nabl-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40297

N-able, Inc.

(Exact name of registrant as specified in its charter)


Delaware						85-4069861
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

30 Corporate Drive

Suite 400

Burlington, Massachusetts 01803

(781) 328-6490

(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	NABL	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No

On May 9, 2022, 179,921,088 shares of common stock, par value $0.001 per share, were outstanding.

N-able, Inc.

Table of Contents


PART I - FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of March 3 1 , 202 2 and December 31, 202 1	5
	Consolidated Statements of Operations for the three m onth period ended March 31,202 2 and 2021	6
	Consolidated Statements of Comprehensive Loss for the three m onth period ended March 31,2022 and 2021	7
	Consolidated Statements of Stockholders' Equity for the three m onth period ended March 31,2022 and 2021	8
	Consolidated Statements of Cash Flows for the three month period ended March 31,2022 and 2021	9
	Notes to the Consolidated Financial Statements	10
	1. Organization and Nature of Operations
	2. Summary of Significant Accounting Policies
	3. Goodwill
	4. Relationship with Parent and Related Entities
	5. Debt
	6. Earnings Per Share
	7. Income Taxes
	8. Commitment and Contingencies
	9. Subsequent Events
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures of Market Risk	32
Item 4.	Controls and Procedures	33
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signature	38
	Certifications

Safe Harbor Cautionary Statement

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such statements 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. In this report, forward-looking statements include statements regarding our financial projections, future financial performance and plans and objectives for future operations including, without limitation, the following:

•expectations regarding our financial condition and results of operations, including revenue, revenue growth, revenue mix, cost of revenue, operating expenses, operating income, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA and adjusted EBITDA margin, cash flows and effective income tax rate;

•expectations regarding investment in product development and our expectations about the results of those efforts;

•expectations concerning acquisitions and opportunities resulting from our acquisitions;

•expectations regarding hiring additional personnel globally in the areas of sales and marketing and research and development;

•intentions regarding our international earnings;

•expectations regarding our capital expenditures;

•expectations regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition;

•our beliefs regarding the sufficiency of our cash and cash equivalents, cash flows from operating activities and borrowing capacity; and

•expectations regarding our spin-off from SolarWinds Corporation ("SolarWinds") into a newly created and separately traded public company.

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:

•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;

•the possibility that the global COVID-19 pandemic may continue to adversely affect our business, results of operations and financial condition or the impact of the COVID-19 pandemic on the global economy or on the business operations and financial conditions of our customers, their end customers and our prospective customers;

•our ability to sell subscriptions to new 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;

•any decline in our renewal or net retention rates;

•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, 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 financial condition or results of operations;

•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;

•any inability to successfully identify, complete and integrate acquisitions and manage our growth effectively;

•risks associated with our international operations;

•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;

•our status as a controlled company;

•our ability to attract and retain qualified employees and key personnel as a standalone public company;

•the timing and success of new product introductions and product upgrades by N-able or its competitors;

•our ability to protect and defend our intellectual property and not infringe upon others’ intellectual property;

•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;

•potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity;

•our indebtedness, including potential restrictions on our operations and the impact of events of default;

•our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States; and

•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 this Quarterly Report on Form 10-Q.

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially and adversely from those anticipated in these forward-looking statements, even if new information becomes available in the future.

In this report “N-able,” “Company,” “we,” “us” and “our” refer to N-able, Inc. and its consolidated subsidiaries, and references to “SolarWinds” and “Parent” refer to SolarWinds Corporation.

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

N-able, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)


	March 31,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	70,439	$	66,736

Accounts receivable, net of allowances of $1,636 and $1,653 as of March 31, 2022 and December 31, 2021, respectively	33,963		33,041
Income tax receivable	8,212		7,250

Prepaid and other current assets	14,004		13,962
Total current assets	126,618		120,989
Property and equipment, net	37,481		38,748
Operating lease right-of-use assets	35,893		36,206
Deferred taxes	1,685		1,681
Goodwill	833,493		840,923
Intangible assets, net	5,603		8,066
Other assets, net	9,387		9,086
Total assets	$	1,050,160	$	1,055,699
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,192	$	5,865
Due to affiliates	38		464
Accrued liabilities and other	24,303		30,944
Current operating lease liabilities	5,634		4,830


Income taxes payable	8,060		4,600
Current portion of deferred revenue	11,336		10,675
Current debt obligation	3,500		3,500
Total current liabilities	56,063		60,878
Long-term liabilities:

Deferred revenue, net of current portion	209		223
Non-current deferred taxes	3,116		2,632
Non-current operating lease liabilities	36,905		37,822
Long-term debt, net of current portion	334,902		335,379
Other long-term liabilities	410		410
Total liabilities	431,605		437,344
Commitments and contingencies (Note 8)

Stockholders’ equity:
Common stock, $0.001 par value: 550,000,000 shares authorized and 179,915,692 and 179,049,429 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	180		179
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	—		—

Additional paid-in capital	607,261		602,996
Accumulated other comprehensive income	5,886		15,053
Retained earnings	5,228		127
Total stockholders' equity	618,555		618,355
Total liabilities and stockholders' equity	$	1,050,160	$	1,055,699

The accompanying notes are an integral part of these Consolidated Financial Statements.

