Summary
N-able reported third quarter revenue of $107.6 million, up 15.0% year over year. Year-to-date revenue was $313.5 million, up 13.6%. On a constant currency basis, total revenue grew approximately 12.9%. Gross profit for the quarter was $90.2 million, up 15.0%, and gross margin was 83.9%, flat compared with the prior-year quarter. Operating income was $18.4 million, up 56.5%, and operating margin was 17.1%, up 4.5 percentage points. Net income was $6.0 million, up 1945.2%, and diluted EPS was $0.03, up $0.03. Year-to-date net income was $14.1 million, up 44.6%, and year-to-date diluted EPS was $0.08, up $0.03. Year-to-date gross margin was 83.9%, down 0.4 percentage points, while year-to-date operating margin was 15.5%, up 3.5 percentage points.
Cash generation improved. Operating cash flow was $27.5 million for the quarter, up 60.4%, and $58.9 million year to date, up 11.0%. Capital expenditures were $3.5 million for the quarter, down 17.5%, and $10.5 million year to date, up 8.2%. Deferred revenue was $11.7 million, up 4.0%, and remaining performance obligations were $18.2 million, up 61.8%. On a non-GAAP basis, adjusted EBITDA was $36.6 million, up approximately 27% year over year, with a 34.0% margin. Non-GAAP net income was $17.2 million, or $0.09 per diluted share, and non-GAAP gross margin was 84.6%. Free cash flow was $22.0 million for the quarter, and unlevered free cash flow was $30.2 million.
Operational metrics point to expansion among larger partners. As of September 30, 2023, N-able had approximately 25,000 customers. MSP partners with annualized recurring revenue over $50,000 totaled 2,134, up from 1,786 a year earlier, an increase of approximately 19%. Those larger partners represented approximately 55% of total ARR, up from approximately 50%. Annual dollar-based net revenue retention for subscription products was approximately 108%, compared with approximately 104% for the trailing twelve-month period ended September 30, 2022. The company ended the quarter with 1,580 employees. Product highlights included being named the number one RMM provider in CRN's 2023 annual report card awards for the third year running, an enhanced integration with SentinelOne, and the launch of N-able Attack Surface Management powered by SentinelOne.
Management provided fourth quarter and full-year 2023 guidance. For the fourth quarter, the company expects total revenue growth of approximately 11% to 12% year over year, or approximately 10% to 11% on a constant currency basis, and adjusted EBITDA of $35.0 to $35.5 million, approximately 33% of total revenue. For full-year 2023, management maintained its revenue growth outlook of approximately 13% year over year on both a reported and constant currency basis. It raised the full-year 2023 adjusted EBITDA outlook to $139.2 to $139.7 million, approximately 33% of total revenue. Risks include adverse economic conditions, foreign exchange fluctuations, rising interest rates, the company's indebtedness, the SolarWinds cyber incident, the spin-off from SolarWinds, competition, security incidents, and the ability to attract and retain employees. Higher interest rates on variable-rate borrowings pressure results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $107.6M | $106.1M | +1.4% | $93.5M | +15.0% |
| Gross profit | $90.2M | $89.1M | +1.3% | $78.4M | +15.0% |
| Gross margin | 83.9% | 84.0% | -0.1 pp | 83.8% | +0.0 pp |
| Research & development | $19.8M | $20.2M | -2.4% | $16.0M | +23.2% |
| Sales & marketing | $33.7M | $34.9M | -3.5% | $31.1M | +8.1% |
| General & administrative | $18.4M | $18.1M | +1.9% | $18.1M | +2.1% |
| Total operating expenses | $71.9M | $73.2M | -1.9% | $66.7M | +7.7% |
| Operating income (loss) | $18.4M | $15.8M | +15.9% | $11.7M | +56.5% |
| Operating margin | 17.1% | 14.9% | +2.1 pp | 12.5% | +4.5 pp |
| Net income (loss) | $6.0M | $4.5M | +33.4% | $294.0K | +1945.2% |
| Net margin | 5.6% | 4.3% | +1.3 pp | 0.3% | +5.3 pp |
| Diluted EPS | $0.03 | $0.02 | +$0.01 | $0.00 | +$0.03 |
| Customers | 25,000 | 25,000 | ±0.0% | 25,000 | ±0.0% |
Risks
The SolarWinds Cyber Incident has caused reputational harm and adversely impacted N-able's reputation, new subscription sales and net retention rates. Although the company believes adverse impacts on financial results have diminished through the three and nine months ended September 30, 2023, it may face future lawsuits, investigations or inquiries and expects additional security enhancement expenses.
Outstanding borrowings under the Credit Agreement bear interest at variable rates, and the company expects interest rates under the Credit Agreement to continue to increase in the year ending December 31, 2023, which could adversely affect financial results and cash flows.
As a global company, N-able faces exposure to adverse movements in foreign currency exchange rates. Fluctuations in foreign currencies impact reported total assets, liabilities, revenue, operating expenses and cash flows upon translation into U.S. dollars.
The company's effective tax rate is affected by changes in tax laws, regulations or rates, valuation allowance, uncertain tax positions, stock-based compensation, permanent nondeductible book and tax differences, and shifts in the allocation of income earned throughout the world.
The company expects to continue to grow its sales and marketing, research and development, and general and administrative organizations, and stock-based compensation expense increased during the three and nine months ended September 30, 2023 compared to prior-year periods, which may pressure operating margins.
The COVID-19 pandemic caused a deceleration in year-over-year subscription revenue growth in the second quarter of 2020, and while the impact continued to dissipate through the third quarter of 2023, risks to the business from the pandemic remain as referenced in the 2022 Annual Report.
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 over $50,000 ARR as % of total ARR
Summary, forecast, risks and KPIs are extracted from N-able, Inc.'s SEC filings for Q3 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.