Summary
N-able reported second quarter fiscal 2022 revenue of $91.6 million, up 7.4% from the prior-year quarter. Gross profit reached $77.5 million, up 6.8%, while gross margin was 84.5%, down from the prior-year quarter. Operating income was $10.3 million, up 4.2%, and operating margin was 11.2%, down from the prior-year quarter. Net income was $4.3 million, up from the prior-year quarter, and diluted EPS was $0.02, up from the prior-year quarter. For the first six months of fiscal 2022, revenue was $182.5 million, up 8.3%. Year-to-date net income was $9.4 million, up from a prior-year loss, and year-to-date diluted EPS was $0.05, up from a prior-year loss per share.
The company ended June 30, 2022 with approximately 25,000 customers. MSP partners with annualized recurring revenue over $50,000 totaled 1,818, up from 1,647 a year earlier, an increase of 10.4%. Those larger partners represented approximately 50% of total ARR, up from approximately 46%. The trailing twelve-month dollar-based net retention rate for subscription products was approximately 106%, compared with 110% a year earlier. N-able launched Cove Data Protection and later added Standby Image, and it introduced N-able N-hanced Services. MarketBuilder marked its first anniversary with adoption by more than 2,500 partners, who generated over 4,600 leads, created 14,000 social media posts with a combined 1.8 million followers, and sent 350,000 emails with an open rate of approximately 20%. Cove Data Protection for Microsoft 365 surpassed one million protected users, with more than 4,600 partners using it across more than 36,000 customer domains and over 1.2 million Exchange mailboxes. After the quarter, N-able acquired Spinpanel.
Cash generation improved. Operating cash flow was $22.7 million for the quarter, up from the prior-year quarter. Capital expenditures were $2.7 million, down from the prior-year quarter. Free cash flow was $18.8 million, compared with negative $0.3 million in the prior-year quarter. Unlevered free cash flow was $25.1 million, compared with $15.0 million. Deferred revenue and remaining performance obligations were both $11.1 million, up 16.4% from the prior-year quarter.
Management provided guidance for the third quarter of 2022 and full year 2022. For the third quarter, total revenue is expected in the range of $92.5 million to $93.0 million, representing approximately 5% year-over-year growth, or approximately 11% to 12% growth on a constant currency basis. Adjusted EBITDA is expected in the range of $26.5 million to $27.0 million, representing approximately 29% of total revenue. For full year 2022, total revenue is expected in the range of $370 million to $372 million, representing 7% year-over-year growth, or 12% to 13% year-over-year growth on a constant currency basis. Adjusted EBITDA is expected in the range of $107.0 million to $109.0 million, representing approximately 29% of total revenue. The full-year revenue outlook includes 2 points of negative foreign exchange impact. Risks include COVID-19, inflation, rising interest rates, war and political unrest, military conflict including between Russia and Ukraine, sanctions, foreign exchange losses, the SolarWinds cyber incident and its reputational harm, and the company's indebtedness. The company also faces risks related to its spin-off from SolarWinds and its ability to integrate acquisitions such as Spinpanel.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $91.6M | $90.9M | +0.8% | $85.3M | +7.4% |
| Gross profit | $77.5M | $76.6M | +1.1% | $72.5M | +6.8% |
| Gross margin | 84.5% | 84.3% | +0.2 pp | 85.0% | -0.4 pp |
| Research & development | $15.2M | $15.4M | -0.9% | $12.5M | +21.9% |
| Sales & marketing | $32.0M | $31.1M | +3.1% | $24.5M | +30.7% |
| General & administrative | $18.4M | $17.6M | +4.6% | $21.4M | -13.7% |
| Total operating expenses | $67.2M | $65.5M | +2.5% | $62.6M | +7.2% |
| Operating income (loss) | $10.3M | $11.1M | -7.0% | $9.9M | +4.2% |
| Operating margin | 11.2% | 12.2% | -0.9 pp | 11.6% | -0.3 pp |
| Net income (loss) | $4.3M | $5.1M | -15.2% | $462.0K | +836.6% |
| Net margin | 4.7% | 5.6% | -0.9 pp | 0.5% | +4.2 pp |
| Diluted EPS | $0.02 | $0.03 | -$0.01 | $0.00 | +$0.02 |
| Customers | 25,000 | 25,000 | ±0.0% | 25,000 | ±0.0% |
| Net retention rate | 106.0% | 108.0% | -2.0 pp | 109.0% | -3.0 pp |
Risks
The SolarWinds Cyber Incident has caused reputational harm and an adverse impact on N-able's new subscription sales and net retention rates. The annual dollar-based net revenue retention rate for subscription products was approximately 106% for the trailing twelve months ended June 30, 2022, down from 110% for the trailing twelve months ended June 30, 2021, and the company notes the incident could continue to adversely affect results in future periods.
The COVID-19 pandemic created significant volatility and uncertainty, particularly for the SME end customers of N-able's MSP partners. The company experienced a deceleration in year-over-year subscription revenue growth in the second quarter of 2020 due to increased churn, downgrades and slower MSP partner adds, and states it cannot predict the long-term impact of the pandemic on its business.
Following the July 19, 2021 Separation from SolarWinds, N-able is incurring increased costs as a standalone public company, including higher general and administrative expense and allocated facilities and IT costs. Spin-off costs were $0.4 million in the three months ended June 30, 2022 versus $6.0 million in the prior-year quarter, and the company expects G&A expense to increase as a result of standalone operations.
Stock-based compensation expense and related employer-paid payroll taxes rose sharply, reaching $10.0 million in the three months ended June 30, 2022 versus $4.4 million in the prior-year quarter, driven by conversion of equity awards at Separation and new awards. This contributed to sales and marketing expense increasing 30.7% in the quarter, pressuring operating margins.
N-able carries total borrowings of $337.9 million as of June 30, 2022 under a Credit Agreement with a floating-rate term loan and revolving facility. Interest expense, net was $3.8 million in the three months ended June 30, 2022, and the company remains exposed to changes in interest rates on this debt.
Revenue is concentrated geographically, with the United States accounting for approximately 48.4% and the United Kingdom approximately 10.4% of total revenue for the three months ended June 30, 2022. This concentration exposes results to region-specific economic and currency conditions.
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 Q2 FY2022 (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 2, 2026.