N-ABLE(NABL) - 2024 Q3 - Quarterly Report

Revenue Performance - Total revenue for the three months ended September 30, 2024, was $116.4 million, an increase from$ 107.6 million in the same period of 2023, representing a growth of 8.2%[79] - Total revenue increased by $8.9 million, or 8.3%, for the three months ended September 30, 2024, compared to the same period in 2023[90] - Total revenue increased by$ 36.2 million, or 11.5%, for the nine months ended September 30, 2024, compared to the same period in 2023[103] Subscription Revenue - Subscription revenue rose by $9.8 million, or 9.3%, for the three months ended September 30, 2024, with subscription revenue accounting for 98.8% of total revenue[91] - Subscription revenue rose by$ 37.9 million, or 12.4%, for the nine months ended September 30, 2024, driven by growth in data protection and security solutions[103] - Subscription revenue accounted for 98.8% of total revenue for the three months ended September 30, 2024, up from 97.8% in 2023[92] Income and Profitability - Operating income for the three months ended September 30, 2024, was $23.9 million, compared to$ 18.4 million for the same period in 2023, reflecting a growth of 29.9%[80] - Net income for the three months ended September 30, 2024, was $10.8 million, up from$ 6.0 million in the same period of 2023, indicating an increase of 80%[80] - Income before income taxes increased by $19.8 million, or 71.9%, for the nine months ended September 30, 2024, compared to the same period in 2023[111] Expenses - Total cost of revenue increased by$ 2.5 million, or 14.7%, primarily due to increased public cloud infrastructure and hosting fees[94] - Research and development expenses increased by $3.2 million, or 16.4%, driven by higher personnel costs and stock-based compensation[96] - Total operating expenses increased by$ 11.5 million, or 5.4%, for the nine months ended September 30, 2024, compared to the same period in 2023[106] Cash Flow and Liquidity - Cash flows from operations for the three months ended September 30, 2024, were $22.0 million, down from$ 27.5 million in the same period of 2023[81] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $53.5 million, down from$ 58.9 million in the same period of 2023[121] - Cash and cash equivalents totaled $174.4 million as of September 30, 2024, with international subsidiaries holding approximately$ 167.1 million[119] Retention and Customer Metrics - The number of MSP partners with annualized recurring revenue (ARR) over $50,000 increased by 6.6%, from 2,134 as of September 30, 2023, to 2,275 as of September 30, 2024[79] - Annual dollar-based net revenue retention rate for subscription products was approximately 105% for the trailing twelve-month period ended September 30, 2024, down from 108% in 2023[91] - The company had approximately 25,000 customers as of September 30, 2024[79] Tax and Interest - Income tax expense increased by$ 3.8 million, with an effective tax rate of 42.3% for the three months ended September 30, 2024[101] - Interest expense, net decreased by $0.3 million, or 3.4%, primarily due to lower interest rates and reduced outstanding borrowings[99] - Interest expense, net increased by$ 0.2 million, or 1.0%, primarily due to increased interest rates on borrowings under the Credit Agreement[109] Research and Development - Research and development expenses are expected to grow as the company continues to enhance security, monitoring, and authentication of its solutions[85] - Research and development expenses increased by $8.7 million, or 14.7%, primarily due to higher personnel costs and stock-based compensation[106] Operational Efficiency - Non-GAAP operating income for Q3 2024 was$ 37.5 million, compared to $30.5 million in Q3 2023, reflecting a 22.9% growth[115] - Non-GAAP operating margin for Q3 2024 was 32.2%, up from 28.4% in Q3 2023[115] - Operating expenses totaled$ 72.6 million, representing 62.4% of total revenue for the three months ended September 30, 2024, compared to 66.8% in 2023[95] Other Income and Expenses - Other income (expense), net increased by $2.7 million, or 636.4%, primarily due to changes in foreign currency exchange rates[100] - Other revenue decreased by$ 0.9 million, or 38.8%, primarily due to a decline in maintenance and professional services revenue[93] - Other income, net increased by $2.1 million, or 135.6%, primarily due to higher dividend income from money market fund financial assets[110] Financial Position - Total borrowings as of September 30, 2024, were$ 333.6 million, slightly down from $335.0 million as of December 31, 2023[119] - The company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements during the reporting period[119] - The company plans to utilize foreign earnings for investments in foreign operations or remit them to U.S. entities in a tax-efficient manner[119] Accounting Policies - The company’s financial statements are prepared in accordance with GAAP, requiring management to make estimates that affect reported amounts of assets, liabilities, revenue, costs, and expenses[128] - Critical accounting policies include the valuation of goodwill, intangibles, long-lived assets, revenue recognition, and income taxes[128] - There have been no material changes to critical accounting policies and estimates since the 2023 Annual Report[128]