 

 

$

3,829

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses

$

1,119

 

 

$

(100

)

 

$

956

 

 

$

(583

)

Right-of-use assets obtained in exchange for operating lease liabilities

$

483

 

 

$

 

 

$

483

 

 

$

967

 

N-able, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

17,022

 

 

$

14,169

 

 

$

33,231

 

 

$

28,432

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(381

)

 

 

(296

)

 

 

(717

)

 

 

(620

)

Amortization of acquired technologies

 

(463

)

 

 

(545

)

 

 

(919

)

 

 

(1,527

)

Restructuring costs and other

 

(8

)

 

 

(23

)

 

 

(17

)

 

 

(30

)

Non-GAAP cost of revenue

$

16,170

 

 

$

13,305

 

 

$

31,578

 

 

$

26,255

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

89,058

 

 

$

77,458

 

 

$

172,667

 

 

$

154,055

 

Stock-based compensation expense and related employer-paid payroll taxes

 

381

 

 

 

296

 

 

 

717

 

 

 

620

 

Amortization of acquired technologies

 

463

 

 

 

545

 

 

 

919

 

 

 

1,527

 

Restructuring costs and other

 

8

 

 

 

23

 

 

 

17

 

 

 

30

 

Non-GAAP gross profit

$

89,910

 

 

$

78,322

 

 

$

174,320

 

 

$

156,232

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

34,889

 

 

$

32,020

 

 

$

67,452

 

 

$

63,074

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(4,116

)

 

 

(3,359

)

 

 

(7,658

)

 

 

(6,346

)

Acquisition related costs

 

(24

)

 

 

(14

)

 

 

(24

)

 

 

(14

)

Restructuring costs and other

 

(24

)

 

 

(2

)

 

 

(24

)

 

 

(2

)

Non-GAAP sales and marketing expense

$

30,725

 

 

$

28,645

 

 

$

59,746

 

 

$

56,712

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

20,234

 

 

$

15,241

 

 

$

39,044

 

 

$

30,626

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(2,405

)

 

 

(1,684

)

 

 

(4,395

)

 

 

(3,231

)

Acquisition related costs

 

(8

)

 

 

(32

)

 

 

(8

)

 

 

(32

)

Restructuring costs and other

 

(152

)

 

 

(72

)

 

 

(790

)

 

 

(112

)

Non-GAAP research and development expense

$

17,669

 

 

$

13,453

 

 

$

33,851

 

 

$

27,251

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

18,091

 

 

$

18,440

 

 

$

35,439

 

 

$

36,069

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(5,132

)

 

 

(4,635

)

 

 

(9,880

)

 

 

(8,561

)

Acquisition related costs

 

310

 

 

 

(223

)

 

 

41

 

 

 

(223

)

Restructuring costs and other

 

(225

)

 

 

(260

)

 

 

(205

)

 

 

(285

)

Spin-off costs

 

(227

)

 

 

(420

)

 

 

(457

)

 

 

(954

)

Non-GAAP general and administrative expense

$

12,817

 

 

$

12,902

 

 

$

24,938

 

 

$

26,046

 

 

 

 

 

 

 

 

 

GAAP operating income

$

15,834

 

 

$

10,297

 

 

$

30,158

 

 

$

21,365

 

Amortization of acquired technologies

 

463

 

 

 

545

 

 

 

919

 

 

 

1,527

 

Amortization of acquired intangibles

 

10

 

 

 

1,460

 

 

 

574

 

 

 

2,921

 

Stock-based compensation expense and related employer-paid payroll taxes

 

12,034

 

 

 

9,974

 

 

 

22,650

 

 

 

18,758

 

Acquisition related costs

 

(278

)

 

 

269

 

 

 

(9

)

 

 

269

 

Restructuring costs and other

 

409

 

 

 

357

 

 

 

1,036

 

 

 

429

 

Spin-off costs

 

227

 

 

 

420

 

 

 

457

 

 

 

954

 

Non-GAAP operating income

$

28,699

 

 

$

23,322

 

 

$

55,785

 

 

$

46,223

 

GAAP operating margin

 

14.9

%

 

 

11.2

%

 

 

14.6

%

 

 

11.7

%

Non-GAAP operating margin

 

27.1

%

 

 

25.5

%

 

 

27.1

%

 

 

25.3

%

 

 

 

 

 

 

 

 

GAAP net income

$

4,509

 

 

$

4,327

 

 

$

8,048

 

 

$

9,428

 

Amortization of acquired technologies

 

463

 

 

 

545

 

 

 

919

 

 

 

1,527

 

Amortization of acquired intangibles

 

10

 

 

 

1,460

 

 

 

574

 

 

 

2,921

 

Stock-based compensation expense and related employer-paid payroll taxes

 

12,034

 

 

 

9,974

 

 

 

22,650

 

 

 

18,758

 

Acquisition related costs

 

(278

)

 

 

269

 

 

 

(9

)

 

 

269

 

Restructuring costs and other

 

409

 

 

 

357

 

 

 

1,036

 

 

 

429

 

Spin-off costs

 

