8-K: N-able Exceeds Expectations in Q3 2024, Raises Full-Year Outlook

N-able reported strong third-quarter results, exceeding revenue and adjusted EBITDA guidance, and subsequently raised its full-year 2024 outlook.

Summary

• N-able announced its financial results for the third quarter of 2024, ending September 30, 2024.
• The company reported total revenue of $116.4 million, an 8.3% increase year-over-year, or 7.3% on a constant currency basis.
• Subscription revenue reached $115.0 million, growing 9.3% year-over-year, or 8.3% on a constant currency basis.
• GAAP net income was $10.8 million, or $0.06 per diluted share, while non-GAAP net income was $24.3 million, or $0.13 per diluted share.
• Adjusted EBITDA was $44.8 million, a 22.7% increase year-over-year, with an adjusted EBITDA margin of 38.5%.
• The company's TTM Dollar Based Net Revenue Retention Rate was 105%.
• N-able updated its full-year 2024 revenue outlook to a midpoint of $462 million and raised its full-year adjusted EBITDA margin outlook to 37%.
• As of September 30, 2024, N-able had $174.4 million in cash and cash equivalents and $333.6 million in total debt, net of issuance costs.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, raised outlook, and strategic initiatives. The company is performing well and is optimistic about the future.

Positives

• N-able exceeded its quarterly revenue and adjusted EBITDA guidance.
• The company experienced strong year-over-year growth in both total and subscription revenue.
• Adjusted EBITDA saw a significant increase, indicating improved profitability.
• The company's net revenue retention rate of 105% demonstrates strong customer loyalty and expansion.
• N-able is actively investing in product development and go-to-market strategies.
• The launch of global compliance initiatives and expansion of the Technology Alliance Program are positive strategic moves.
• The company was honored with a 2024 Stevie award for great employers.

Negatives

• The financial results are preliminary and pending final review by the company and its external auditors.
• The company has a significant amount of debt, with $333.6 million in total debt, net of issuance costs.
• Other revenue decreased by 38.8% year-over-year.

Risks

• The company's forward-looking statements are subject to various risks and uncertainties, including economic conditions and the ability to retain MSP partners.
• Cybersecurity incidents could negatively impact the company's operations and reputation.
• The company's indebtedness could lead to increased borrowing costs and potential restrictions on operations.
• Fluctuations in foreign exchange rates could impact financial results.
• The company's ability to successfully integrate acquisitions and manage growth is a risk factor.

Future Outlook

N-able expects total revenue in the range of $111.5 to $113.0 million for the fourth quarter of 2024, with adjusted EBITDA between $38.0 and $38.5 million. For the full year 2024, total revenue is expected to be between $461.2 and $462.7 million, with adjusted EBITDA between $169.3 and $169.8 million.

Management Comments

• N-able president and CEO John Pagliuca stated that the company made considerable progress during the quarter as product development and go-to-market engines continued to deliver resiliency and efficiency.
• N-able CFO Tim O'Brien noted that the company's outperformance against quarterly guidance reflects its commitment to its mission and execution.

Industry Context

This announcement reflects a positive trend in the IT services and cybersecurity sector, where demand for remote monitoring and management solutions is growing. N-able's focus on compliance and partnerships aligns with industry needs for robust security and integrated solutions.

Comparison to Industry Standards

• N-able's revenue growth of 8.3% year-over-year is solid, but it is important to compare this to peers like ConnectWise, Datto (now part of Kaseya), and SolarWinds MSP. These companies often report similar growth rates in the high single to low double digits.
• The adjusted EBITDA margin of 38.5% is strong and indicates good operational efficiency. Companies like Datto and ConnectWise typically aim for EBITDA margins in the 30-40% range, so N-able is performing well in this regard.
• The TTM Dollar Based Net Revenue Retention Rate of 105% is a positive sign of customer loyalty and expansion. Industry benchmarks for SaaS companies are often in the 100-120% range, so N-able is within a healthy range.
• N-able's focus on compliance initiatives is in line with industry trends, as cybersecurity regulations like CMMC 2.0 and NIS2 are becoming increasingly important for MSPs. This is a key differentiator for N-able.
• The expansion of the Technology Alliance Program is a common strategy in the MSP software space, as it allows companies to offer a more comprehensive suite of solutions. This is similar to how other companies like ConnectWise and Kaseya operate.

Stakeholder Impact

• Shareholders will likely react positively to the strong financial results and raised outlook.
• Employees may be motivated by the company's success and recognition as a great employer.
• Customers (MSPs) will benefit from the company's focus on product development and compliance initiatives.
• Partners will benefit from the expanded Technology Alliance Program.

Next Steps

• N-able will host a conference call to discuss its financial results and business outlook.
• The company will continue to focus on product development, go-to-market strategies, and strategic partnerships.
• N-able will file its quarterly report on Form 10-Q for the period.

Key Dates

Keywords

Managed Service Providers, MSP, IT Services, Remote Monitoring, Data Protection, Cybersecurity, SaaS, Software, Financial Results, EBITDA, Revenue, Subscription