N-able, Inc.

Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Revenue:
Subscription and other revenue	$	90,860	$	83,190
Cost of revenue:
Cost of revenue	13,281		11,304
Amortization of acquired technologies	982		2,704
Total cost of revenue	14,263		14,008
Gross profit	76,597		69,182
Operating expenses:
Sales and marketing	31,054		25,714
Research and development	15,385		12,042
General and administrative	17,629		20,228
Amortization of acquired intangibles	1,461		6,019
Total operating expenses	65,529		64,003
Operating income	11,068		5,179
Other expense:
Interest expense, net	(3,526)		(6,518)
Other income (expense), net	1,059		(529)
Total other expense	(2,467)		(7,047)
Income before income taxes	8,601		(1,868)
Income tax expense	3,500		2,410
Net income (loss)	$	5,101	$	(4,278)

Net income (loss) per share:
Basic earnings (loss) per share	$	0.03	$	(0.03)
Diluted earnings (loss) per share	$	0.03	$	(0.03)
Weighted-average shares used to compute net income (loss) per share:
Shares used in computation of basic earnings (loss) per share:	179,460		158,124
Shares used in computation of diluted earnings (loss) per share:	180,184		158,124

The accompanying notes are an integral part of these Consolidated Financial Statements.

N-able, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net income (loss)	$	5,101	$	(4,278)
Other comprehensive loss:
Foreign currency translation adjustment	(9,167)		(19,319)

Other comprehensive loss	(9,167)		(19,319)
Comprehensive loss	$	(4,066)	$	(23,597)

The accompanying notes are an integral part of these Consolidated Financial Statements.

N-able, Inc.

Consolidated Statements of Stockholders' Equity

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2022
	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Retained Earnings		Total
Balance at December 31, 2021	179,049	$	179	$	602,996	$	15,053	$	127	$	618,355
Net income	—	—		—		—		5,101		5,101
Foreign currency translation adjustment	—	—		—		(9,167)		—		(9,167)
Exercise of stock options	13	—		16		—		—		16
Restricted stock units issued, net of shares withheld for taxes	746	1		(4,554)		—		—		(4,553)
Issuance of stock	51	—		—		—		—		—
Issuance of stock under employee stock purchase plan	57	—		568		—		—		568
Stock-based compensation	—	—		8,235		—		—		8,235
Balance as of March 31, 2022	179,916	$	180	$	607,261	$	5,886	$	5,228	$	618,555


	Three Months Ended March 31, 2021

	Parent Company Net Investment		Accumulated Other Comprehensive Income		Total
Balance at December 31, 2020	$	582,206	$	48,991	$	631,197
Net loss	(4,278)		—		(4,278)
Foreign currency translation adjustment	—		(19,319)		(19,319)
Stock-based compensation	4,749		—		4,749
Net transfers from Parent	2,383		—		2,383
Balance as of March 31, 2021	$	585,060	$	29,672	$	614,732

The accompanying notes are an integral part of these Consolidated Financial Statements

N-able, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	5,101	$	(4,278)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	6,338		11,330
(Benefit from) provision for doubtful accounts	(17)		283
Stock-based compensation expense	8,169		4,749
Deferred taxes	480		(1,450)
Amortization of debt issuance costs	398		—
Operating lease right-of-use assets, net	(892)		(151)
(Gain) loss on foreign currency exchange rates	(825)		421
Other non-cash expenses	39		2
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable	(1,097)		188
Income tax receivable	(972)		(546)
Prepaid expenses and other assets	(59)		(3,593)
Accounts payable	(2,043)		(3,314)
Due to and from affiliates	(394)		10,577
Accrued liabilities and other	(4,945)		(1,851)
Accrued related party interest payable	—		3,245
Income taxes payable	3,363		(2,603)
Deferred revenue	673		160
Other long-term assets	(187)		—
Net cash provided by operating activities	13,130		13,169
Cash flows from investing activities
Purchases of property and equipment	(2,704)		(2,417)
Purchases of intangible assets	(1,141)		(2,335)

Net cash used in investing activities	(3,845)		(4,752)
Cash flows from financing activities



Payments of tax withholding obligations related to restricted stock	(4,553)		—
Exercise of stock options	16		—
Proceeds from issuance of common stock under employee stock purchase plan	568		—


Repayments of borrowings from Credit Agreement	(875)		—
Net transfers from Parent	—		2,383
Net cash (used in) provided by financing activities	(4,844)		2,383
Effect of exchange rate changes on cash and cash equivalents	(738)		628
Net increase in cash and cash equivalents	3,703		11,428
Cash and cash equivalents
Beginning of period	66,736		99,790
End of period	$	70,439	$	111,218

Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,057	$	3,273
Cash paid for income taxes	$	707	$	7,182

Supplemental disclosure of non-cash activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses	$	(483)	$	(2,034)
Right-of-use assets obtained in exchange for operating lease liabilities	$	967	$	316

The accompanying notes are an integral part of these Consolidated Financial Statements.

