or UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC OF 1934 For the quarterly period ended March 31, 2023 | Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | | --- | --- | --- | | Common Stock, $0.001 par value | NABL | New York Stock Exchange | ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) N-able is a leading global provider of cloud software solutions for MSPs, driving SME digital transformation through a land-and-expand model for recurring revenue growth - N-able is a leading global provider of cloud-based software solutions for managed services providers (MSPs), empowering the digital transformation and growth of small and medium-sized enterprises (SMEs)[17](index=17&type=chunk) - The company's platform offers remote monitoring and management, security solutions, data protection as a service, and business management solutions[22](index=22&type=chunk) - The company employs a multi-faceted "land-and-expand" model, growing as MSP partners add customers, offer new services, and customers add devices[23](index=23&type=chunk) - In 2022, 2021, and 2020, **51.3%**, **53.6%**, and **52.2%** of the company's revenue, respectively, was generated from outside the United States[25](index=25&type=chunk) Key Financial Data | Metric | 2022 (USD in millions) | 2021 (USD in millions) | 2020 (USD in millions) | | :----------------- | :------------------ | :------------------ | :------------------ | | Revenue | 371.8 | 346.5 | 302.9 | | Net Income (Loss) | 16.7 | 0.1 | (7.2) | | Adjusted EBITDA | 114.7 | 113.3 | 120.6 | MSP Partner Growth (ARR over $50,000) | Metric | December 31, 2022 | December 31, 2021 | Growth Rate | | :--------------------- | :------------- | :------------- | :----- | | Number of Partners | 1,898 | 1,678 | 13.1% | | Percentage of Total ARR | ~51% | ~47% | +4pp | [Business Overview](index=6&type=section&id=Business%20Overview) N-able provides cloud software solutions for MSPs to monitor, manage, and secure their end-customers' systems, data, and networks through a flexible technology platform - N-able is a leading global provider of cloud-based software solutions for managed services providers (MSPs), empowering the digital transformation and growth of small and medium-sized enterprises (SMEs)[17](index=17&type=chunk) - The company's platform offers remote monitoring and management, security solutions, data protection as a service, and business management solutions[22](index=22&type=chunk) - The company employs a multi-faceted "land-and-expand" model, growing as MSP partners add customers, offer new services, and customers add devices[23](index=23&type=chunk) [Industry Background](index=7&type=section&id=Industry%20Background) SMEs increasingly rely on technology for digital transformation, driving demand for MSP services as their IT spending is projected to grow from $1.3 trillion to $1.8 trillion - SME IT spending is projected to grow from **$1.3 trillion** in 2022 to **$1.8 trillion** in 2026[26](index=26&type=chunk)[36](index=36&type=chunk) - SMEs face digital transformation challenges including IT management not being a core competency, growing cyber threats, rising compliance costs, a proliferation of connected endpoints, and expectations for an "always-on" IT environment[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - As SME demand for continuous availability, performance, and security grows, they increasingly rely on MSPs to manage these business aspects, driving the rise of the managed IT services model[33](index=33&type=chunk) [Market Opportunity](index=8&type=section&id=Market%20Opportunity) The company's addressable global market is projected to grow from $23.3 billion in 2020 to $43.9 billion by 2025, driven by rising SME IT spending - The company's solutions enable MSPs to support the deployment, management, and security of IT environments for over 500,000 SMEs globally[36](index=36&type=chunk) Global Market Opportunity | Metric | 2020 (Billion USD) | 2025 (Forecast, Billion USD) | Compound Annual Growth Rate (CAGR) | | :----------------- | :------------------ | :---------------------- | :-------------------- | | Market Size | 23.3 | 43.9 | 13.5% | [Limitations of Existing Approaches Used by MSPs](index=8&type=section&id=Limitations%20of%20Existing%20Approaches%20Used%20by%20MSPs) Existing MSP approaches suffer from tools not designed for managed services, single-point solutions with poor integration, a lack of enterprise-grade features, and inflexible pricing - Existing tools are not purpose-built for MSPs, making it difficult to achieve scalable and efficient service delivery[39](index=39&type=chunk) - Many MSP offerings are single-point solutions, lacking a unified platform and integration capabilities, which leads to fragmented management[39](index=39&type=chunk) - Existing approaches lack enterprise-grade functionality and rapid innovation capabilities, struggling to meet the evolving IT needs of SMEs[39](index=39&type=chunk) - Alternative solutions lack automation features, requiring manual intervention that increases costs and resolution times[43](index=43&type=chunk) [Our Solution](index=9&type=section&id=Our%20Solution) N-able offers integrated cloud-based remote monitoring, security, and data protection solutions on a multi-tenant technology platform designed specifically for MSPs - The company provides cloud-based remote monitoring and management, security solutions, and data protection as a service, all integrated within its technology platform[41](index=41&type=chunk) - The platform features a multi-layered, multi-tenant architecture, a unified agent management system, and microservices designed to securely deliver integrated solutions for MSPs and their SME clients[41](index=41&type=chunk) - The platform simplifies integration with third-party solutions from numerous leading enterprise technology vendors through its Ecosystem Framework[42](index=42&type=chunk) [Key Strengths of our Platform](index=9&type=section&id=Key%20Strengths%20of%20our%20Platform) The platform's key strengths include in-depth remote monitoring, a layered security approach, hybrid IT support, out-of-the-box automation, and robust reporting capabilities - Provides in-depth remote monitoring and management capabilities, offering extensive visibility and insight into systems, network infrastructure, and devices via a centralized dashboard[44](index=44&type=chunk) - Employs a layered security approach to defend against cyber threats at the network, infrastructure, application, and endpoint layers through various protection and assessment solutions[44](index=44&type=chunk) - The platform's solutions are designed to meet the needs of MSPs and their SME clients across cloud, on-premises, and hybrid cloud IT infrastructures[44](index=44&type=chunk) - Offers out-of-the-box automation features and a no-code, drag-and-drop editor to help MSPs deliver services efficiently and manage their business for growth[44](index=44&type=chunk) - Reporting and analytics dashboards provide MSPs with a comprehensive view of data and analytical outputs from their SME clients' IT environments, with the ability to generate compliance reports[44](index=44&type=chunk) [Why We Win](index=10&type=section&id=Why%20We%20Win) N-able's competitive advantages stem from its MSP-success-oriented platform, differentiated go-to-market strategy, scalability, enterprise-grade technology, and flexible pricing models - The platform is designed for MSP success, offering customizable solutions, continuous feature expansion, robust automation policies, and training resources[47](index=47&type=chunk) - A differentiated go-to-market strategy is based on a multi-faceted "land-and-expand" model, acquiring new MSP partners through efficient "inside sales" and analytics-driven marketing campaigns[46](index=46&type=chunk)[47](index=47&type=chunk) - Delivers enterprise-grade technology to SME clients through its platform and strategic technology partnerships, innovating with feedback from an active user community[47](index=47&type=chunk) - Provides a best-in-class partner success strategy, including dedicated teams, the MSP Institute, and the Head Nerds program to help MSPs scale their business and enhance services[47](index=47&typechunk) - Offers flexible subscription pricing and billing models, supporting committed volume or "pay-as-you-go" options with cloud, on-premises, and hybrid deployment choices[47](index=47&type=chunk) [Our Differentiated Go-to-Market Approach](index=10&type=section&id=Our%20Differentiated%20Go-to-Market%20Approach) The company's go-to-market strategy leverages a "land-and-expand" model, acquiring MSP partners through digital marketing and inside sales to achieve scalable growth - The go-to-market strategy is based on a differentiated, multi-faceted "land-and-expand" model, acquiring new MSP partners through efficient "inside sales" and analytics-driven digital marketing campaigns[46](index=46&type=chunk)[47](index=47&type=chunk) - MSP partners effectively extend the company's sales reach into the global SME market and expand naturally as their clients grow and adopt new services[48](index=48&type=chunk) - A best-in-class partner success strategy enhances the loyalty and retention of MSP partners[48](index=48&type=chunk) - The company has a strong international presence, delivering globally through an extensive international distribution network and localized go-to-market strategies[48](index=48&type=chunk) [Growth Strategy](index=11&type=section&id=Growth%20Strategy) N-able's growth strategy focuses on expanding its MSP partner base, driving partner-led growth, broadening service offerings, innovating, and growing its co-managed IT business - Expanding the MSP partner base with a focus on partners who have the potential for growth[48](index=48&type=chunk) - Fostering partner-driven growth as MSP partners expand their SME client base and adopt new solutions[48](index=48&type=chunk) - Broadening the scope of networks, devices, services, and users managed and secured by the platform through in-house development, strategic partnerships, and integrations[48](index=48&type=chunk) - Driving innovation, particularly in expanding security services, technology controls, automation, and reporting and analytics capabilities[48](index=48&type=chunk) - Expanding the co-managed IT business to serve large enterprise customers and continuing to expand channels and personnel in global markets[48](index=48&type=chunk) Dollar-Based Net Retention Rate | Year | Net Retention Rate | | :--- | :----------- | | 2022 | 103% | | 2021 | 110% | | 2020 | 109% | [Our