Summary
N-able posted $99.8 million of total revenue for the quarter ended March 31, 2023, up 9.9% from $90.9 million in the prior-year quarter. Subscription revenue grew roughly 10%, or about 13% on a constant currency basis. Currency was the main drag on the top line. The company estimated a $2.9 million foreign exchange impact on total revenue, which lifted constant currency growth to 13.1%. Gross profit rose 9.2% to $83.6 million, while gross margin eased to 83.8% from 84.3%.
Operating leverage improved. Operating income climbed 29.4% to $14.3 million, and operating margin expanded to 14.4% from 12.2%. Below the operating line the picture darkened. Net income fell 30.6% to $3.5 million, and diluted EPS slipped to $0.02 from $0.03. Management attributed the decline to higher interest expense, research and development, cost of revenue, sales and marketing and income tax expense, partly offset by revenue growth and lower amortization of acquired technologies and intangibles. Non-GAAP results looked sturdier. Adjusted EBITDA was $32.7 million, a 32.8% margin, and non-GAAP net income was $15.0 million, or $0.08 per diluted share.
Cash generation softened. Operating cash flow was $10.6 million, down 19.0% from $13.1 million a year earlier, held back by cash payments for interest and income taxes. Free cash flow, which the company reports after capital expenditures, was $5.0 million against $9.3 million in the prior-year quarter. Capital expenditures of $3.4 million rose 25.9% from $2.7 million. The balance sheet carried $98.1 million of cash and cash equivalents and $336.5 million of total debt, net of debt issuance costs, at March 31, 2023. Deferred revenue of $12.6 million was up 9.5%, and remaining performance obligations of $13.3 million were up 15.4%.
Partner metrics held up. N-able served roughly 25,000 customers at March 31, 2023, and counted 1,936 MSP partners with annualized recurring revenue above $50,000, up from 1,733 a year earlier, an 11.7% increase. Those larger partners grew from about 48% to about 52% of total ARR. The trailing-twelve-month dollar-based net revenue retention rate was approximately 103%, compared with 108% for the trailing-twelve-month period ended March 31, 2022, a decline management tied to adverse foreign currency movements. The press release put the rate at 108% on a constant currency basis.
Guidance points higher. For the second quarter of 2023, management guided to revenue growth of about 12%, or roughly 14% on a constant currency basis, and adjusted EBITDA of $32.0 million to $32.5 million, or 31% to 32% of revenue. For the full year 2023, the company raised its outlook to 11% to 12% revenue growth, or 12% to 13% on a constant currency basis, and adjusted EBITDA of $127 million to $130 million, about 31% of revenue.
Risks stay concentrated in the capital structure and the macro backdrop. Borrowings under the credit agreement carry variable rates, and the company expects interest rates to keep rising through the year, which pressures net income and cash flow. Foreign exchange already trimmed reported growth. Management also flagged inflation, central bank actions to counter it, bank failures and related financial services uncertainty, war and political unrest, and the military conflict between Russia and Ukraine as factors that could reduce information technology spending or delay purchasing decisions. The SolarWinds cyber incident still carries reputational and legal overhang, and the company expects to keep spending on security enhancements across its solutions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $99.8M | $95.8M | +4.2% | $90.9M | +9.9% |
| Gross profit | $83.6M | $80.7M | +3.6% | $76.6M | +9.2% |
| Gross margin | 83.8% | 84.3% | -0.5 pp | 84.3% | -0.5 pp |
| Research & development | $18.8M | $16.8M | +11.8% | $15.4M | +22.3% |
| Sales & marketing | $32.6M | $31.1M | +4.8% | $31.1M | +4.9% |
| General & administrative | $17.3M | $17.0M | +2.0% | $17.6M | -1.6% |
| Total operating expenses | $69.3M | $66.4M | +4.4% | $65.5M | +5.7% |
| Operating income (loss) | $14.3M | $14.3M | +0.1% | $11.1M | +29.4% |
| Operating margin | 14.3% | 14.9% | -0.6 pp | 12.2% | +2.2 pp |
| Net income (loss) | $3.5M | $7.0M | -49.3% | $5.1M | -30.6% |
| Net margin | 3.5% | 7.3% | -3.7 pp | 5.6% | -2.1 pp |
| Diluted EPS | $0.02 | $0.09 | -$0.07 | $0.03 | -$0.01 |
| Customers | 25,000 | 25,000 | ±0.0% | 25,000 | ±0.0% |
| Net retention rate | 103.0% | — | — | 108.0% | -5.0 pp |
Risks
The SolarWinds Cyber Incident has caused reputational harm and had an adverse impact on N-able's reputation, new subscription sales and net retention rates, and the company may in the future become subject to lawsuits, investigations or inquiries related to it. N-able also expects to incur additional expenses in future periods for continued security enhancements across its solutions.
Interest expense, net increased 104.2% to $7.2 million for the three months ended March 31, 2023 compared to the prior-year quarter, driven by higher rates on variable-rate borrowings under the Credit Agreement. The company expects interest rates under the Credit Agreement to continue to increase in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Annual dollar-based net revenue retention rate for subscription products declined to approximately 103% for the trailing twelve-month period ended March 31, 2023 from approximately 108% for the trailing twelve-month period ended March 31, 2022, primarily due to adverse movements in foreign currency exchange rates.
As a global company, N-able faces exposure to adverse movements in foreign currency exchange rates that impact reported assets, liabilities, revenue, operating expenses and cash flows, and FX movements were cited as the driver of the decline in the annual dollar-based net revenue retention rate for the trailing twelve-month period ended March 31, 2023.
Income tax expense increased $1.1 million and the effective tax rate rose to 56.4% for the three months ended March 31, 2023 from 40.7% in the prior-year quarter, primarily due to an increase in income before income taxes outside the United States and a decrease in the unbenefited loss in the United States.
MSP partners with over $50,000 of ARR on the platform grew from approximately 48% of total ARR as of March 31, 2022 to approximately 52% as of March 31, 2023, increasing reliance on a smaller set of larger partners.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Non-GAAP Operating Margin
Adjusted EBITDA
Non-GAAP Gross Margin
Total customers
Unlevered Free Cash Flow
MSP partners with ARR over $50,000
Free Cash Flow
MSP partners with ARR over $50,000 as % of total ARR
Summary, forecast, risks and KPIs are extracted from N-able, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.