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N-able Announces Fourth Quarter and Full-Year 2023 Results

Full-Year 2023 Revenue Increased 13.5% Year-Over-Year

TTM Dollar-Based Net Retention Rate of 110%

Full-Year 2024 Revenue Outlook of 9% to 10% Year-Over-Year Growth

Full-Year 2024 Adjusted EBITDA Margin Outlook of 34% to 35%

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 fourth quarter and full-year ended December 31, 2023.

“Our 2023 performance was strong, and we believe lays the groundwork for a successful 2024,” said N-able president and CEO John Pagliuca. “Demand for effective IT management software has remained robust, with increasing security threats, intensifying compliance standards, and rising IT complexity challenging MSPs and SMEs across the globe. With our expanding suite of purpose-built software products - including the recent additions of MDR and Cloud Commander - N-able is poised to meet these needs. We have high ambitions in 2024 and are determined to deliver for our customers and stakeholders.”

“Our fourth quarter results exceeded expectations on the top and bottom lines capping a successful year where we advanced our product roadmap, expanded our cross-sell opportunity, and drove double digit revenue growth while growing our full-year adjusted EBITDA margin by over 300 basis points,” added N-able CFO Tim O’Brien. “Our 2024 operating plan builds on this momentum and we believe positions us to advance critical strategic initiatives as we aim to achieve a sustained Rule of 50 performance goal.”

Fourth quarter 2023 financial highlights:

  • Total revenue of $108.4 million, representing 13.2% year-over-year growth, or 11.4% year-over-year growth on a constant currency basis.
  • Subscription revenue of $106.1 million, representing 13.6% year-over-year growth, or 11.7% year-over-year growth on a constant currency basis.
  • GAAP gross margin of 83.7% and non-GAAP gross margin of 84.5%.
  • GAAP net income of $9.4 million, or $0.05 per diluted share, and non-GAAP net income of $19.8 million, or $0.11 per diluted share.
  • Adjusted EBITDA of $39.2 million, up 25.7% year-over-year, representing an adjusted EBITDA margin of 36.2%.

Full-year 2023 financial highlights:

  • Total revenue of $421.9 million, representing 13.5% year-over-year growth on both a reported and constant currency basis.
  • Subscription revenue of $412.1 million, representing 13.6% year-over-year growth, or 13.7% year-over-year growth on a constant currency basis.
  • GAAP gross margin of 83.8% and non-GAAP gross margin of 84.6%.
  • GAAP net income of $23.4 million, or $0.13 per diluted share, and non-GAAP net income of $68.2 million, or $0.37 per diluted share.
  • Adjusted EBITDA of $143.4 million, up 25.0% 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 fourth quarter of 2023 include:

Balance Sheet

As of December 31, 2023, total cash and cash equivalents were $153.0 million and total debt, net of debt issuance costs, was $335.0 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 annual report on Form 10-K 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 February 22, 2024, N-able is providing its financial outlook for the first quarter of 2024 and full-year 2024. 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 (gains) losses, 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 First Quarter of 2024

N-able management currently expects to achieve the following results for the first quarter of 2024:

  • Total revenue in the range of $111.0 to $111.5 million, representing approximately 11% to 12% year-over-year growth on both a reported and constant currency basis.
  • Adjusted EBITDA in the range of $37.5 to $38.0 million, representing approximately 34% of total revenue.