Platform](index=12&type=section&id=Our%20Platform) The N-able platform comprises three core solution categories: Remote Monitoring and Management, Security and Data Protection, and Business Management - The platform consists of three core solution categories: Remote Monitoring and Management, Security and Data Protection, and Business Management[49](index=49&type=chunk) [Remote Monitoring and Management](index=12&type=section&id=Remote%20Monitoring%20and%20Management) The RMM solution provides MSPs with centralized visibility and insight into their clients' networks, infrastructure, devices, and applications - The RMM solution provides MSPs with visibility and insight into their customers' networks, infrastructure, devices, and applications through a centralized dashboard[50](index=50&type=chunk) - Supports thousands of device types, including Windows, macOS, and Linux endpoints, as well as network infrastructure components[52](index=52&type=chunk) - Offers remote access and support, automation policies and tasks, proactive device discovery, automated alerting, and customizable performance checks[52](index=52&type=chunk) [Security and Data Protection](index=12&type=section&id=Security%20and%20Data%20Protection) The security and data protection solution employs a layered approach covering networks, infrastructure, applications, and endpoints with cloud-based backup and disaster recovery - Provides a layered protection approach covering networks, system infrastructure, applications, and end-user devices through data protection, patch management, endpoint security, web protection, email security, and vulnerability assessment solutions[51](index=51&type=chunk) - The backup, recovery, and disaster recovery solution offers granular data protection and recovery across various data and systems, including servers, virtual machines, workstations, critical databases, and SaaS applications like M365[53](index=53&type=chunk) - Endpoint protection includes traditional antivirus and next-generation endpoint detection and response (EDR) for attack prevention, detection, response, and rapid recovery[52](index=52&type=chunk) - The patch management solution provides flexible, cloud-based updates with support for automated, scheduled, or manual patch deployment[54](index=54&type=chunk) - Web protection and content filtering allow for setting content filtering policies and website access controls, while mail protection and archiving provide anti-spam, malware, and ransomware protection[54](index=54&type=chunk) [Business Management](index=13&type=section&id=Business%20Management) The business management solution enhances MSP operational efficiency through professional services automation, password management, and desktop management tools - Professional services automation and ticketing systems help MSPs organize their workforce, share knowledge, improve visibility, and streamline billing processes[55](index=55&type=chunk) - Password and documentation management provides secure access to customer environments, standardizes service delivery, and offers mobile password reset capabilities[55](index=55&type=chunk) - The desktop management solution enables MSPs to remotely troubleshoot and proactively resolve client endpoint and network issues without interrupting customer operations[55](index=55&type=chunk)[56](index=56&type=chunk) [Technology](index=14&type=section&id=Technology) The N-able technology platform features a highly scalable, multi-tenant architecture with robust automation, unified agent management, and stringent security measures - The platform is highly scalable, enabling rapid integration with a wide range of third-party technologies through its Ecosystem Framework[57](index=57&type=chunk) - A multi-layered, multi-tenant architecture allows MSPs to efficiently manage multiple customers and sites from a single control panel, supporting cloud, on-premises, and hybrid environments[58](index=58&type=chunk) - The platform offers over 100 out-of-the-box automation policies and a no-code visual workflow builder to automate common tasks and resolve issues[59](index=59&type=chunk) - A unified agent management system simplifies agent deployment and new feature updates, enhancing MSP efficiency[60](index=60&type=chunk) - The company invests heavily in solution security, employing a secure software development lifecycle, regular penetration testing, and compliance with standards like HIPAA, ISO 27001, SOC 1 Type II, and SOC 2 Type II[61](index=61&type=chunk) - Strategic technology partner solutions are integrated into the platform through a technology alliance program, integrated solution partnerships, and collaborations with large enterprise technology vendors[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) [Key features of our Platform](index=14&type=section&id=Key%20features%20of%20our%20Platform) The platform's core features include high scalability, a multi-tenant architecture, automation, unified agent management, stringent security, and a consistent user interface - The platform enables deep integrations through its Ecosystem Framework, allowing for easy extension of built-in functionality and creation of custom monitoring capabilities[57](index=57&type=chunk) - A multi-layered, multi-tenant architecture enables MSPs to efficiently manage multiple customers and sites from a single control panel, supporting cloud, on-premises, and hybrid cloud environments[58](index=58&type=chunk) - Provides over 100 out-of-the-box automation policies and a no-code visual workflow builder to help MSPs automate common tasks[59](index=59&type=chunk) - A unified agent management system simplifies agent deployment and new feature updates, improving MSP efficiency[60](index=60&type=chunk) - The company employs a secure software development lifecycle, conducts regular penetration testing, and complies with multiple security standards to ensure solution security[61](index=61&type=chunk) - The platform offers a consistent, intuitive, and easy-to-use user experience and utilizes a global multi-cloud architecture, providing customer choice in speed and data sovereignty[62](index=62&type=chunk)[63](index=63&type=chunk) [Strategic Technology Partnerships](index=14&type=section&id=Strategic%20Technology%20Partnerships) N-able integrates third-party solutions through technology alliances, integrated solution partnerships, and collaborations with major enterprise technology vendors - The Technology Alliance Program enables third-party technology or software vendors to integrate with the N-able platform, simplifying workflows and sharing data[64](index=64&type=chunk) - Integrated solution partnerships allow best-in-class third-party products to be directly embedded into the N-able platform, offering MSPs a broader range of product choices[65](index=65&type=chunk) - Collaborations with large enterprise technology vendors (such as Microsoft Intune, Mac support, and Meraki cloud services monitoring) expand the range of devices MSPs can manage and secure[66](index=66&type=chunk) [Our MSP Partners](index=15&type=section&id=Our%20MSP%20Partners) N-able serves approximately 25,000 customers, with 1,898 MSP partners contributing over $50,000 in ARR each and accounting for 51% of total ARR - N-able is a leading global provider of MSP software solutions, empowering MSPs to support the digital transformation and growth of SMEs worldwide[67](index=67&type=chunk) - MSP partners range from small IT firms with one or two technicians to large IT service providers with thousands of employees, serving a wide range of industries including financial services, healthcare, professional services, education, and manufacturing[68](index=68&type=chunk) - Annualized Recurring Revenue (ARR) is calculated by multiplying the monthly recurring revenue and associated usage revenue (net of credits and provisions) for the last month of the reporting period by twelve[69](index=69&type=chunk) MSP Partner Data | Metric | December 31, 2022 | December 31, 2021 | Change | | :--------------------- | :------------- | :------------- | :--- | | Number of Customers | ~25,000 | - | - | | MSP Partners with ARR >$50k | 1,898 | 1,678 | +13.1% | | Percentage of Total ARR | ~51% | ~47% | +4pp | [Marketing, Sales, Partner Success and Support](index=15&type=section&id=Marketing%2C%20Sales%2C%20Partner%20Success%20and%20Support) The company drives its "land-and-expand" strategy through digital marketing, inside sales, comprehensive partner success programs, and 24x7x365 technical support - The marketing, sales, and partner success organizations are the engine of the company's multi-faceted "land-and-expand" go-to-market strategy[70](index=70&type=chunk) - Marketing efforts generate high-quality sales opportunities through digital marketing techniques (such as SEO, paid search, social media, email campaigns) and localized websites[72](index=72&type=chunk)[73](index=73&type=chunk) - The sales team employs an efficient "inside sales" model, selling online or by phone and offering fully functional trial versions of its solutions[76](index=76&type=chunk)[77](index=77&type=chunk) - The partner success program includes onboarding, post-sales engineering, and partner success management teams, as well as the MSP Institute, Head Nerds program, and community resources to help MSPs grow their business[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The company provides 24x7x365 technical support to its MSP partners[83](index=83&type=chunk) [Research and Development](index=16&type=section&id=Research%20and%20Development) The R&D team focuses on designing, developing, and deploying new solutions while continuously improving existing ones, emphasizing platform integration and scalability - The R&D organization is primarily responsible for the architecture, design, development, testing, and deployment of new and existing solutions, with a focus on ensuring the platform is fully integrated and scalable[84](index=84&type=chunk) - The software development process is responsive to MSP partner needs, cost-effective, and agile, building solutions in close collaboration with partners[85](index=85&type=chunk) - The company employs a global development model, utilizing small Scrum teams and is committed to assigning meaningful design and development work to its international branches[86](index=86&type=chunk) [Competition](index=17&type=section&id=Competition) N-able competes in a large, fragmented industry against pure-play MSP vendors and point-solution providers based on feature breadth, scalability, innovation, and total cost of ownership - The company competes in a large and