N-able, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Organization and Nature of Operations

Background

On August 6, 2020, SolarWinds Corporation ("SolarWinds" or "Parent") announced that its board of directors had authorized management to explore a potential spin-off of its managed service provider ("MSP") business into our company, a newly created and separately traded public company, and separate into two distinct, publicly traded companies (the "Separation").

On July 19, 2021, SolarWinds completed the Separation through a pro-rata distribution (the "Distribution") of all the outstanding shares of our common stock it held to the stockholders of record of SolarWinds as of the close of business on July 12, 2021 (the "Record Date"). Each SolarWinds stockholder of record received one share of our common stock, $0.001 par value, for every two shares of SolarWinds common stock, $0.001 par value, held by such stockholder as of the close of business on the Record Date. SolarWinds distributed 158,020,156 shares of our common stock in the Distribution, which was effective at 11:59 p.m., Eastern Time, on July 19, 2021. The Distribution reflected 316,040,312 shares of SolarWinds common stock outstanding on July 12, 2021 at a distribution ratio of one share of our common stock for every two shares of SolarWinds common stock. In addition, on July 19, 2021, and prior to completion of the Distribution, we issued 20,623,282 newly-issued shares of our common stock in connection with a private placement of N-able’s common stock (the “Private Placement”). As a result of the Distribution, we became an independent public company and our common stock is listed under the symbol "NABL" on the New York Stock Exchange. Our financial statements for the periods through the Separation and Distribution date of July 19, 2021 are prepared on a “carve-out” basis as described below.

Description of Business

N-able, Inc., a Delaware corporation, together with its subsidiaries is a leading global provider of cloud-based software solutions for MSPs, enabling them to support digital transformation and growth for small and medium-sized enterprises ("SMEs"), which we define as those enterprises having less than 1,000 employees. With a flexible technology platform and powerful integrations, N-able makes it easy for MSPs to monitor, manage, and protect their end-customer systems, data, and networks. Our growing portfolio of security, automation, and backup and recovery solutions is built for IT services management professionals. N-able simplifies complex ecosystems and enables customers to solve their most pressing challenges. In addition, we provide extensive, proactive support—through enriching partner programs, hands-on training, and growth resources—to help MSPs deliver exceptional value and achieve success at scale. Through our multi-dimensional land and expand model and global presence, we are able to drive strong recurring revenue growth and profitability.

N-able qualifies as an “emerging growth company” (“EGC”) as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim Consolidated Financial Statements do not include all of the information and footnotes required by United States of America generally accepted accounting principles ("GAAP") for complete financial statements. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

Prior to the Separation from SolarWinds

Our financial statements for the periods through the Separation and Distribution date of July 19, 2021 are Consolidated Financial Statements prepared on a “carve-out” basis. The Consolidated Statements of Operations include all revenues and costs directly attributable to N-able as well as an allocation of expenses related to facilities, functions and services provided by SolarWinds prior to the Separation and Distribution. These corporate expenses have been allocated to us based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount. See Note 4. Relationship with Parent and Related Entities for further details. The allocated costs were deemed to be settled by N-able to SolarWinds in the period in which the expense was recorded in the Consolidated Statements of Operations and these settlements were reflected in cash flows from operating activities in the Consolidated Statements of Cash Flows. Current and deferred income taxes and related tax expense have been determined based on the stand-alone results of N-able by applying Accounting Standards Codification No. 740, Income Taxes (“ASC 740”), to N-able’s operations in each country as if it were a separate taxpayer (i.e. following the Separate Return Methodology).

N-able, Inc.

Notes to Consolidated Financial Statements (Unaudited)

SolarWinds maintains various stock-based compensation plans at a corporate level. N-able employees participated in those programs prior to the Separation and Distribution and a portion of the compensation cost associated with those plans is included in N-able’s Consolidated Statements of Operations. The stock-based compensation expense is included within Parent company net investment for periods prior to the Separation and Distribution, with the accumulated balance included within Parent company net investment being transferred to additional paid-in capital upon consummation of the Separation and Distribution. The amounts presented in the Consolidated Financial Statements are not necessarily indicative of future awards. See Note 4. Relationship with Parent and Related Entities for further details.

