8-K: N-able Acquires Adlumin, Bolstering Security Platform with Cloud-Native XDR and MDR

N-able has acquired Adlumin to integrate its cloud-native XDR and MDR capabilities into its existing security and IT management platform.

Summary

• N-able has acquired Adlumin, a provider of security operations platforms, to enhance its security offerings.
• The acquisition builds on an existing partnership between the two companies, which has already shown strong growth.
• The deal includes approximately $100 million in cash, 1,570,762 shares of N-able's common stock, $120 million in deferred cash payments, and up to $30 million in earn-out payments.
• Adlumin's platform is cloud-native and provides XDR and MDR services, which will be integrated into N-able's platform.
• N-able expects the acquisition to be immediately accretive to ARR growth and accretive to cash flow by the fourth quarter of 2025.
• Adlumin's standalone business has $22 million in ARR and is growing at over 60% year-over-year.
• N-able has updated its financial outlook for the fourth quarter of 2024, projecting total revenue between $113.3 and $114.8 million and adjusted EBITDA between $35.0 and $35.5 million.
• For the full year 2024, N-able expects total revenue between $463.0 and $464.5 million and adjusted EBITDA between $166.3 and $166.8 million.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic acquisition, expected financial benefits, and strong growth projections. The language used is optimistic and forward-looking, indicating confidence in the deal's success.

Positives

• The acquisition is expected to be immediately accretive to N-able's ARR growth.
• The combination of N-able and Adlumin's technologies is expected to provide a more comprehensive security solution.
• The acquisition builds on a successful existing partnership, indicating a strong market fit.
• Adlumin's cloud-native platform aligns with current market trends and customer needs.
• The acquisition is expected to enhance N-able's ability to address the growing cybersecurity services market.

Risks

• There are risks related to integrating the acquired business, technology, and employees.
• The acquisition could disrupt existing business and operational relationships.
• There are potential negative effects on N-able's stock price, credit ratings, or operating results.
• There are risks related to unknown liabilities and the adequacy of insurance coverage.
• Security risks related to the acquired technology could lead to cyberattacks or other security incidents.
• There is a risk of higher MSP partner and employee attrition and the loss of key personnel.
• The acquisition could lead to litigation or regulatory scrutiny.

Future Outlook

N-able anticipates that this acquisition will be immediately accretive to ARR growth and accretive to cash flow by the fourth quarter of 2025. The company has also provided updated financial outlook for the fourth quarter of 2024 and full-year 2024.

Management Comments

• John Pagliuca, President and CEO of N-able, stated that cloud-native XDR and MDR solutions are mission-critical for their customers.
• He also mentioned that they determined they could scale their business faster by owning Adlumin.
• Robert Johnston, CEO of Adlumin, expressed excitement about joining forces with N-able to deliver enterprise-grade security to businesses of all sizes.

Industry Context

This acquisition reflects the growing demand for comprehensive cybersecurity solutions, particularly cloud-native XDR and MDR, within the managed services provider (MSP) market. It also highlights the increasing convergence of IT operations and security operations.

Comparison to Industry Standards

• The acquisition of Adlumin by N-able is similar to other moves in the cybersecurity industry where larger companies acquire smaller, innovative firms to enhance their product offerings.
• For example, companies like CrowdStrike and Palo Alto Networks have made similar acquisitions to expand their capabilities in areas like XDR and MDR.
• The projected ARR growth of Adlumin at 60%+ is very strong compared to industry averages, indicating a high demand for their services.
• N-able's expectation of immediate ARR accretion and cash flow accretion by Q4 2025 is a positive sign, but will need to be monitored against actual results.
• The total consideration of $236 million to $266 million is a significant investment, reflecting the strategic importance of cybersecurity in the current market.

Stakeholder Impact

• Shareholders can expect potential growth in ARR and cash flow.
• Employees of both companies will be integrated into a single organization.
• Customers will benefit from a more comprehensive security solution.
• Partners will have access to a broader range of services and technologies.

Next Steps

• N-able will integrate Adlumin's technology into its platform.
• N-able will host a conference call to discuss the acquisition.
• N-able will work to scale its security portfolio and ARR from the acquisition.
• N-able will enter into a registration rights agreement with certain equity holders of Adlumin.

Key Dates

Keywords

acquisition, XDR, MDR, cybersecurity, cloud-native, security operations, managed services, IT management, N-able, Adlumin, ARR, EBITDA