fragmented industry against MSP pure-play vendors (such as Kaseya, Datto, ConnectWise) and vendors focused on specific areas (such as Auvik, Mimecast, Veeam)[87](index=87&type=chunk) - Key competitive factors include breadth and scalability of features, focus on MSP and SME success, platform and solution scalability, performance and reliability, ability to solve technical and business problems, deployment model flexibility, continuous innovation, ease of use, brand recognition, and sales and marketing effectiveness[87](index=87&type=chunk) [Our People](index=17&type=section&id=Our%20People) As of December 31, 2022, N-able had 1,462 employees and fosters a positive culture through core values, diversity initiatives, and employee development programs - As of December 31, 2022, the company had **1,462 full-time employees**, with 321 in the United States and 1,141 outside the United States[88](index=88&type=chunk) - The company's values include "N-rich Lives," "N-spire Others," and "N-joy the Journey"[90](index=90&type=chunk)[92](index=92&type=chunk) - The employee engagement strategy revolves around four pillars: Diversity, Equity, and Belonging (DEB); Giving Back; Health and Wellness; and Learning and Development[94](index=94&type=chunk) - In 2022, the company was certified as a "Great Place to Work" and received awards from Comparably for "Happiest Employees," "Best Company Compensation," "Best Global Culture," "Best Company Work-Life Balance," and "Best CEO"[99](index=99&type=chunk) [Intellectual Property](index=18&type=section&id=Intellectual%20Property) N-able protects its proprietary rights through patents, copyrights, trademarks, and trade secrets, holding five U.S. patents and one foreign patent as of year-end 2022 - The company relies on a combination of patent, copyright, trademark, trade dress, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect its proprietary rights[101](index=101&type=chunk) - As of December 31, 2022, the company held **five issued U.S. patents and one issued foreign patent**, with expiration dates ranging from 2033 to 2034[101](index=101&type=chunk) - Intellectual property may be challenged, invalidated, or circumvented, and protection may be difficult to enforce effectively in certain countries[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Additional Information](index=19&type=section&id=Additional%20Information) N-able's official website is www.n-able.com, where SEC filings such as 10-K, 10-Q, and 8-K reports are available free of charge in the investor relations section - The company's website address is www.n-able.com[104](index=104&type=chunk) - The company's annual reports (10-K), quarterly reports (10-Q), current reports (8-K), and their amendments filed with the SEC are available free of charge on the company's investor relations website and the SEC's website (http://www.sec.gov)[104](index=104&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risks of investing in N-able, including business, industry, debt, intellectual property, cybersecurity, and regulatory risks - Key risks include future revenue and operating results fluctuations, inability to attract and retain MSP partners, intense market competition, cyberattacks (including the SolarWinds Cyber Incident), debt burden, intellectual property protection, risks related to the separation and distribution, government regulation, accounting and tax changes, and risks related to the corporate governance structure[109](index=109&type=chunk)[112](index=112&type=chunk) [Summary of Risk Factors](index=20&type=section&id=Summary%20of%20Risk%20Factors) This summary lists key speculative or risk factors, including quarterly performance volatility, challenges in MSP partner acquisition, market competition, and cybersecurity incidents - Key risks of investing in N-able common stock include: quarterly revenue and operating results fluctuations, inability to attract and retain MSP partners, intense market competition, declining subscription renewal rates, limited visibility into consumption-based revenue, acquisition risks, international operational risks, impact of cyberattacks and the SolarWinds Cyber Incident, risks related to the separation and distribution, government regulation, accounting and tax changes, and risks related to the company's ownership and organizational structure[109](index=109&type=chunk)[112](index=112&type=chunk) [Risks Related to Our Business and Industry](index=20&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) N-able faces risks from quarterly performance volatility, the COVID-19 pandemic's impact, challenges in MSP partner acquisition, intense competition, and acquisition integration - The company's quarterly revenue and operating results may fluctuate due to various factors, making future performance difficult to predict[111](index=111&type=chunk)[112](index=112&type=chunk) - The global COVID-19 pandemic previously led to a slowdown in subscription revenue growth, and future outbreaks or other pandemics could continue to adversely affect the business[116](index=116&type=chunk)[117](index=117&type=chunk) - An inability to attract new MSP partners, sell more solutions to existing partners, or increase their usage of solutions could adversely affect revenue growth and operating results[120](index=120&type=chunk) - The company operates in a highly competitive market and may struggle to acquire and retain MSP partners at historical rates[125](index=125&type=chunk) - The company's success depends on adapting to the rapidly changing needs of MSP partners and their SME clients, including continuously enhancing existing products and developing new solutions[131](index=131&type=chunk) - Acquisitions present numerous risks, including integration difficulties, management distraction, inability to maintain key business relationships, increased costs, and potential liabilities[136](index=136&type=chunk) - International operations face risks from currency exchange rate fluctuations, complex foreign regulatory requirements, difficulties in managing international employees, political and socioeconomic instability, and inadequate intellectual property protection[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - Labor shortages, employee turnover, and increased labor costs could adversely affect operating results[164](index=164&type=chunk) - Future litigation, particularly intellectual property infringement claims, could result in substantial costs, management distraction, and reputational damage[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) [Risks Related to Our Indebtedness](index=33&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) N-able's substantial debt could adversely affect its financial health and ability to fund future operations, with credit agreements imposing restrictive covenants - As of December 31, 2022, the company had **$337 million** in total outstanding debt (net of issuance costs), which could result in a significant portion of cash flow being used for debt service, reducing operating funds and increasing vulnerability to adverse economic conditions[178](index=178&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) - The credit agreements contain numerous restrictive covenants that limit the ability of the company and its subsidiaries to incur debt, create liens, engage in mergers and acquisitions, sell assets, pay dividends and distributions, make investments, and conduct certain transactions with affiliates[180](index=180&type=chunk)[182](index=182&type=chunk) - A breach of financial covenants in the credit agreements or other events of default could lead to the acceleration of debt and have severe consequences for the company's financial condition and operating results[186](index=186&type=chunk) [Risks Related to Our Intellectual Property](index=35&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on protecting its intellectual property, but it faces risks of patents being challenged and the potential for litigation from using open-source software - The company's success depends on its ability to acquire, maintain, protect, and enforce its intellectual property rights, including patents, copyrights, trademarks, trade dress, and trade secrets[187](index=187&type=chunk) - As of December 31, 2022, the company held **six issued patents**, but the patent application process is expensive and time-consuming, with no guarantee that patents will adequately protect intellectual property[188](index=188&type=chunk) - Intellectual property may be challenged, invalidated, or circumvented, and protection may be difficult to enforce effectively in certain countries[188](index=188&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - The use of open-source software could lead to unintended licensing conditions or litigation, potentially requiring the company to disclose source code or redesign software, thereby affecting profitability[193](index=193&type=chunk) [Risks Related to Cybersecurity and the Cyber Incident](index=37&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20the%20Cyber%20Incident) N-able faces significant cybersecurity risks, including sophisticated supply chain attacks like the SolarWinds incident, which could lead to operational disruption and financial loss - The company is highly dependent on its technology infrastructure, and its systems are vulnerable to cyberattacks, including sophisticated state-sponsored attacks[196](index=196&type=chunk) - Cyberattacks could lead to system breaches, implantation of malicious code, theft of proprietary and confidential information, operational disruptions, legal liability, reputational damage, and financial losses[195](index=195&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - The SolarWinds Cyber Incident adversely affected the company's reputation, new subscription sales, and net retention rates, and led to increased investigation and remediation costs[203](index=203&type=chunk) - During the cyber incident, threat actors accessed and potentially exfiltrated product source code, MSP partner data (such as business emails, encrypted login credentials), and trial and product activation data for the N-central On Demand solution[204](index=204&type=chunk) - Although the company has implemented numerous security enhancements, there is no guarantee of complete protection against future cyber threats, and new discoveries or incidents could further increase costs and liabilities[207](index=207&type=chunk) [Risks Related to Accounting and Taxation](index=39&type=section&id=Risks%20Related%20to%20Accounting%20and%20Taxation) N-able faces risks from potential