SolarWinds' third party debt and the related interest have not been allocated to us for any of the applicable periods presented because SolarWinds' borrowings were primarily for corporate cash purposes and were not directly attributable to N-able. In addition, none of the N-able legal entities guaranteed the debt nor were they jointly and severally liable for SolarWinds' debt.

Any transactions which have been included in the Consolidated Financial Statements from legal entities which are not exclusively operating as N-able legal entities are considered to be effectively settled in the Consolidated Financial Statements at the time the transaction is recorded between SolarWinds and the N-able business. The total net effect of the settlement of these intercompany transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity. See Note 4. Relationship with Parent and Related Entities for further details.

All of the allocations and estimates in the Consolidated Financial Statements are based on assumptions that management believes are reasonable. However, the Consolidated Financial Statements included herein may not be indicative of the results of operations and cash flows of N-able in the future or if N-able had been a separate, stand-alone publicly traded entity during the applicable periods presented. Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Going forward, we may perform these functions using our own resources or outsourced services. For a period following the Separation and Distribution, however, some of these functions continue to be provided by SolarWinds under a Transition Services Agreement. Additionally, we provide some services to SolarWinds under such Transition Services Agreement. See Note 4. Relationship with Parent and Related Entities for further details regarding allocated shared costs with SolarWinds.

Following the Separation from SolarWinds

Our financial statements for periods from July 20, 2021 forward are Consolidated Financial Statements based on our reported results as a standalone company. We prepared our Consolidated Financial Statements in conformity with GAAP and the reporting regulations of the Securities and Exchange Commission ("SEC"). The accompanying Consolidated Financial Statements include the accounts of N-able, Inc. and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019 ("COVID-19") pandemic on our business, results of operations and financial condition is uncertain. We have made estimates of the impact of the COVID-19 pandemic within our financial statements as of and for the three months ended March 31, 2022 and 2021 which did not result in material adjustments. The estimates assessed included, but were not limited to, allowances for credit losses, the carrying values of goodwill and intangible assets and other long-lived assets, valuation allowances for tax assets and revenue recognition and may change in future periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include:

•the valuation of goodwill, intangibles, long-lived assets and contingent consideration;

•revenue recognition;

•income taxes; and

•management’s assessment of allocations of expenses prior to the Separation and Distribution.

N-able, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Recently Adopted and Issued Accounting Pronouncements

As of March 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that are expected to have a material impact on our consolidated financial position, results of operations, or cash flows.

Fair Value Measurements

We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis.

The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us.

Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1.

Level 3: Inputs that are unobservable in the marketplace and significant to the valuation.

The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. Our related party debt with SolarWinds Holdings, Inc. prior to the Separation is not carried at fair value. See Note 4. Relationship with Parent and Related Entities for further details regarding our related party debt.

The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. We held no financial instruments as of March 31, 2022 and December 31, 2021. As of March 31, 2022 and December 31, 2021, the carrying value of our outstanding debt approximates its estimated fair value as the interest rate on the debt is adjusted for changes in market rates. See Note 5. Debt for additional information regarding our debt.

Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income by component are summarized below:


	Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Income

	(in thousands)




Balance at December 31, 2021	$	15,053	$	15,053
Other comprehensive loss before reclassification	(9,167)		(9,167)

Net current period other comprehensive loss	(9,167)		(9,167)
Balance at March 31, 2022	$	5,886	$	5,886

N-able, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Revenue

Our revenue consists of the following:


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Subscription revenue	$	88,635	$	80,671
Other revenue	2,225		2,519
Total subscription and other revenue	$	90,860	$	83,190

During the three month periods ended March 31, 2022 and 2021, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Revenue recognized at a point in time	$	15,514	$	15,111
Revenue recognized over time	75,346		68,079
Total revenue recognized	$	90,860	$	83,190

Deferred Revenue

Deferred revenue primarily consists of transaction prices allocated to remaining performance obligations from annually billed subscription agreements and maintenance services associated with our historical sales of perpetual license products which are delivered over time. Certain of our maintenance agreements are billed annually in advance for services to be performed over a 12-month period. We initially record the amounts allocated to maintenance performance obligations as deferred revenue and recognize these amounts ratably on a daily basis over the term of the maintenance agreement.

Details of our total deferred revenue balance was as follows:


	Total Deferred Revenue

	(in thousands)
Balance at December 31, 2021	$	10,898

Deferred revenue recognized	(4,661)
Additional amounts deferred	5,308

Balance at March 31, 2022	$	11,545

We expect to recognize revenue related to remaining performance obligations as of March 31, 2022 as follows:

Revenue Recognition Expected by Period

Total

Less than 1 year

1-3 years

More than 3 years

(in thousands)

Expected recognition of deferred revenue

SEC Form 10-Q filed by N-able Inc.