N-able, Inc. Q3 FY2024 earnings

N-able's third quarter of 2024 revenue was $116.4 million, up 8.3% from the prior-year quarter. Year-to-date revenue reached $349.6 million, up 11.5%. Gross profit was $96.5 million for the quarter, up 7.0%, and $292.3 million year to date, up 11.2%. Gross margin slipped to 82.9%, down 1.0 percentage point from the prior-year quarter, and year-to-date gross margin was 83.6%, down 0.3 percentage point. Operating income rose 30.3% to $23.9 million in the quarter, and operating margin expanded to 20.5%, up 3.5 percentage points. Year-to-date operating income was $66.4 million, up 36.8%, with operating margin of 19.0%, up 3.5 percentage points. Net income was $10.8 million, up 78.9%, and diluted EPS was $0.06, up $0.03. Year-to-date net income was $27.7 million, up 96.8%, and diluted EPS was $0.15, up $0.07.

Operating cash flow was $22.0 million in the quarter, down 20.1% from the prior-year quarter, and $53.5 million year to date, down 9.2%. Capital expenditures were $3.7 million in the quarter, up 6.3%, and $10.4 million year to date, down 0.6%. Deferred revenue was $11.2 million, down 4.4% from the prior-year quarter. Remaining performance obligations jumped to $193.4 million, up 963.8%, reflecting the Long-Term Contract Initiative that began materially affecting results in the second quarter of 2024. Management said it believes existing cash and cash equivalents and cash flows from operating activities will be sufficient to fund operations and meet commitments for capital expenditures for at least the next twelve months.

Annual dollar-based net revenue retention for subscription products was approximately 105% for the trailing twelve-month period ended September 30, 2024, down from approximately 108% a year earlier. The company had approximately 25,000 customers as of September 30, 2024. MSP partners with annualized recurring revenue over $50,000 totaled 2,275, up from 2,134 a year earlier, an increase of 6.6%, and those partners represented approximately 57% of total ARR, up from approximately 55%. Non-GAAP adjusted EBITDA was $44.8 million, up 22.7%, with an adjusted EBITDA margin of 38.5%. Non-GAAP net income was $24.3 million, or $0.13 per diluted share. The company launched global compliance initiatives tied to CMMC 2.0, NIS2, Cyber Essentials, Essential Eight, and other frameworks. It expanded its Technology Alliance Program with Bocada, AlertOps, DeskDay, PIXM, and Hudu, and received a 2024 Stevie award for great employers.

For the fourth quarter of 2024, management expects total revenue growth of 3% to 4% year over year on a reported and constant currency basis, and adjusted EBITDA of $38.0 million to $38.5 million, approximately 34% of total revenue. For the full-year 2024, management expects total revenue growth of approximately 9% to 10% year over year, or approximately 9% on a constant currency basis, and adjusted EBITDA of $169.3 million to $169.8 million, approximately 37% of total revenue. The outlook reflects expectations regarding foreign exchange rates and current macroeconomic dynamics. Risks include adverse economic conditions, reduced information technology spending, delays in purchasing decisions, foreign exchange fluctuations, and the possibility that general economic uncertainty harms the business. The company also faces risks related to its spin-off from SolarWinds, including tax matters and indemnification obligations, and risks from the SolarWinds cyber incident, which may continue to affect reputation, new subscription sales, and net retention rates. Other risks include the ability to sell subscriptions to new and existing MSP partners, maintain partner loyalty, and manage indebtedness and rising interest rates.