failures in internal controls, changes in accounting standards or tax laws, and possible tax adjustments that could impact financial results - Failure to maintain appropriate and effective internal controls could have a material adverse effect on the company's business, operating results, and stock price[208](index=208&type=chunk) - Changes in accounting standards or practices could result in unfavorable, unexpected financial reporting fluctuations and affect reported operating results[209](index=209&type=chunk) - Changes in tax laws or regulations (such as the U.S. Tax Cuts and Jobs Act and potential Biden administration tax reform proposals) could negatively impact the company's effective tax rate and cash tax liability[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) - Tax authorities may challenge the company's tax positions or conduct audits, resulting in additional taxes, penalties, and interest that could affect operating results[213](index=213&type=chunk)[214](index=214&type=chunk) - The loss of certain tax benefits (such as those related to R&D personnel in Belarus, the United Kingdom, and Romania) could significantly increase the effective income tax rate or operating expenses[215](index=215&type=chunk) [Risks Related to Governmental Regulation](index=40&type=section&id=Risks%20Related%20to%20Governmental%20Regulation) N-able is subject to global data privacy, export control, and e-commerce regulations, where non-compliance could result in significant costs, fines, and business interruptions - The company's business is subject to a wide range of local, state, national, and international data privacy and security laws, directives, and regulations that are constantly evolving and becoming more stringent[216](index=216&type=chunk)[217](index=217&type=chunk) - Failure to comply with privacy, data protection, and information security laws could result in enforcement actions, fines, reputational damage, and loss of customers[218](index=218&type=chunk) - Certain solutions are subject to U.S. export control and economic sanctions laws, which could limit international sales and lead to reputational damage or fines[220](index=220&type=chunk)[221](index=221&type=chunk) - The company is also subject to domestic and foreign anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act[222](index=222&type=chunk) - Government regulation of the internet and e-commerce is constantly evolving, and unfavorable changes or failure to comply with regulations could harm operating results[223](index=223&type=chunk) [Risks Related to the Separation and Distribution](index=42&type=section&id=Risks%20Related%20to%20the%20Separation%20and%20Distribution) The separation from SolarWinds may not achieve expected benefits and could result in significant tax liabilities, while a limited operating history as a standalone company presents challenges - The separation and distribution may not achieve all expected benefits and could disrupt or adversely affect the business, operating results, and financial condition[224](index=224&type=chunk) - If the separation and distribution are determined to be taxable transactions, the company could incur significant tax liabilities and may be required to indemnify SolarWinds under the tax matters agreement[226](index=226&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - The company has a limited operating history as a standalone public company, and historical financial information may not be representative of its performance as an independent entity[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) - Post-separation, the company may struggle to cost-effectively establish its own administrative and other support functions or obtain services on terms as favorable as those with SolarWinds[238](index=238&type=chunk) - The terms of agreements with SolarWinds may restrict the company from taking certain actions, such as pursuing strategic transactions or equity offerings[225](index=225&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Relationships with directors and executives of SolarWinds could create conflicts of interest, and intellectual property allocation agreements could affect the company's competitive position[243](index=243&type=chunk)[244](index=244&type=chunk) [Risks Related to Ownership of Our Common Stock](index=46&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) N-able's common stock price may be volatile, and the company does not intend to pay dividends, while anti-takeover provisions could deter beneficial acquisition attempts - The trading price of the company's common stock has been and may continue to be volatile, potentially leading to a decline in investment value[247](index=247&type=chunk)[249](index=249&type=chunk)[251](index=251&type=chunk) - The issuance of misleading or unfavorable research by securities or industry analysts could cause a decline in stock price and trading volume[252](index=252&type=chunk) - The sale of a substantial number of common shares by large stockholders (such as the Sponsors), or the market perception that such sales could occur, may lower the stock price[253](index=253&type=chunk) - Future issuances of additional equity by the company (for financing, acquisitions, or employee incentive plans) will dilute the ownership of all other stockholders[254](index=254&type=chunk) - The company does not intend to pay dividends on its common stock, so investment returns will depend on stock price appreciation[255](index=255&type=chunk) - The company's certificate of incorporation and bylaws contain anti-takeover provisions (such as a classified board, issuance of preferred stock, and advance notice procedures) that could delay or prevent acquisition attempts that stockholders may deem favorable[256](index=256&type=chunk)[257](index=257&type=chunk) [Risks Related to Our Organizational Structure](index=48&type=section&id=Risks%20Related%20to%20Our%20Organizational%20Structure) The company's organizational structure is subject to risks from the controlling influence of its Sponsors, which may lead to conflicts of interest and affect corporate governance - The Sponsors collectively hold approximately **61.7%** of the voting power and have a controlling influence over matters requiring stockholder approval, including board composition and major business decisions[258](index=258&type=chunk)[261](index=261&type=chunk) - Directors with relationships to the Sponsors may face conflicts of interest, and the Sponsors and their affiliated funds may pursue corporate opportunities that conflict with the company's interests[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - The Sponsors' control over the board may make it difficult for the company to recruit high-quality independent directors[265](index=265&type=chunk)[266](index=266&type=chunk) - The company's certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of litigation, which may limit a stockholder's ability to choose a favorable judicial forum[268](index=268&type=chunk)[269](index=269&type=chunk) - As an emerging growth company (EGC) and a "controlled company" under NYSE rules, the company is exempt from certain corporate governance requirements, which may result in less information available to investors and could affect the stock's attractiveness[270](index=270&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk) [Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments - The company has no unresolved staff comments[275](index=275&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) N-able leases office space globally, with its corporate headquarters in Burlington, Massachusetts, and believes its current facilities are sufficient for future needs - The company leases its offices and does not own any real estate; its corporate headquarters is located in Burlington, Massachusetts[276](index=276&type=chunk) - The company leases office space in multiple domestic and international locations, including Austin, Bucharest, and Sydney[276](index=276&type=chunk) - All leases are classified as operating leases, with remaining terms ranging from less than one year to 9.4 years[276](index=276&type=chunk) - The company believes its existing facilities are sufficient to meet its foreseeable future needs[277](index=277&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20Proceedings) N-able and its subsidiaries are not currently involved in any material legal proceedings that would have a significant adverse effect on the company's financial condition - The company and its subsidiaries are not currently involved in any material legal proceedings that are expected to have a material adverse effect on the consolidated financial statements, cash flows, or financial condition[278](index=278&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[279](index=279&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) N-able's common stock has been listed on the NYSE since July 20, 2021, and the company does not plan to pay cash dividends in the foreseeable future - The company's common stock has been listed on the New York Stock Exchange under the symbol "NABL" since July 20, 2021[282](index=282&type=chunk) - The initial public offering (IPO) price was **$16.00 per share**[282](index=282&type=chunk) - As of March 6, 2023, the closing price of the common stock was **$12.29 per share**, and there were 41 registered stockholders[283](index=283&type=chunk) - The company has never declared or paid any cash dividends on its common stock and does not intend to do so in the foreseeable future, planning to use all available funds and future earnings for business operations and expansion[284](index=284&type=chunk) - All repurchases were related to restricted shares held by employees and were not made under a publicly announced plan or program[290](index=290&type=chunk) Issuer Purchases of Securities | Period | Number of Shares Purchased | | :-------------------- | :----------- | | October 1-31, 2022 | — | | November 1-30, 2022 | — | | December 1-31, 2022 | 600 | | **Total** | **600** | [Market Information](index=52&type=section&id=Market%20Information) N-able's common stock has been listed on the NYSE under the symbol "NABL" since July 20, 2021, with an IPO price of $16.00 per share - The company's common stock has been listed on the New York Stock Exchange under the symbol "NABL" since July 20, 2021[282](index=282&type=chunk) - The initial public offering (IPO) price was **$16.00 per share**[282](index=282&type=chunk) - As of March 6, 2023, the closing price of the common stock was **$12.29 per share**, and there were 41 registered