227

 

 

 

420

 

 

 

457

 

 

 

954

 

Tax benefits associated with above adjustments (1)

 

(1,112

)

 

 

(1,378

)

 

 

(2,439

)

 

 

(2,715

)

Non-GAAP net income

$

16,262

 

 

$

15,974

 

 

$

31,236

 

 

$

31,571

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

0.02

 

 

$

0.02

 

 

$

0.04

 

 

$

0.05

 

Non-GAAP diluted earnings per share

$

0.09

 

 

$

0.09

 

 

$

0.17

 

 

$

0.17

 

 

 

 

 

 

 

 

 

Shares used in computation of diluted earnings per share:

 

185,643

 

 

 

180,504

 

 

 

184,732

 

 

 

180,675

 

_________________

(1) The tax benefits associated with non-GAAP adjustments for the three and six months ended June 30, 2023, and 2022, respectively, is calculated utilizing the Company's individual statutory tax rates for each impacted subsidiary.

N-able, Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Net income

$

4,509

 

 

$

4,327

 

 

$

8,048

 

 

$

9,428

 

Amortization

 

1,391

 

 

 

2,694

 

 

 

3,388

 

 

 

5,837

 

Depreciation

 

3,755

 

 

 

3,201

 

 

 

7,425

 

 

 

6,396

 

Income tax expense

 

4,799

 

 

 

2,300

 

 

 

9,372

 

 

 

5,800

 

Interest expense, net

 

7,530

 

 

 

3,845

 

 

 

14,730

 

 

 

7,371

 

Unrealized foreign currency losses (gains)

 

530

 

 

 

228

 

 

 

555

 

 

 

(597

)

Acquisition related costs

 

(278

)

 

 

269

 

 

 

(9

)

 

 

269

 

Spin-off costs

 

227

 

 

 

420

 

 

 

457

 

 

 

954

 

Stock-based compensation expense and related employer-paid payroll taxes

 

12,034

 

 

 

9,974

 

 

 

22,650

 

 

 

18,758

 

Restructuring costs and other

 

409

 

 

 

357

 

 

 

1,036

 

 

 

429

 

Adjusted EBITDA

$

34,906

 

 

$

27,615

 

 

$

67,652

 

 

$

54,645

 

Adjusted EBITDA margin

 

32.9

%

 

 

30.1

%

 

 

32.9

%

 

 

29.9

%

N-able, Inc.

Reconciliation of GAAP Revenue to Non-GAAP Revenue on a Constant Currency Basis

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

Growth Rate

 

 

2023

 

 

2022

 

Growth Rate

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenue

$

103,355

 

$

89,369

 

15.6

%

 

$

200,797

 

$

178,004

 

12.8

%

Estimated foreign currency impact (1)

 

929

 

 

 

1.0

 

 

 

3,826

 

 

 

2.1

 

Non-GAAP subscription revenue on a constant currency basis

$

104,284

 

$

89,369

 

16.7

%

 

$

204,623

 

$

178,004

 

15.0

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other revenue

$

2,725

 

$

2,258

 

20.7

%

 

$

5,101

 

$

4,483

 

13.8

%

Estimated foreign currency impact (1)

 

16

 

 

 

0.7

 

 

 

57

 

 

 

1.3

 

Non-GAAP other revenue on a constant currency basis

$

2,741

 

$

2,258

 

21.4

%

 

$

5,158

 

$

4,483

 

15.1

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription and other revenue

$

106,080

 

$

91,627

 

15.8

%

 

$

205,898

 

$

182,487

 

12.8

%

Estimated foreign currency impact (1)

 

945

 

 

 

1.0

 

 

 

3,883

 

 

 

2.1

 

Non-GAAP subscription and other revenue on a constant currency basis

$

107,025

 

$

91,627

 

16.8

%

 

$

209,781

 

$

182,487

 

15.0

%

_________________

(1) The estimated foreign currency impact is calculated using the average foreign currency exchange rates in the comparable prior year monthly periods and applying those rates to foreign-denominated revenue in the corresponding monthly periods in the three and six months ended June 30, 2023.

N-able, Inc.

Reconciliation of Unlevered Free Cash Flow

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

20,726

 

 

$

22,737

 

 

$

31,357

 

 

$

35,867

 

Capital expenditures (1)

 

(6,023

)

 

 

(3,938

)

 

 

(11,638

)

 

 

(7,783

)

Free cash flow

 

14,703

 

 

 

18,799

 

 

 

19,719

 

 

 

28,084

 

Cash paid for interest, net of cash interest received

 

7,014

 

 

 

3,126

 

 

 

13,703

 

 

 

6,183

 

Cash paid for acquisition related costs, restructuring costs, spin-off costs, employer-paid payroll taxes on stock awards and other one-time items

 

1,895

 

 

 

3,144

 

 

 

4,052

 

 

 

4,319

 

Unlevered free cash flow

$

23,612

 

 

$

25,069

 

 

$

37,474

 

 

$

38,586

 

_________________

(1) Includes purchases of property and equipment and purchases of intangible assets.

 

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