Summary
N-able closed fiscal 2022 with fourth quarter revenue of $95.8 million, up 7.0% from the prior-year quarter. Subscription revenue reached $93.4 million, up about 7% year over year, and management put constant currency growth at roughly 13%. The gap between reported and constant currency growth comes from foreign exchange, which the company said subtracted 5 points from its trailing twelve month dollar-based net retention rate. GAAP gross profit was $80.7 million for the quarter, up 5.9%, and GAAP operating income climbed 68.4% to $14.3 million.
Profitability improved faster than the top line. Operating margin expanded 5.4 percentage points to 14.9%. GAAP net income was $7.0 million, up 239.7% from the prior-year quarter. Adjusted EBITDA, a non-GAAP measure, was $31.2 million, a 32.6% margin, and non-GAAP net income was $18.0 million, or $0.10 per diluted share. Gross margin slipped 0.9 percentage points to 84.3%, while non-GAAP gross margin was 85.0%.
Full-year figures tell a similar story. Revenue for fiscal 2022 was $371.8 million, up 7.3%. Gross profit rose 6.5% to $313.2 million, and gross margin was 84.2%, down 0.6 percentage points. Operating income was $47.4 million, up 42.2%, with an operating margin of 12.7%. Net income was $16.7 million, up sharply from the prior year, and diluted EPS was $0.09. Non-GAAP net income for the year was $61.8 million, or $0.34 per diluted share, and adjusted EBITDA was $114.7 million, a 30.9% margin. Operating cash flow for the year was $71.4 million, up 57.5%, while capital expenditures fell 58.1% to $12.8 million. In the quarter alone, operating cash flow was $18.4 million, down 4.1%, and capital expenditures were $3.1 million, down 72.1%.
The customer base held near 25,000, but the mix shifted toward larger partners. N-able ended 2022 with 1,898 MSP partners generating more than $50,000 of ARR, up from 1,678 a year earlier, an increase of 13.1%. Those partners grew from about 47% of total ARR to about 51%. Deferred revenue was $12.1 million, up 11.3%, and remaining performance obligations were $12.6 million, up 15.6%. The annual dollar-based net revenue retention rate for subscription products was approximately 103%, down from 110%, a decline management attributed to adverse foreign currency movements.
Guidance points to steadier growth. For the first quarter of 2023, management guided revenue of $97.5 million to $98.0 million, roughly 7% to 8% year-over-year growth, or 11% to 12% on a constant currency basis, with adjusted EBITDA of $29.0 million to $29.5 million, about 30% of revenue. For the full year 2023, revenue is expected at $408 million to $412 million, 10% to 11% growth, or 11% to 12% constant currency, and adjusted EBITDA of $122 million to $126 million, roughly 30% to 31% of revenue.
Risks remain. The company carries meaningful debt from its separation from SolarWinds, and management expects interest rates under its credit agreement to rise in 2023. Management also flagged the SolarWinds cyber incident, which it said hurt reputation, new subscription sales and net retention rates, along with foreign exchange swings, inflation, rising interest rates and geopolitical conflict as factors that could pressure results. The July 1, 2022 acquisition of Spinpanel added to the product portfolio, and the company continues to invest in security, monitoring and authentication enhancements.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $95.8M | $93.5M | +2.4% | $89.5M | +7.0% |
| Gross profit | $80.7M | $78.4M | +2.9% | $76.2M | +5.9% |
| Gross margin | 84.3% | 83.8% | +0.4 pp | 85.1% | -0.9 pp |
| Research & development | $16.8M | $16.0M | +4.9% | $14.8M | +13.9% |
| Sales & marketing | $31.1M | $31.1M | -0.2% | $32.3M | -3.7% |
| General & administrative | $17.0M | $18.1M | -5.8% | $19.1M | -10.9% |
| Total operating expenses | $66.4M | $66.7M | -0.5% | $67.7M | -2.0% |
| Operating income (loss) | $14.3M | $11.7M | +22.1% | $8.5M | +68.4% |
| Operating margin | 14.9% | 12.5% | +2.4 pp | 9.5% | +5.4 pp |
| Net income (loss) | $7.0M | $294.0K | +2275.9% | $2.1M | +239.7% |
| Net margin | 7.3% | 0.3% | +7.0 pp | 2.3% | +5.0 pp |
| Diluted EPS | $0.09 | $0.00 | +$0.09 | $0.01 | +$0.08 |
| Customers | 25,000 | 25,000 | ±0.0% | 25,000 | ±0.0% |
Risks
The SolarWinds Orion Cyber Incident has caused reputational harm and adversely affected N-able's new subscription sales and net retention rates. MD&A states 2021 saw an adverse impact to new subscription sales and expansion rates relative to historical levels, and the risk factor says the incident may continue to adversely affect business, reputation, results of operations, financial condition or cash flows.