stockholders[283](index=283&type=chunk) [Dividend Policy](index=52&type=section&id=Dividend%20Policy) N-able has never paid cash dividends on its common stock and does not intend to do so, as it plans to retain earnings for business operations and expansion - The company has never declared or paid any cash dividends on its common stock and does not intend to do so in the foreseeable future[284](index=284&type=chunk) - The company plans to use all available funds and future earnings for business operations and expansion[284](index=284&type=chunk) - The company's credit agreements restrict its ability to pay cash dividends[284](index=284&type=chunk) [Performance Graph](index=52&type=section&id=Performance%20Graph) The performance graph compares the cumulative total stockholder return of N-able's common stock against the S&P 500 and S&P 500 Software & Services indices - The performance graph compares the cumulative total stockholder return of the company's common stock from July 20, 2021, to December 31, 2022[285](index=285&type=chunk) - The comparison benchmarks include the S&P 500 Index and the S&P 500 Software & Services Index[285](index=285&type=chunk) [Issuer Purchases of Securities](index=53&type=section&id=Issuer%20Purchases%20of%20Securities) In the fourth quarter of 2022, N-able repurchased 600 shares of common stock related to restricted shares held by employees upon their departure - All repurchases were related to restricted shares held by employees, which the company exercised its right to repurchase upon the employees' departure, and were not made under a publicly announced plan or program[290](index=290&type=chunk) Equity Purchases in Q4 2022 | Period | Number of Shares Purchased | | :-------------------- | :----------- | | October 1-31, 2022 | — | | November 1-30, 2022 | — | | December 1-31, 2022 | 600 | | **Total** | **600** | [Reserved](index=53&type=section&id=Item%206.%20Reserved) This item is reserved and not applicable - This item is not applicable[291](index=291&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses N-able's financial condition and results of operations, including its business overview, separation from SolarWinds, and key financial performance metrics - N-able is a leading global provider of cloud-based software solutions for managed services providers (MSPs), empowering the digital transformation and growth of small and medium-sized enterprises (SMEs)[294](index=294&type=chunk) - The company completed its separation from SolarWinds on July 19, 2021, becoming an independent publicly traded company[296](index=296&type=chunk) - The SolarWinds Cyber Incident adversely affected the company's reputation, new subscription sales, and net retention rates, but its adverse impact had diminished by the end of fiscal year 2022[302](index=302&type=chunk) - As of December 31, 2022, cash and cash equivalents were **$98.8 million**, and the company believes existing cash and cash flows from operations are sufficient to meet its operational and capital expenditure needs for at least the next 12 months[354](index=354&type=chunk)[355](index=355&type=chunk) Fourth Quarter 2022 Financial Highlights | Metric | Q4 2022 (USD in millions) | Q4 2021 (USD in millions) | | :----------------------- | :-------------------- | :-------------------- | | Total Revenue | 95.8 | 89.5 | | Net Income | 7.0 | 2.1 | | Adjusted EBITDA | 31.2 | 27.8 | | Cash Flow from Operations | 18.4 | 19.2 | Comparison of Financial Performance for 2022 and 2021 | Metric | 2022 (USD in thousands) | 2021 (USD in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :------- | | Total revenue | 371,769 | 346,456 | 7.3% | | Subscription revenue | 362,609 | 336,845 | 7.6% | | Sales and marketing expense | 125,301 | 112,678 | 11.2% | | Research and development expense | 63,484 | 53,959 | 17.7% | | Net income | 16,707 | 113 | >100% | Comparison of Financial Performance for 2021 and 2020 | Metric | 2021 (USD in thousands) | 2020 (USD in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :------- | | Total revenue | 346,456 | 302,871 | 14.4% | | Subscription revenue | 336,845 | 292,027 | 15.3% | | Sales and marketing expense | 112,678 | 82,034 | 37.4% | | Research and development expense | 53,959 | 42,719 | 26.3% | | Net income (loss) | 113 | (7,158) | >100% | Non-GAAP Financial Measures | Metric | 2022 (USD in thousands) | 2021 (USD in thousands) | 2020 (USD in thousands) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Non-GAAP operating income | 97,952 | 98,647 | 111,281 | | Non-GAAP operating margin | 26.3% | 28.5% | 36.7% | | Adjusted EBITDA | 114,696 | 113,346 | 120,560 | | Adjusted EBITDA margin | 30.9% | 32.7% | 39.8% | Summary of Cash Flows | Cash Flow Type | 2022 (USD in thousands) | 2021 (USD in thousands) | 2020 (USD in thousands) | | :----------------------------- | :-------------- | :-------------- | :-------------- | | Net cash provided by operating activities | 71,413 | 45,341 | 85,668 | | Net cash used in investing activities | (30,209) | (34,833) | (16,140) | | Net cash used in financing activities | (10,402) | (42,322) | (10,550) | [Overview](index=54&type=section&id=Overview) N-able is a leading global provider of cloud software solutions for MSPs, enabling the digital transformation of SMEs through a recurring revenue model - N-able is a leading global provider of cloud-based software solutions for managed services providers (MSPs), empowering the digital transformation and growth of small and medium-sized enterprises (SMEs)[294](index=294&type=chunk) - The company provides security, automation, and backup and recovery solutions, achieving strong recurring revenue growth and profitability through a multi-faceted "land-and-expand" model[294](index=294&type=chunk) [Separation from SolarWinds](index=54&type=section&id=Separation%20from%20SolarWinds) N-able completed its separation from SolarWinds on July 19, 2021, becoming an independent, publicly traded company listed on the New York Stock Exchange - SolarWinds completed the separation of N-able on July 19, 2021, through a pro rata distribution of N-able common stock to SolarWinds stockholders[296](index=296&type=chunk) - One share of N-able common stock was distributed for every two shares of SolarWinds common stock held[296](index=296&type=chunk) - N-able became an independent, publicly traded company with its common stock listed on the New York Stock Exchange under the symbol "NABL"[296](index=296&type=chunk) - Financial statements prior to the separation were prepared on a "carve-out" basis, while post-separation statements are prepared as a standalone consolidated company[297](index=297&type=chunk) [SolarWinds Cyber Incident](index=54&type=section&id=SolarWinds%20Cyber%20Incident) The 2020 SolarWinds cyberattack did not affect N-able's solutions with malicious code, but it adversely impacted reputation and sales, with effects diminishing by late 2022 - SolarWinds was the victim of a cyberattack in December 2020, but no malicious code was found in N-able's solutions[298](index=298&type=chunk)[299](index=299&type=chunk) - The company has implemented several security enhancements, including multi-factor authentication, a unified single sign-on service, and a secure key vault[300](index=300&type=chunk) - The cyber incident adversely affected the company's reputation, new subscription sales, and net retention rates, but its adverse impact had diminished by the end of fiscal year 2022[302](index=302&type=chunk) - Under the separation and distribution agreement, SolarWinds will indemnify N-able for potential costs arising from the cyber incident[301](index=301&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) N-able's financial statements were prepared on a "carve-out" basis before its separation on July 19, 2021, and on a standalone consolidated basis thereafter - The company's financial statements were prepared on a "carve-out" basis before the separation on July 19, 2021, and on a standalone consolidated basis thereafter[303](index=303&type=chunk) - Prior to the separation, costs for facilities, IT, and certain corporate administrative services provided by SolarWinds were allocated to N-able, primarily based on direct usage or headcount[305](index=305&type=chunk) - Management believes the cost allocation methods were reasonable but may not be representative of the actual costs the company would have incurred as a standalone entity[305](index=305&type=chunk) [Fourth Quarter Financial Highlights](index=56&type=section&id=Fourth%20Quarter%20Financial%20Highlights) N-able achieved growth in revenue and profitability in Q4 2022, with total revenue reaching $95.8 million and net income increasing to $7.0 million Fourth Quarter 2022 Financial Highlights | Metric | Q4 2022 (USD in millions) | Q4 2021 (USD in millions) | | :----------------------- | :-------------------- | :-------------------- | | Total Revenue | 95.8 | 89.5 | | Net Income | 7.0 | 2.1 | | Adjusted EBITDA | 31.2 | 27.8 | | Cash Flow from Operations | 18.4 | 19.2 | MSP Partner Growth (ARR over $50,000) | Metric | December 31, 2022 | December 31, 2021 | Growth Rate | | :--------------------- | :------------- | :------------- | :----- | | Number of Partners | 1,898 | 1,678 | 13.1% | | Percentage of Total ARR | ~51% | ~47% | +4pp | [Components of Our Results of Operations](index=56&type=section&id=Components%20of%20Our%20Results%20of%20Operations) N-able's results are driven by subscription revenue, with costs comprising technical support, cloud infrastructure, and amortization, and operating expenses in sales, R&D, and G&A - Revenue is primarily derived from the sale of subscriptions for SaaS solutions and term-based licenses, as well as a small amount of maintenance services for perpetual licenses[310](index=310&type=chunk) - Cost of revenue includes personnel costs for technical support, public cloud infrastructure and hosting fees, royalties, and amortization of acquired technologies[314](index=314&type=chunk) - Operating expenses consist of sales and marketing, research and development, general and administrative expenses, and amortization of acquired intangible assets[315](index=315&type=chunk) - Other expense primarily includes interest expense related to credit agreements and related party debt, as well as gains or losses from foreign currency exchange rate changes[313](index=313&type=chunk) - Income tax expense includes domestic and foreign corporate income taxes and is affected by various factors such as tax laws, regulations, tax rates, valuation allowances, and income allocation[316](index=316&type=chunk) [Revenue](index=56&type=section&id=Revenue) N-able's