Financial Outlook for Full-Year 2024

N-able management currently expects to achieve the following results for the full-year 2024:

  • Total revenue in the range of $460.0 to $465.0 million, representing approximately 9% to 10% year-over-year growth, or 9% to 11% on a constant currency basis.
  • Adjusted EBITDA in the range of $158.0 to $162.0 million, representing approximately 34% to 35% 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 February 22, 2024. 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 first quarter and full-year 2024 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 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 impact of adverse economic conditions; (c) 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; (d) any decline in our renewal or net retention rates; (e) 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 inflation, actions taken by central banks to counter inflation, rising interest rates, war and political unrest, military conflict (including between Russia and Ukraine and in the Middle East), terrorism, sanctions or other geopolitical events globally, or that such factors may otherwise harm our business, financial condition or results of operations; (f) 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; (g) any inability to successfully identify, complete and integrate acquisitions and manage our growth effectively; (h) any inability to resell third-party software or integrate third-party software into our solutions, or find suitable replacements for such third-party software; (i) risks associated with our international operations; (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 (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; (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; and (s) 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, and those that will be discussed in the Annual Report on Form 10-K for the period ended December 31, 2023, that N-able anticipates filing on or before February 29, 2024. 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 (gains) losses, 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

© 2024 N-able, Inc. All rights reserved.

Source: N-able, Inc.

Category: Financial

N-able, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

December 31,

 

2023

 

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

153,048

 

$

98,847

 

Accounts receivable, net of allowances of $1,171 and $1,330 as of December 31, 2023 and 2022, respectively

 

40,013

 

 

34,798

 

Income tax receivable

 

8,001

 

 

7,814

 

Prepaid and other current assets

 

23,729

 

 

12,697

 

Total current assets

 

224,791

 

 

154,156

 

Property and equipment, net

 

36,838

 

 

37,404

 

Operating lease right-of-use assets

 

32,067

 

 

31,752

 

Deferred taxes

 

1,087

 

 

795

 

Goodwill

 

838,497

 

 

828,795

 

Intangible assets, net

 

6,717

 

 

8,873

 

Other assets, net

 

22,794

 

 

17,082

 

Total assets

$

1,162,791

 

$

1,078,857

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

5,239

 

$

3,544

 

Accrued liabilities and other

 

49,366

 

 

35,630

 

Current operating lease liabilities

 

6,443

 

 

5,771

 

Income taxes payable

 

4,523

 

 

1,629

 

Current portion of deferred revenue

 

12,646

 

 

11,740

 

Current debt obligation

 

3,500

 

 

3,500

 

Total current liabilities

 

81,717

 

 

61,814

 

 

 

 

 

Long-term liabilities:

 

 

 

Deferred revenue, net of current portion

 

167

 

 

387

 

Non-current deferred taxes

 

1,820

 

 

2,783

 

Non-current operating lease liabilities

 

33,064

 

 

33,110

 

Long-term debt, net of current portion

 

331,509

 

 

333,488

 

Other long-term liabilities

 

3,154

 

 

5,204

 

Total liabilities

 

451,431

 

 

436,786

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value: 550,000,000 shares authorized and 183,220,689 and 180,849,537 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 

183

 

 

181

 

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

 

 

 

 

Additional paid-in capital

 

666,522

 

 

632,871

 

Accumulated other comprehensive income (loss)

 

4,409

 

 

(7,815

)

Retained earnings

 

40,246

 

 

16,834

 

Total stockholders' equity

 

711,360

 

 

642,071

 

Total liabilities and stockholders' equity

$

1,162,791

 

$

1,078,857

 

N-able, Inc.

Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

2023

 

2022

Revenue:

 

 

 

 

 

 

 

Subscription and other revenue

$

108,415

 

 

$

95,755

 

 

$

421,880

 

 

$

371,769

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue

 

17,164

 

 

 

14,641

 

 

 

66,369

 

 

 

56,133

 

Amortization of acquired technologies

 

457

 

 

 

434

 

 

 

1,839

 

 

 

2,477

 

Total cost of revenue

 

17,621

 

 

 

15,075

 

 

 

68,208

 

 

 

58,610

 

Gross profit

 

90,794

 

 

 

80,680

 

 

 

353,672

 

 

 

313,159

 

Operating expenses:

 

��

 

 

 

 

 

Sales and marketing

 

33,579

 

 

 

31,078

 

 

 

134,691

 

 

 

125,301

 

Research and development

 

19,384

 

 

 

16,820

 

 

 

78,180

 

