nabl-20240930

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 September 30, 2024


☐			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 November 4, 2024, 185,755,674 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 (Unaudited)	5
	Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	5
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	6
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30 , 2024 and 2023	7
	Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30 , 2024 and 2023	8
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30 , 2024 and 2023	10
	Notes to the Consolidated Financial Statements	11
	1. Organization and Nature of Operations
	2. Summary of Significant Accounting Policies
	3. Acquisitions
	4. Goodwill
	5. Relationship with Parent and Related Entities
	6. Fair Value Measurements
	7. Accrued Liabilities and Other
	8. Debt
	9. Earnings Per Share
	10. Income Taxes
	11. Commitment and Contingencies

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures of Market Risk	35
Item 4.	Controls and Procedures	36
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38

Item 5.	Other Information	38
Item 6.	Exhibits	39
	Signature	40

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 the impact of foreign exchange rates and macroeconomic conditions on our business;

•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;

•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 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 impact of adverse economic conditions;

•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;

•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 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;

•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;

•any inability to resell third-party software or integrate third-party software into our solutions, or find suitable replacements for such third-party software;

•risks associated with our international operations;

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

•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;

•our status as a controlled company;

•our ability to attract and retain qualified employees and key personnel;

•the timing and success of new product introductions and product upgrades by us or our 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 a percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business;

•our indebtedness, including increased borrowing costs resulting from rising interest rates, 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 described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

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)


	September 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	174,445	$	153,048
Accounts receivable, net of allowances of $1,099 and $1,171 as of September 30, 2024 and December 31, 2023, respectively	39,626		40,013
Income tax receivable	14,897		8,001
Recoverable taxes	21,907		12,116
Current contract assets	16,020		1,124
Prepaid and other current assets	15,382		10,489
Total current assets	282,277		224,791
Property and equipment, net	34,514		36,838
Operating lease right-of-use assets	29,732		32,067
Deferred taxes	1,066		1,087
Goodwill	843,884		838,497
Intangible assets, net	5,379		6,717
Other assets, net	26,606		22,794
Total assets	$	1,223,458	$	1,162,791
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,530	$	5,239
Accrued liabilities and other	46,472		49,366
Current operating lease liabilities	6,116		6,443
Income taxes payable	20,234		4,523
Current portion of deferred revenue	10,926		12,646
Current debt obligation	3,500		3,500
Total current liabilities	93,778		81,717
Long-term liabilities:
Deferred revenue, net of current portion	244		167
Non-current deferred taxes	1,885		1,820
Non-current operating lease liabilities	32,177		33,064
Long-term debt, net of current portion	330,081		331,509
Other long-term liabilities	342		3,154
Total liabilities	458,507		451,431
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.001 par value: 550,000,000 shares authorized and 185,747,109 and 183,220,689 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	186		183
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	686,072		666,522
Accumulated other comprehensive income	10,779		4,409
Retained earnings	67,914		40,246
Total stockholders' equity	764,951		711,360
Total liabilities and stockholders' equity	$	1,223,458	$	1,162,791

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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue:
Subscription and other revenue	$	116,442	$	107,567	$	349,638	$	313,465
Cost of revenue:
Cost of revenue	19,433		16,893		55,975		49,205
Amortization of acquired technologies	467		463		1,386		1,382
Total cost of revenue	19,900		17,356		57,361		50,587
Gross profit	96,542		90,211		292,277		262,878
Operating expenses:
Sales and marketing	32,294		33,660		100,960		101,112
Research and development	22,995		19,752		67,468		58,796
General and administrative	17,330		18,438		57,427		53,877
Amortization of acquired intangibles	15		11		44		585
Total operating expenses	72,634		71,861		225,899		214,370
Operating income	23,908		18,350		66,378		48,508
Other expense:
Interest expense, net	(7,535)		(7,802)		(22,762)		(22,532)
Other income (expense), net	2,269		(423)		3,696		1,569
Total other expense, net	(5,266)		(8,225)		(19,066)		(20,963)
Income before income taxes	18,642		10,125		47,312		27,545
Income tax expense	7,885		4,112		19,644		13,484
Net income	$	10,757	$	6,013	$	27,668	$	14,061
Net income per share:
Basic earnings per share	$	0.06	$	0.03	$	0.15	$	0.08
Diluted earnings per share	$	0.06	$	0.03	$	0.15	$	0.08
Weighted-average shares used to compute net income per share:
Shares used in computation of basic earnings per share:	185,506		182,710		184,840		182,135
Shares used in computation of diluted earnings per share:	188,074		186,221		188,039		185,506

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

N-able, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income	$	10,757	$	6,013	$	27,668	$	14,061
Other comprehensive income (loss):
Foreign currency translation adjustment	19,800		(10,575)		6,370		(6,105)

Other comprehensive income (loss)	19,800		(10,575)		6,370		(6,105)
Comprehensive income	$	30,557	$	(4,562)	$	34,038	$	7,956

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 September 30, 2024
	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings		Total








Balance as of June 30, 2024	185,233	$	185	$	676,049	$	(9,021)	$	57,157	$	724,370
Net income	—	—		—		—		10,757		10,757
Foreign currency translation adjustment	—	—		—		19,800		—		19,800
Exercise of stock options	9	—		4		—		—		4
Restricted stock units issued, net of shares withheld for taxes	396	1		(2,826)		—		—		(2,825)

Issuance of stock under employee stock purchase plan	109	—		1,182		—		—		1,182
Stock-based compensation	—	—		11,663		—

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