revenue primarily comes from subscription sales of SaaS solutions and term-based licenses, recognized ratably over the subscription period - Subscription revenue is primarily derived from the sale of SaaS solutions and term-based licenses and is generally recognized ratably over the subscription period[310](index=310&type=chunk) - Other revenue primarily consists of maintenance services related to historical perpetual license sales, with maintenance revenue recognized ratably on a daily basis over the contract term[311](index=311&type=chunk) [Cost of Revenue](index=57&type=section&id=Cost%20of%20Revenue) The cost of revenue includes technical support personnel, cloud infrastructure fees, royalties, and the amortization of acquired technologies - Cost of revenue includes personnel costs for technical support, public cloud infrastructure and hosting fees, royalties, and allocated indirect costs for subscription revenue and maintenance services[314](index=314&type=chunk) - Amortization of acquired technologies is included in the cost of revenue and primarily relates to technologies acquired in the SolarWinds take-private transaction in early 2016 and subsequent business combinations[314](index=314&type=chunk) [Operating Expenses](index=57&type=section&id=Operating%20Expenses) Operating expenses consist of sales and marketing, R&D, and G&A costs, primarily driven by personnel expenses, with continued investment expected to support growth - Operating expenses include sales and marketing, research and development, and general and administrative expenses, as well as amortization of acquired intangible assets[315](index=315&type=chunk) - Personnel costs are the primary component of operating expenses and include salaries, bonuses, stock-based compensation, and related employer-paid payroll taxes[312](index=312&type=chunk) - Prior to the separation, costs for facilities, IT, and certain corporate administrative services provided by SolarWinds were allocated to N-able[312](index=312&type=chunk) - The company expects to continue increasing its investment in sales and marketing and research and development to drive new MSP partner additions, expansion with existing partners, and new product releases and security enhancements[315](index=315&type=chunk) [Other Expense](index=57&type=section&id=Other%20Expense) Other expenses primarily consist of interest expense from credit agreements and related party debt, as well as gains and losses from foreign currency fluctuations - Other expense primarily includes interest expense related to credit agreements and related party debt, as well as gains or losses from foreign currency exchange rate changes on foreign currency-denominated accounts[313](index=313&type=chunk) - Changes in interest rates could adversely affect the company's financial results and cash flows, as outstanding borrowings under the credit agreements bear floating interest rates[313](index=313&type=chunk) [Foreign Currency](index=57&type=section&id=Foreign%20Currency) As a global company, N-able is exposed to foreign currency exchange rate fluctuations, which affect the U.S. dollar-reported amounts of its foreign subsidiaries' financials - As a global company, the company is exposed to the risk of adverse changes in foreign currency exchange rates[314](index=314&type=chunk) - Foreign currency fluctuations affect the U.S. dollar-reported amounts of total assets, liabilities, revenue, operating expenses, and cash flows of its foreign subsidiaries[314](index=314&type=chunk) - These risks may evolve with business practices and economic conditions, including the impact of the COVID-19 pandemic or the Russia-Ukraine conflict[393](index=393&type=chunk) [Income Tax Expense](index=58&type=section&id=Income%20Tax%20Expense) N-able's income tax expense is influenced by various factors, including changes in tax laws, valuation allowances, and the global distribution of its income - Income tax expense includes domestic and foreign corporate income taxes[316](index=316&type=chunk) - The effective tax rate is affected by numerous factors, including changes in tax laws, regulations, tax rates, new interpretations of existing laws, valuation allowances, uncertain tax positions, stock-based compensation, permanent non-deductible book and tax differences, and changes in the global distribution of income[316](index=316&type=chunk) [Comparison of the Years Ended December 31, 2022 and 2021](index=58&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202022%20and%202021) In 2022, total revenue grew 7.3% to $371.8 million, driven by data protection and security solution sales, while operating expenses increased by 1.9% - The dollar-based net retention rate decreased from **110%** in 2021 to **103%** in 2022, primarily due to unfavorable foreign currency exchange rate movements[320](index=320&type=chunk) - In 2022, revenue from the United States accounted for **48.7%** of total revenue, and the United Kingdom accounted for **10.3%**[317](index=317&type=chunk) Comparison of Financial Performance for 2022 and 2021 | Metric | 2022 (USD in thousands) | 2021 (USD in thousands) | Change (USD in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total revenue | 371,769 | 346,456 | 25,313 | 7.3% | | Subscription revenue | 362,609 | 336,845 | 25,764 | 7.6% | | Other revenue | 9,160 | 9,611 | (451) | (4.7)% | | Total cost of revenue | 58,610 | 52,432 | 6,178 | 11.8% | | Sales and marketing expense | 125,301 | 112,678 | 12,623 | 11.2% | | Research and development expense | 63,484 | 53,959 | 9,525 | 17.7% | | General and administrative expense | 71,125 | 80,575 | (9,450) | (11.7)% | | Amortization of acquired intangible assets | 5,853 | 13,482 | (7,629) | (56.6)% | | Net interest expense | (18,852) | (20,472) | 1,620 | 7.9% | | Other income (expense), net | 1,881 | (1,266) | 3,147 | 248.6% | | Income tax expense | 13,718 | 11,479 | 2,239 | 19.5% | | Effective tax rate | 45.1% | 99.0% | (53.9) pp | | [Comparison of the Years Ended December 31, 2021 and 2020](index=61&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202021%20and%202020) In 2021, total revenue grew 14.4% to $346.5 million, driven by data protection and security solution sales, while operating expenses increased by 26.6% - The dollar-based net retention rate increased slightly from **109%** in 2020 to **110%** in 2021, primarily due to strong customer retention and expansion of MSP products[333](index=333&type=chunk) - In 2021, revenue from the United States accounted for **46.4%** of total revenue, and the United Kingdom accounted for **11.1%**[331](index=331&type=chunk) Comparison of Financial Performance for 2021 and 2020 | Metric | 2021 (USD in thousands) | 2020 (USD in thousands) | Change (USD in thousands) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total revenue | 346,456 | 302,871 | 43,585 | 14.4% | | Subscription revenue | 336,845 | 292,027 | 44,818 | 15.3% | | Other revenue | 9,611 | 10,844 | (1,233) | (11.4)% | | Total cost of revenue | 52,432 | 63,173 | (10,741) | (17.0)% | | Sales and marketing expense | 112,678 | 82,034 | 30,644 | 37.4% | | Research and development expense | 53,959 | 42,719 | 11,240 | 26.3% | | General and administrative expense | 80,575 | 57,331 | 23,244 | 40.5% | | Amortization of acquired intangible assets | 13,482 | 23,848 | (10,366) | (43.5)% | | Net interest expense | (20,472) | (28,137) | 7,665 | 27.2% | | Other (expense), net | (1,266) | (773) | (493) | 63.8% | | Income tax expense | 11,479 | 12,014 | (535) | (4.5)% | | Effective tax rate | 99.0% | 247.4% | (148.4) pp | | [Non-GAAP Financial Measures](index=63&type=section&id=Non-GAAP%20Financial%20Measures) N-able uses non-GAAP operating income and adjusted EBITDA to evaluate performance, excluding items like stock-based compensation and acquisition-related costs - The company uses non-GAAP operating income and adjusted EBITDA to evaluate its operating performance, as these measures exclude certain items that management believes are not indicative of core operating performance[344](index=344&type=chunk)[349](index=349&type=chunk) - Non-GAAP operating income excludes stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangible assets, acquisition-related costs, separation costs, and restructuring costs and other charges[346](index=346&type=chunk) - Adjusted EBITDA excludes amortization of acquired intangible assets and developed technology, depreciation expense, income tax expense (benefit), net interest expense, unrealized foreign currency (gains) losses, acquisition-related costs, separation costs, stock-based compensation expense and related employer-paid payroll taxes, and restructuring and other costs[349](index=349&type=chunk) Non-GAAP Operating Income and Margin | Metric | 2022 (USD in thousands) | 2021 (USD in thousands) | 2020 (USD in thousands) | | :----------------------- | :-------------- | :-------------- | :-------------- | | GAAP operating income | 47,396 | 33,330 | 33,766 | | Non-GAAP operating income | 97,952 | 98,647 | 111,281 | | GAAP operating margin | 12.7% | 9.6% | 11.1% | | Non-GAAP operating margin | 26.3% | 28.5% | 36.7% | Adjusted EBITDA and Margin | Metric | 2022 (USD in thousands) | 2021 (USD in thousands) | 2020 (USD in thousands) | | :----------------------- | :-------------- | :-------------- | :-------------- | | Net income (loss) | 16,707 | 113 | (7,158) | | Adjusted EBITDA | 114,696 | 113,346 | 120,560 | | Adjusted EBITDA margin | 30.9% | 32.7% | 39.8% | [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, N-able had $98.8 million in cash and believes its liquidity is sufficient to meet its operational needs for at

N-able, Inc. (NYSE:NABL) Q4 2022 Earnings Conference Call February 23, 2023 8:30 AM ET Company Participants Griffin Gyr - Investor Relations John Pagliuca - President and CEO Tim O'Brien - EVP and CFO Conference Call Participants Mike Cikos - Needham Matt Hedberg - RBC Capital Markets Jason Ader - William Blair Brian Essex - JPMorgan Operator Hello, and welcome to the N-able Fourth Quarter and Full-Year 2022 Earnings Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] ...

Professional Services Automation Password & Documentation Management g Cloud User Hub Business Management Multi-tenant Unified Agents Secure Design Automation Extensibility N- N-ABLE Confidential and proprietary information of N-able, Inc. – Do not distribute or duplicate without N-able's express written permission. 17 Monitor Everything from Anywhere Visibility and control over disparate devices and IT environments Solution capabilities What problems does it solve for the MSP? | --- | --- | --- | --- | --- ...