 

 

63,484

 

General and administrative

 

16,008

 

 

 

17,006

 

 

 

69,885

 

 

 

71,125

 

Amortization of acquired intangibles

 

12

 

 

 

1,467

 

 

 

597

 

 

 

5,853

 

Total operating expenses

 

68,983

 

 

 

66,371

 

 

 

283,353

 

 

 

265,763

 

Operating income

 

21,811

 

 

 

14,309

 

 

 

70,319

 

 

 

47,396

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

 

(7,720

)

 

 

(6,393

)

 

 

(30,252

)

 

 

(18,852

)

Other income, net

 

2,690

 

 

 

2,442

 

 

 

4,259

 

 

 

1,881

 

Total other expense, net

 

(5,030

)

 

 

(3,951

)

 

 

(25,993

)

 

 

(16,971

)

Income before income taxes

 

16,781

 

 

 

10,358

 

 

 

44,326

 

 

 

30,425

 

Income tax expense

 

7,430

 

 

 

3,373

 

 

 

20,914

 

 

 

13,718

 

Net income

$

9,351

 

 

$

6,985

 

 

$

23,412

 

 

$

16,707

 

Net income per share:

 

 

 

 

 

 

 

Basic earnings per share

$

0.05

 

 

$

0.04

 

 

$

0.13

 

 

$

0.09

 

Diluted earnings per share

$

0.05

 

 

$

0.04

 

 

$

0.13

 

 

$

0.09

 

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

 

 

 

 

 

 

 

Shares used in computation of basic earnings per share:

 

183,072

 

 

 

180,712

 

 

 

182,371

 

 

 

180,136

 

Shares used in computation of diluted earnings per share:

 

186,495

 

 

 

182,162

 

 

 

185,980

 

 

 

181,297

 

N-able, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

9,351

 

 

$

6,985

 

 

$

23,412

 

 

$

16,707

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

5,481

 

 

 

6,170

 

 

 

21,623

 

 

 

24,440

 

Benefit from doubtful accounts

 

(546

)

 

 

(461

)

 

 

(159

)

 

 

(323

)

Stock-based compensation expense

 

10,677

 

 

 

8,449

 

 

 

43,570

 

 

 

36,527

 

Deferred taxes

 

350

 

 

 

(1,636

)

 

 

330

 

 

 

(1,423

)

Amortization of debt issuance costs

 

404

 

 

 

404

 

 

 

1,601

 

 

 

1,623

 

Operating lease right-of-use assets, net

 

(500

)

 

 

(15

)

 

 

(1,550

)

 

 

(1,168

)

(Gain) loss on foreign currency exchange rates

 

(1,779

)

 

 

(2,135

)

 

 

358

 

 

 

(1,246

)

Gain on contingent consideration

 

(485

)

 

 

(249

)

 

 

(1,443

)

 

 

(83

)

Other non-cash expenses

 

92

 

 

 

105

 

 

 

220

 

 

 

148

 

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

 

 

 

 

 

 

 

Accounts receivable

 

(939

)

 

 

(3,710

)

 

 

(7,060

)

 

 

(3,432

)

Income tax receivable

 

8,700

 

 

 

2,235

 

 

 

(174

)

 

 

(567

)

Prepaid expenses and other assets

 

(2,802

)

 

 

680

 

 

 

(10,823

)

 

 

283

 

Accounts payable

 

1,451

 

 

 

813

 

 

 

1,833

 

 

 

(1,624

)

Due to and from affiliates

 

 

 

 

 

 

 

 

 

 

(402

)

Accrued liabilities and other

 

7,381

 

 

 

(123

)

 

 

16,065

 

 

 

3,003

 

Income taxes payable

 

(6,525

)

 

 

(278

)

 

 

2,966

 

 

 

(3,188

)

Deferred revenue

 

1,127

 

 

 

865

 

 

 

684

 

 

 

1,358

 

Other long-term assets

 

(68

)

