N-able, Inc. Q2 FY2025 earnings

N-able closed the fiscal 2025 second quarter with revenue of $131.2 million, up 9.9% from the prior-year quarter, and total ARR of $513.7 million, up 14.5% year over year, or 12.0% on a constant currency basis. The company crossed the $500 million ARR milestone, which management tied to demand for its security suite and expansion through the channel. Customers with more than $50,000 of ARR reached 2,540, up 15.8% from 2,194 a year earlier, and they now account for roughly 60% of total ARR, up from about 56%.

The top line held up. The bottom line did not. GAAP operating income fell 53.9% to $10.1 million for the quarter, and the company swung to a net loss of $4.0 million from net income of $9.5 million a year earlier. Diluted EPS was -$0.02 against $0.05. Gross margin slipped to 78.1% from 84.0%, a drop of 5.8 percentage points, and operating margin fell to 7.7% from 18.4%. Cost of revenue climbed on higher amortization of acquired technologies tied to the November 20, 2024 Adlumin acquisition, and sales and marketing and research and development spending also rose. Year to date, revenue of $249.4 million rose 7.0%, operating income of $11.9 million fell 71.9%, and the net loss reached $11.2 million versus net income of $16.9 million in the prior-year period.

Non-GAAP results look far healthier. Adjusted EBITDA was $41.6 million, or 31.7% of revenue, and non-GAAP net income was $20.4 million, or $0.11 per diluted share. Non-GAAP gross margin was 81.8%. The gap between the two sets of numbers comes from stock-based compensation and related employer-paid payroll taxes of $13.2 million, transaction related costs of $5.6 million, and amortization of acquired intangibles and developed technology of $6.3 million, among other items.

Cash generation was mixed. Operating cash flow of $24.2 million for the quarter was down 11.3% from $27.3 million a year earlier, but year-to-date operating cash flow of $43.9 million was up 39.4%. Capital expenditures of $3.8 million rose 16.8% in the quarter. Free cash flow, defined as operating cash flow less purchases of property and equipment and intangible assets, was $17.4 million, down from $22.1 million. Unlevered free cash flow was $33.3 million. Cash and cash equivalents were $93.9 million at June 30, 2025, and total debt, net of issuance costs, was $332.1 million. The company repurchased $10.0 million of stock during the quarter under a program that authorizes up to $75.0 million.

Backlog metrics expanded. Deferred revenue of $23.3 million was up 117.4% from the prior-year quarter, and remaining performance obligations of $245.1 million rose 37.7%. Headcount stood at 1,882 employees.

Guidance points to a slower second half. For the third quarter of 2025, management expects revenue of $127 million to $128 million, roughly 9% to 10% year-over-year growth, and adjusted EBITDA of $36 million to $37 million, about 28% to 29% of revenue. For the full year 2025, the company raised its ARR outlook to $525 million to $530 million, 9% to 10% growth, and guided to revenue of $500 million to $503 million, 7% to 8% growth, with adjusted EBITDA of $141 million to $144 million.

The filings list a long set of risks: adverse economic conditions, reduced or delayed information technology spending, foreign exchange volatility, and the chance that cyberattacks or security incidents compromise the company's own or its customers' systems. N-able also cites its status as a controlled company, its indebtedness and related borrowing costs, and the possibility that operating income declines as a percentage of revenue as it spends more to expand. Net revenue retention for subscription products was approximately 102% for the trailing twelve months ended June 30, 2025, down from 108% a year earlier, a decline management attributes to pricing and packaging changes and rationalization tied to its Long-Term Contract Initiative.