Financial Data and Key Metrics Changes - Q3 2022 revenue reached $93.5 million, representing a 13% year-over-year growth on a constant currency basis [7][44] - Adjusted EBITDA was $28.9 million, resulting in a 31% EBITDA margin, exceeding the high end of the forecast [8][49] - Gross margin decreased to 84.8% from 87.7% in Q3 2021, attributed to foreign exchange rates, product mix, and data center investments [48] - Dollar-based net revenue retention was 104% on a reported basis, reflecting a 4-point negative FX impact [46] Business Line Data and Key Metrics Changes - Subscription revenue was $91.2 million, showing a 6% year-over-year growth [44] - EDR and Cove Data Protection offerings continued to outpace total company revenue growth [46] - The Cove Data Protection solution demonstrated significant competitive differentiation and growth, with a focus on its TrueDelta innovation [23][24] Market Data and Key Metrics Changes - Approximately 44% of revenue was generated outside North America [50] - Cloud-based IT spending by SMEs is projected to grow from $600 billion in 2022 to $1 trillion by 2027, indicating a strong macro tailwind for the company [10] Company Strategy and Development Direction - The company aims to expand integrated cloud offerings to help MSPs manage and protect multi-cloud environments [15] - Focus on high LTV products and optimizing marketing spend in profitable geographies [82] - The company is positioned to be recession-resilient, addressing challenges like labor scarcity and cybersecurity [22] Management's Comments on Operating Environment and Future Outlook - Management noted that while some partners experienced elongated sales cycles, most did not feel a material slowdown in their cross-sell business [21] - The company is taking a prudent approach to forecasting, with a focus on maintaining strong demand despite macroeconomic uncertainties [102] - Retention rates remain strong, with no degradation observed [101] Other Important Information - The company hosted its Empower Partner Conference, welcoming over 450 partners, which was seen as a significant event for engagement and industry discussion [8][9] - The company is focusing on product and engineering investments while moderating spending in other areas [52] Q&A Session Summary Question: Clarification on partners generating over $50,000 ARR - The number of partners generating over $50,000 ARR is 1,786, with growth primarily affected by FX rates [67][68] Question: Insights on gross margins and sales/marketing expenses - Gross margin pressure is attributed to new product investments, FX impacts, and data center costs, while sales and marketing expenses saw a seasonal decline [70][72] Question: Specifics on operational expenditure tightening - The company is focusing on high ROI initiatives and pulling back on less profitable marketing efforts in certain geographies [80][82] Question: Comparison of current environment to early COVID period - The current environment is different, with MSPs not experiencing the same reluctance to add new customers as seen during the pandemic [86][88] Question: Macro headwinds and device adds - The company is seeing some slowdown in device adds due to flat PC shipments, but overall demand remains strong [96][97]

PART I [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) N-able, Inc.'s unaudited consolidated financial statements for Q3 2022 show $93.5 million revenue, $1.03 billion total assets, and $0.3 million net income [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $1.031 billion, total liabilities stable at $437.3 million, and equity declined to $594.1 million Consolidated Balance Sheet Summary (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $87,729 | $66,736 | | Goodwill | $795,937 | $840,922 | | Total current assets | $143,592 | $120,981 | | **Total assets** | **$1,031,456** | **$1,055,680** | | **Liabilities & Equity** | | | | Total current liabilities | $59,421 | $60,801 | | Long-term debt, net | $333,959 | $335,399 | | **Total liabilities** | **$437,324** | **$437,348** | | **Total stockholders' equity** | **$594,132** | **$618,332** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Q3 2022 revenue grew to $93.5 million, but net income fell to $0.3 million; nine-month revenue reached $276.0 million Statement of Operations Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Subscription and other revenue | $93,527 | $88,423 | $276,014 | $256,953 | | Gross profit | $78,424 | $76,127 | $232,479 | $217,828 | | Operating income | $11,722 | $9,772 | $33,087 | $24,832 | | Net income (loss) | $294 | $1,873 | $9,722 | $(1,943) | | Diluted EPS | $0.00 | $0.01 | $0.05 | $(0.01) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased to $53.0 million; cash and equivalents rose by $21.0 million Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $53,015 | $26,159 | | Net cash used in investing activities | $(22,504) | $(22,329) | | Net cash used in financing activities | $(7,632) | $(40,466) | | Effect of exchange rate changes | $(1,886) | $(1,582) | | **Net increase (decrease) in cash** | **$20,993** | **$(38,218)** | | **Cash at end of period** | **$87,729** | **$61,572** | [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on accounting policies and specific financial statement items, including the Spinpanel acquisition, goodwill changes, and debt structure - On July 1, 2022, the company acquired Spinpanel B.V. for up to **$20.0 million**, including **$10.0 million** in contingent consideration based on revenue metrics. The acquisition is intended to enhance Microsoft 365 management capabilities for MSP partners[57](index=57&type=chunk) - Goodwill decreased by **$45.0 million** in the first nine months of 2022, from **$840.9 million** to **$795.9 million**, primarily due to a **$51.5 million** negative impact from foreign currency translation[63](index=63&type=chunk) - In connection with the SolarWinds separation, the company entered into a new Credit Agreement for **$410.0 million**, with an outstanding principal of **$346.5 million** on the term loan as of September 30, 2022[89](index=89&type=chunk)[90](index=90&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2022 performance, noting a 5.8% revenue increase to $93.5 million, impacted by foreign currency movements, and presents non-GAAP measures - The company had approximately **25,000 customers** as of September 30, 2022, with MSP partners having annualized recurring revenue over **$50,000** growing by **7.5%** year-over-year to **1,786**[127](index=127&type=chunk) - The annual dollar-based net revenue retention rate was approximately **104%** for the trailing twelve months ended September 30, 2022, down from **110%** in the prior year, due to adverse foreign currency exchange rates[146](index=146&type=chunk) - Management believes the adverse impacts of the SolarWinds Cyber Incident on financial results will diminish over time, based on trends through the first nine months of 2022[121](index=121&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details Q3 2022 results, showing 5.8% revenue growth but higher cost of revenue, while nine-month revenue grew 7.4% Revenue Comparison (Q3 2022 vs Q3 2021, in thousands) | Revenue Type | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription revenue | $91,213 | $86,100 | $5,113 | 5.9% | | Other revenue | $2,314 | $2,323 | $(9) | -0.4% | | **Total revenue** | **$93,527** | **$88,423** | **$5,104** | **5.8%** | Operating Expenses Comparison (Q3 2022 vs Q3 2021, in thousands) | Expense Category | Q3 2022 | Q3 2021 | Change ($) | | :--- | :--- | :--- | :--- | | Sales and marketing | $31,149 | $30,178 | $971 | | Research and development | $16,038 | $14,649 | $1,389 | | General and administrative | $18,050 | $19,888 | $(1,838) | | Amortization of acquired intangibles | $1,465 | $1,640 | $(175) | | **Total operating expenses** | **$66,702** | **$66,355** | **$347** | - For the nine months ended Sep 30, 2022, total revenue increased by **$19.1 million** (**7.4%**) year-over-year, while total cost of revenue increased by **$4.4 million** (**11.3%**)[157](index=157&type=chunk)[161](index=161&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures; Q3 2022 Non-GAAP Operating Income was $25.1 million (26.8% margin), and Adjusted EBITDA was $28.9 million (30.9% margin) Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $294 | $1,873 | $9,722 | $(1,943) | | Adjustments (Amortization, Depreciation, Taxes, Interest, etc.) | $28,560 | $27,802 | $73,777 | $87,512 | | **Adjusted EBITDA** | **$28,854** | **$29,675** | **$83,499** | **$85,569** | | **Adjusted EBITDA margin** | **30.9%** | **33.6%** | **30.3%** | **33.3%** | Non-GAAP Operating Income Reconciliation (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | GAAP operating income | $11,722 | $9,772 | $33,087 | $24,832 | | Adjustments (Stock-comp, Amortization, Spin-off costs, etc.) | $13,385 | $16,947 | $38,243 | $52,645 | | **Non-GAAP operating income** | **$25,107** | **$26,719** | **$71,330** | **$77,477** | | **Non-GAAP operating margin** | **26.8%** | **30.2%** | **25.8%** | **30.2%** | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2022, cash and equivalents were $87.7 million, with operating activities providing $53.0 million in cash - Cash and cash equivalents increased to **$87.7 million** as of September 30, 2022[183](index=183&type=chunk) Summary of Cash Flows (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $53,015 | $26,159 | | Net cash used in investing activities | $(22,504) | $(22,329) | | Net cash used in financing activities | $(7,632) | $(40,466) | | **Net increase (decrease) in cash** | **$20,993** | **$(38,218)** | - Total borrowings under the Credit Agreement, net of debt issuance costs, were **$337.5 million** as of September 30, 2022[207](index=207&type=chunk) [Quantitative and Qualitative Disclosures of Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20of%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt and foreign currency exchange rate movements - A hypothetical **100 basis point** increase in interest rates would increase annual interest expense by approximately **$3.5 million** due to variable-rate debt[208](index=208&type=chunk) - N-able faces foreign currency exchange risk from international operations, primarily involving the Euro, British Pound Sterling, and Canadian Dollar[210](index=210&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[217](index=217&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter ended September 30, 2022[218](index=218&type=chunk) PART II [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceeding that would have a material adverse effect on its financial condition or operations - As of the report date, the company is not involved in any legal proceedings expected to have a material adverse effect[221](index=221&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors are reported from prior disclosures in the 2021 Annual Report and Q1 2022 Form 10-Q - No material changes in risk factors are reported since the disclosures in the 2021 Annual Report and the Q1 2022 10-Q[222](index=222&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2022, the company repurchased 600 shares of common stock related to unvested restricted stock from a former employee Issuer Purchases of Securities (Q3 2022) | Period | Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 1 - 31, 2022 | — | $— | | August 1 - 31, 2022 | — | $— | | September 1 - 30, 2022 | 600 | $0 | | **Total** | **600** | | - All repurchases relate to the company exercising its right to repurchase unvested employee-held restricted stock upon cessation of employment[225](index=225&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) There is no other information to report for this item - None[226](index=226&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[229](index=229&type=chunk)

N-able, Inc. (NYSE:NABL) Q2 2022 Earnings Conference Call August 11, 2022 8:30 AM ET Company Participants Jeffrey Magoma - Investor Relations John Pagliuca - President and Chief Executive Officer Tim O???Brien - Executive Vice President and Chief Financial Officer Conference Call Participants Matt Hedberg - RBC Capital Markets Jason Ader - William Blair Mike Cikos - Needham Jeffrey Magoma Thank you and welcome everyone to N-able???s Second Quarter 2022 Earnings Call. With me today are John Pagliuca, N-able? ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40297 N-able, Inc. (Exact name of registrant as specified in its charter) Delaware 85-4069861 (State or other jurisdiction of inco ...