 

 

299

 

 

 

(1,274

)

 

 

780

 

Other long-term liabilities

 

(150

)

 

 

 

 

 

(90

)

 

 

 

Net cash provided by operating activities

 

31,220

 

 

 

18,398

 

 

 

90,089

 

 

 

71,413

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(3,293

)

 

 

(3,144

)

 

 

(13,780

)

 

 

(12,834

)

Purchases of intangible assets

 

(1,881

)

 

 

(4,664

)

 

 

(8,556

)

 

 

(8,176

)

Acquisitions, net of cash acquired

 

 

 

 

103

 

 

 

 

 

 

(9,199

)

Net cash used in investing activities

 

(5,174

)

 

 

(7,705

)

 

 

(22,336

)

 

 

(30,209

)

Cash flows from financing activities

 

 

 

 

 

 

 

Payments of tax withholding obligations related to restricted stock units

 

(1,748

)

 

 

(1,972

)

 

 

(11,976

)

 

 

(8,325

)

Exercise of stock options

 

 

 

 

77

 

 

 

72

 

 

 

108

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

1,681

 

 

 

1,315

 

Deferred acquisition payments

 

(600

)

 

 

 

 

 

(1,450

)

 

 

 

Repayments of borrowings from Credit Agreement

 

(875

)

 

 

(875

)

 

 

(3,500

)

 

 

(3,500

)

Net cash used in financing activities

 

(3,223

)

 

 

(2,770

)

 

 

(15,173

)

 

 

(10,402

)

Effect of exchange rate changes on cash and cash equivalents

 

2,792

 

 

 

3,195

 

 

 

1,621

 

 

 

1,309

 

Net increase in cash and cash equivalents

 

25,615

 

 

 

11,118

 

 

 

54,201

 

 

 

32,111

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

127,433

 

 

 

87,729

 

 

 

98,847

 

 

 

66,736

 

End of period

$

153,048

 

 

$

98,847

 

 

$

153,048

 

 

$

98,847

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

$

7,318

 

 

$

5,322

 

 

$

28,437

 

 

$

15,570

 

Cash paid for income taxes

$

3,888

 

 

$

3,146

 

 

$

14,934

 

 

$

16,303

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

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

$

175

 

 

$

(156

)

 

$

(378

)

 

$

(728

)

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

$

2,805

 

 

$

 

 

$

5,123

 

 

$

967

 

N-able, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

17,621

 

 

$

15,075

 

 

$

68,208

 

 

$

58,610

 

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

 

(363

)

 

 

(263

)

 

 

(1,434

)

 

 

(1,218

)

Amortization of acquired technologies

 

(457

)

 

 

(434

)

 

 

(1,839

)

 

 

(2,477

)

Restructuring costs and other

 

(36

)

 

 

(20

)

 

 

(74

)

 

 

(61

)

Non-GAAP cost of revenue

$

16,765

 

 

$

14,358

 

 

$

64,861

 

 

$

54,854

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

90,794

 

 

$

80,680

 

 

$

353,672

 

 

$

313,159

 

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

 

363

 

 

 

263

 

 

 

1,434

 

 

 

1,218

 

Amortization of acquired technologies

 

457

 

 

 

434

 

 

 

1,839

 

 

 

2,477

 

Restructuring costs and other

 

36

 

 

 

20

 

 

 

74

 

 

 

61

 

Non-GAAP gross profit

$

91,650

 

 

$

81,397

 

 

$

357,019

 

 

$

316,915

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

33,579

 

 

$

31,078

 

 

$

134,691

 

 

$

125,301

 

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

 

(3,715

)

 

 

(2,919

)

 

 

(15,287

)

 

 

(12,500

)

Acquisition related costs

 

4

 

 

 

(3

)

 

 

(24

)

 

 

(21

)

Restructuring costs and other

 

(263

)

 

 

(429

)

 

 

(290

)

 

 

(441

)

Non-GAAP sales and marketing expense

$

29,605

 