N-able has substantial indebtedness under its Credit Agreement, with total borrowings of $337.0 million as of December 31, 2022, net of debt issuance costs, and committed cash interest payments of approximately $146.4 million over the term based on a 7.73% rate as of December 31, 2022. MD&A expects interest rates under the Credit Agreement to increase in 2023 compared to 2022.
The business depends on MSP partners renewing subscription agreements, and annual dollar-based net revenue retention rate for subscription products was approximately 103% for the year ended December 31, 2022, down from 110% for 2021. MD&A attributes the decline to adverse movements in foreign currency exchange rates.
N-able has research and development facilities in Belarus and engages contractors in Ukraine, exposing it to the Russia-Ukraine conflict, civil unrest, sanctions and potential security risks. The company may need to shift research and development activities to other jurisdictions, which could delay development cycles and increase costs.
N-able has limited operating history as a stand-alone public company following the July 19, 2021 Separation and Distribution from SolarWinds, and its historical carve-out financial information may not be representative of future results. The company also faces transition difficulties, potential insufficiency of acquired assets and resources, and possible significant liability if the Separation and Distribution is determined to be taxable, including indemnification obligations to SolarWinds.
N-able operates in a highly competitive MSP market with vendors such as Kaseya, Datto (a Kaseya company), ConnectWise, Auvik, Mimecast and Veeam. Competitors may bundle solutions, offer concessions or sell at zero or negative margins, making it difficult to acquire and retain MSP partners at historic rates.
A portion of revenue is consumption-based, particularly for remote monitoring and management and backup, recovery and disaster recovery solutions, and is recognized as services are delivered. N-able lacks visibility into the timing of this usage, so quarterly or annual results may fall below internal or external expectations.
The COVID-19 pandemic caused a deceleration in year-over-year subscription revenue growth in the second quarter of 2020 due to increased churn and slower MSP partner adds. While MD&A says the impact continued to dissipate through the fourth quarter of 2022, future pandemics or economic weakness could reduce SME IT spending and demand.
N-able completed the July 1, 2022 acquisition of Spinpanel B.V. and expects to continue making acquisitions. Integration difficulties, failure to retain key employees, or inability to increase revenue from acquired solutions could harm business and results of operations.
The Sponsors collectively owned approximately 111,564,512 shares, or 61.7% of voting power, as of December 31, 2022, giving them control over stockholder votes and board composition. As a controlled company, N-able may rely on NYSE corporate governance exemptions, and the Sponsors may pursue corporate opportunities that conflict with N-able's interests.
Global data privacy and security regulations are expanding and evolving, and the Schrems II decision invalidated the EU-U.S. Privacy Shield and imposed additional obligations on standard contractual clauses. This may restrict personal data transfers from the European Union to the United States and increase compliance costs.
N-able relies on third-party software and data center hosting, including NetSuite, salesforce.com, Microsoft and Amazon. Loss of rights to third-party software, errors or defects, or failure to renew data center agreements on commercially reasonable terms could decrease functionality, cause service interruptions or require costly migration.
N-able changed its brand from SolarWinds MSP to N-able during 2021, which may have caused a loss of customer recognition and may have adversely affected business and profitability. Brand promotion activities may not yield increased revenue or offset expenses.
Growth depends on recruiting, training and retaining sufficient numbers of sales personnel, and recent and planned personnel additions may not become as productive as desired or in a timely manner. N-able may be unable to hire or retain sufficient qualified individuals in the markets where it operates.
Failure to maintain proper and effective internal controls could have a material adverse effect on N-able's business, particularly as a newly stand-alone public company. The company may incur additional legal, accounting and other expenses as it develops its standalone control environment.
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
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from N-able, Inc.'s SEC filings for Q4 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 1, 2026.