N-able, Inc. (NYSE:NABL) Q1 2022 Earnings Conference Call May 12, 2022 8:30 AM ET Company Participants John Pagliuca - President and Chief Executive Officer Tim O???Brien - Executive Vice President and Chief Financial Officer Conference Call Participants Matt Hedberg - RBC Capital Markets Mike Cikos - Needham and Company Keith Bachman - BMO Jason Ader - William Blair Operator Hello and welcome to today???s N-able???s First Quarter 2022 Earnings Call. My name is Bailey and I will be your moderator for today? ...

PART I - FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited statements show revenue growth and a return to net income post-separation from SolarWinds [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $1.05 billion, with stable stockholders' equity and a slight increase in cash Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $70,439 | $66,736 | | Total current assets | $126,618 | $120,980 | | Goodwill | $833,493 | $840,923 | | Total assets | $1,050,160 | $1,055,680 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $56,063 | $60,801 | | Long-term debt, net | $334,902 | $335,300 | | Total liabilities | $431,605 | $437,315 | | Total stockholders' equity | $618,555 | $618,365 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a 9.2% revenue increase to $90.9 million and shifted from a net loss to a net income of $5.1 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Subscription and other revenue | $90,860 | $83,190 | | Gross Profit | $76,597 | $69,181 | | Operating Income | $11,068 | $5,179 | | Net Income (Loss) | $5,101 | $(4,278) | | Diluted Earnings (Loss) Per Share | $0.03 | $(0.03) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations remained stable at $13.1 million, while financing activities used cash for tax payments Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,130 | $13,169 | | Net cash used in investing activities | $(3,845) | $(4,752) | | Net cash (used in) provided by financing activities | $(4,844) | $2,383 | | Net increase in cash and cash equivalents | $3,703 | $11,428 | [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Key notes detail the spin-off from SolarWinds, carve-out accounting, new debt, and ongoing tax audits - N-able completed its separation from SolarWinds via a pro-rata distribution on **July 19, 2021**, becoming an independent public company[32](index=32&type=chunk) - Financial statements for periods through July 19, 2021, are prepared on a **'carve-out' basis**, including allocated corporate expenses from SolarWinds[36](index=36&type=chunk)[42](index=42&type=chunk) - In connection with the spin-off, the company entered into a new **Credit Agreement for $410.0 million** and repaid all related-party debt to SolarWinds[62](index=62&type=chunk)[81](index=81&type=chunk) - The company is under audit by the **IRS for tax years 2013-2016** and by the Canadian Revenue Agency for 2017-2018[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2022 performance, highlighting revenue growth, improved profitability, and key non-GAAP metrics - Total revenue for Q1 2022 was **$90.9 million, a 9.2% increase year-over-year**, driven by security and data protection solutions[117](index=117&type=chunk)[131](index=131&type=chunk) - Net income for Q1 2022 was **$5.1 million**, compared to a net loss of $4.3 million in Q1 2021[119](index=119&type=chunk) - Adjusted EBITDA for Q1 2022 was **$27.0 million (29.7% margin)**, compared to $27.7 million (33.2% margin) in Q1 2021[119](index=119&type=chunk)[156](index=156&type=chunk) - The company believes the adverse impacts of the **SolarWinds Cyber Incident** on financial results will diminish over time[112](index=112&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Revenue grew 9.2% to $90.9 million, driven by subscription growth, while operating income improved due to lower amortization Revenue Comparison (in thousands) | Revenue Type | Q1 2022 | Q1 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription revenue | $88,635 | $80,671 | $7,964 | 9.9% | | Other revenue | $2,225 | $2,519 | $(294) | -11.7% | | **Total revenue** | **$90,860** | **$83,190** | **$7,670** | **9.2%** | - The annual dollar-based net revenue retention rate was approximately **108%** for the trailing twelve months ended March 31, 2022[133](index=133&type=chunk) - General and administrative expenses decreased by $2.6 million, primarily due to a **$5.9 million reduction in spin-off costs**[139](index=139&type=chunk) - Amortization of acquired technologies and intangibles **decreased by a combined $6.3 million** year-over-year, significantly boosting operating income[136](index=136&type=chunk)[140](index=140&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) The company reported Adjusted EBITDA of $27.0 million and Non-GAAP Operating Income of $22.9 million for Q1 2022 Non-GAAP Operating Income Reconciliation (in thousands) | | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | GAAP operating income | $11,068 | $5,179 | | Stock-based compensation & related taxes | $8,784 | $5,122 | | Amortization of acquired technologies | $982 | $2,704 | | Amortization of acquired intangibles | $1,461 | $6,019 | | Spin-off costs | $534 | $6,115 | | Restructuring costs and other | $72 | $13 | | **Non-GAAP operating income** | **$22,901** | **$25,152** | Adjusted EBITDA Reconciliation (in thousands) | | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income (loss) | $5,101 | $(4,278) | | Amortization & Depreciation | $6,338 | $11,330 | | Income tax expense | $3,500 | $2,410 | | Interest expense, net | $3,526 | $6,518 | | Other adjustments (spin-off, stock comp, etc.) | $8,561 | $11,671 | | **Adjusted EBITDA** | **$27,030** | **$27,651** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by $70.4 million in cash and a $410.0 million credit facility, with stable operating cash flow - Cash and cash equivalents stood at **$70.4 million** as of March 31, 2022[157](index=157&type=chunk) - The company established a new credit facility in July 2021, consisting of a **$350.0 million term loan** and a **$60.0 million revolving facility**[159](index=159&type=chunk) - Net cash provided by operating activities was **$13.1 million** in Q1 2022, consistent with the prior year[167](index=167&type=chunk)[169](index=169&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations on its variable-rate debt and foreign currency exchange volatility - The company's variable-rate debt creates interest rate risk; a **100 basis point rate increase** would raise annual interest expense by about **$3.5 million**[179](index=179&type=chunk) - As a global company, N-able faces foreign currency exchange risk, primarily from the **Euro, British Pound Sterling, and Canadian Dollar**[181](index=181&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The CEO and CFO concluded that as of March 31, 2022, the company's **disclosure controls and procedures were effective**[189](index=189&type=chunk) - **No material changes** occurred during the quarter that are reasonably likely to materially affect the company's internal control over financial reporting[190](index=190&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any legal proceedings that would have a material adverse effect on the business - As of the filing date, N-able is **not involved in any material legal proceedings**[193](index=193&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Key risks include geopolitical instability affecting international operations, Brexit, and evolving data privacy regulations - The company's international operations, particularly R&D facilities in Belarus, face risks from **regional instability related to the Russia-Ukraine conflict**[198](index=198&type=chunk) - **Brexit continues to pose risks** of economic uncertainty and regulatory divergence that could adversely affect UK operations[199](index=199&type=chunk)[200](index=200&type=chunk) - Evolving data privacy laws, such as the **Schrems II decision invalidating the E.U.-U.S. Privacy Shield**, create uncertainty and could restrict data transfers[201](index=201&type=chunk)[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 1,400 shares from former employees, which was not part of a formal buyback program - The company **repurchased 1,400 shares** of common stock during Q1 2022[206](index=206&type=chunk) - These repurchases were related to **unvested restricted stock from former employees** and were not part of a formal share repurchase plan[206](index=206&type=chunk) [Other Information](index=37&type=section&id=Item%205.%20Other%20Information) There is no other information to report for this period - None[207](index=207&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists key filed exhibits, including the separation agreement, corporate documents, and required certifications - Key exhibits include the **Separation and Distribution Agreement** with SolarWinds, Amended Certificate of Incorporation and Bylaws, and CEO/CFO certifications[210](index=210&type=chunk)