 

$

27,727

 

 

$

119,090

 

 

$

112,339

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

19,384

 

 

$

16,820

 

 

$

78,180

 

 

$

63,484

 

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

 

(2,225

)

 

 

(1,463

)

 

 

(8,995

)

 

 

(6,400

)

Acquisition related costs

 

 

 

 

(16

)

 

 

(8

)

 

 

(48

)

Restructuring costs and other

 

(87

)

 

 

(678

)

 

 

(926

)

 

 

(1,028

)

Non-GAAP research and development expense

$

17,072

 

 

$

14,663

 

 

$

68,251

 

 

$

56,008

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

16,008

 

 

$

17,006

 

 

$

69,885

 

 

$

71,125

 

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

 

(4,565

)

 

 

(4,033

)

 

 

(19,377

)

 

 

(17,540

)

Acquisition related costs

 

474

 

 

 

236

 

 

 

1,128

 

 

 

(220

)

Restructuring costs and other

 

(109

)

 

 

(555

)

 

 

(823

)

 

 

(1,132

)

Spin-off costs

 

(112

)

 

 

(268

)

 

 

(735

)

 

 

(1,616

)

Non-GAAP general and administrative expense

$

11,696

 

 

$

12,386

 

 

$

50,078

 

 

$

50,617

 

 

 

 

 

 

 

 

 

GAAP operating income

$

21,811

 

 

$

14,309

 

 

$

70,319

 

 

$

47,396

 

Amortization of acquired technologies

 

457

 

 

 

434

 

 

 

1,839

 

 

 

2,477

 

Amortization of acquired intangibles

 

12

 

 

 

1,468

 

 

 

597

 

 

 

5,854

 

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

 

10,868

 

 

 

8,678

 

 

 

45,093

 

 

 

37,658

 

Acquisition related costs

 

(478

)

 

 

(217

)

 

 

(1,096

)

 

 

289

 

Restructuring costs and other

 

495

 

 

 

1,682

 

 

 

2,113

 

 

 

2,662

 

Spin-off costs

 

112

 

 

 

268

 

 

 

735

 

 

 

1,616

 

Non-GAAP operating income

$

33,277

 

 

$

26,622

 

 

$

119,600

 

 

$

97,952

 

GAAP operating margin

 

20.1

%

 

 

14.9

%

 

 

16.7

%

 

 

12.7

%

Non-GAAP operating margin

 

30.7

%

 

 

27.8

%

 

 

28.3

%

 

 

26.3

%

 

 

 

 

 

 

 

 

GAAP net income

$

9,351

 

 

$

6,985

 

 

$

23,412

 

 

$

16,707

 

Amortization of acquired technologies

 

457

 

 

 

434

 

 

 

1,839

 

 

 

2,477

 

Amortization of acquired intangibles

 

12

 

 

 

1,468

 

 

 

597

 

 

 

5,854

 

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

 

10,868

 

 

 

8,678

 

 

 

45,093

 

 

 

37,658

 

Acquisition related costs

 

(478

)

 

 

(217

)

 

 

(1,096

)

 

 

289

 

Restructuring costs and other

 

495

 

 

 

1,682

 

 

 

2,113

 

 

 

2,662

 

Spin-off costs

 

112

 

 

 

268

 

 

 

735

 

 

 

1,616

 

Tax benefits associated with above adjustments (1)

 

(992

)

 

 

(1,332

)

 

 

(4,472

)

 

 

(5,430

)

Non-GAAP net income

$

19,825

 

 

$

17,966

 

 

$

68,221

 

 

$

61,833

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

0.05

 

 

$

0.04

 

 

$

0.13

 

 

$

0.09

 

Non-GAAP diluted earnings per share

$

0.11

 

 

$

0.10

 

 

$

0.37

 

 

$

0.34

 

 

 

 

 

 

 

 

 

Shares used in computation of diluted earnings per share:

 

186,495

 

 

