N-ABLE(US:NABL)2022-05-12 13:07PART I - FINANCIAL INFORMATION Financial Statements The company's unaudited statements show revenue growth and a return to net income post-separation from SolarWinds Consolidated Balance Sheets 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 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 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 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 company32 - Financial statements for periods through July 19, 2021, are prepared on a 'carve-out' basis, including allocated corporate expenses from SolarWinds3642 - 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 SolarWinds6281 - The company is under audit by the IRS for tax years 2013-2016 and by the Canadian Revenue Agency for 2017-201895 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 solutions117131 - Net income for Q1 2022 was $5.1 million, compared to a net loss of $4.3 million in Q1 2021119 - Adjusted EBITDA for Q1 2022 was $27.0 million (29.7% margin), compared to $27.7 million (33.2% margin) in Q1 2021119156 - The company believes the adverse impacts of the SolarWinds Cyber Incident on financial results will diminish over time112 Results of Operations 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, 2022133 - General and administrative expenses decreased by $2.6 million, primarily due to a $5.9 million reduction in spin-off costs139 - Amortization of acquired technologies and intangibles decreased by a combined $6.3 million year-over-year, significantly boosting operating income136140 Non-GAAP Financial Measures 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 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, 2022157 - The company established a new credit facility in July 2021, consisting of a $350.0 million term loan and a $60.0 million revolving facility159 - Net cash provided by operating activities was $13.1 million in Q1 2022, consistent with the prior year167169 Quantitative and Qualitative Disclosures About Market Risk 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 million179 - As a global company, N-able faces foreign currency exchange risk, primarily from the Euro, British Pound Sterling, and Canadian Dollar181 Controls and Procedures 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 effective189 - No material changes occurred during the quarter that are reasonably likely to materially affect the company's internal control over financial reporting190 PART II - OTHER INFORMATION Legal Proceedings 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 proceedings193 Risk Factors 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 conflict198 - Brexit continues to pose risks of economic uncertainty and regulatory divergence that could adversely affect UK operations199200 - Evolving data privacy laws, such as the Schrems II decision invalidating the E.U.-U.S. Privacy Shield, create uncertainty and could restrict data transfers201202 Unregistered Sales of Equity Securities and Use of Proceeds 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 2022206 - These repurchases were related to unvested restricted stock from former employees and were not part of a formal share repurchase plan206 Other Information There is no other information to report for this period - None207 Exhibits 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 certifications210