 

182,162

 

 

 

185,980

 

 

 

181,297

 

 
_________________

(1) The tax benefits associated with non-GAAP adjustments for the three and twelve months ended December 31, 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 December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income

$

9,351

 

 

$

6,985

 

 

$

23,412

 

 

$

16,707

 

Amortization

 

1,571

 

 

 

2,643

 

 

 

6,396

 

 

 

11,191

 

Depreciation

 

3,910

 

 

 

3,527

 

 

 

15,227

 

 

 

13,249

 

Income tax expense

 

7,430

 

 

 

3,373

 

 

 

20,914

 

 

 

13,718

 

Interest expense, net

 

7,720

 

 

 

6,393

 

 

 

30,252

 

 

 

18,852

 

Unrealized foreign currency (gains) losses

 

(1,779

)

 

 

(2,135

)

 

 

358

 

 

 

(1,246

)

Acquisition related costs

 

(478

)

 

 

(217

)

 

 

(1,096

)

 

 

289

 

Spin-off costs

 

112

 

 

 

268

 

 

 

735

 

 

 

1,616

 

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

 

10,868

 

 

 

8,678

 

 

 

45,093

 

 

 

37,658

 

Restructuring costs and other

 

495

 

 

 

1,682

 

 

 

2,113

 

 

 

2,662

 

Adjusted EBITDA

$

39,200

 

 

$

31,197

 

 

$

143,404

 

 

$

114,696

 

Adjusted EBITDA margin

 

36.2

%

 

 

32.6

%

 

 

34.0

%

 

 

30.9

%

N-able, Inc.

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

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

Growth

Rate

 

2023

 

2022

 

Growth

Rate

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenue

$

106,067

 

 

$

93,392

 

13.6

%

 

$

412,072

 

$

362,609

 

13.6

%

Estimated foreign currency impact (1)

 

(1,726

)

 

 

 

(1.9

)

 

 

166

 

 

 

0.1

 

Non-GAAP subscription revenue on a constant currency basis

$

104,341

 

 

$

93,392

 

11.7

%

 

$

412,238

 

$

362,609

 

13.7

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other revenue

$

2,348

 

 

$

2,363

 

(0.7

)%

 

$

9,808

 

$

9,160

 

7.1

%

Estimated foreign currency impact (1)

 

(1

)

 

 

 

 

 

 

52

 

 

 

0.5

 

Non-GAAP other revenue on a constant currency basis

$

2,347

 

 

$

2,363

 

(0.7

)%

 

$

9,860

 

$

9,160

 

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription and other revenue

$

108,415

 

 

$

95,755

 

13.2

%

 

$

421,880

 

$

371,769

 

13.5

%

Estimated foreign currency impact (1)

 

(1,727

)

 

 

 

(1.8

)

 

 

218

 

 

 

 

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

$

106,688

 

 

$

95,755

 

11.4

%

 

$

422,098

 

$

371,769

 

13.5

%

 
_________________

(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 twelve months ended December 31, 2023.

N-able, Inc.

Reconciliation of Unlevered Free Cash Flow

(In thousands)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

31,220

 

 

$

18,398

 

 

$

90,089

 

 

$

71,413

 

Purchases of property and equipment

 

(3,293

)

 

 

(3,144

)

 

 

(13,780

)

 

 

(12,834

)

Purchases of intangible assets

 

(1,881

)

 

 

(4,664

)

 

 

(8,556

)

 

 

(8,176

)

Free cash flow

 

26,046

 

 

 

10,590

 

 

 

67,753

 

 

 

50,403

 

Cash paid for interest, net of cash interest received

 

7,318

 

 

 

5,322

 

 

 

28,437

 

 

 

15,570

 

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

 

1,243

 

 

 

1,677

 

 

 

6,128

 

 

 

8,881

 

Unlevered free cash flow

$

34,607

 

 

$

17,589

 

 

$

102,318

 

 

$

74,854

 

 

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