N-ABLE(NABL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, total ARR was $540 million, growing at 12% year-over-year on a reported basis and 8% on a constant currency basis [24] - Total revenue for Q4 was $130 million, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis [24] - Adjusted EBITDA in Q4 was $39 million, reflecting a 30% margin, with full year adjusted EBITDA also at $153 million and a 30% margin [24][27] - For the full year 2025, total revenue was $511 million, representing year-over-year growth of 10% on a reported basis and 9% on a constant currency basis [26] Business Line Data and Key Metrics Changes - The company solidified its presence in the AI SOC market and crossed $200 million in ARR for data protection [5] - Subscription revenue for Q4 was $129 million, showing approximately 12% year-over-year growth on a reported basis [24] - Customers contributing $50,000 or more of ARR grew approximately 14% year-over-year, now representing about 61% of total ARR [25] Market Data and Key Metrics Changes - Approximately 45% of total revenue for Q4 and the full year came from outside North America [26] - The company reported a Dollar-based Net Revenue Retention of approximately 103% on a reported basis [26] Company Strategy and Development Direction - The company aims to leverage AI as a core differentiator, with plans to develop an AI workflow assistant named Enzo to enhance IT and security operations [14][45] - The strategy includes expanding into the VAR channel and enhancing product offerings to address the growing demand for cybersecurity solutions [11][20] - The company is focused on solving evolving customer problems and delivering security and efficiency [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in steady demand trends and stable retention, with expectations for improved gross retention and new product traction [38][30] - The company anticipates continued growth in ARR and adjusted EBITDA margins, with a full-year 2026 revenue outlook of approximately $554 million to $559 million [31][32] - The management highlighted the importance of AI in enhancing customer security and operational efficiency, positioning the company well for future growth [10][15] Other Important Information - The company has a strong balance sheet with approximately $112 million in cash and a net leverage of about 1.9 times [28] - The acquisition of Adlumin has been successful, with cross-sell opportunities performing ahead of expectations [24][50] Q&A Session Summary Question: Can you talk about the confidence in guiding for higher constant currency ARR growth in 2026? - Management indicated that the guidance is based on steady assumptions, improved gross retention, and traction from new SKUs [38] Question: Can you clarify the AI product Enzo and its expected value for customers? - Enzo is currently in limited preview and aims to enhance operational efficiency by allowing MSPs to assess and take action in their environments quickly [44] Question: What is driving the earlier-than-expected success of the Adlumin acquisition? - The success is attributed to the AI technology, the ability to assess and take action quickly, and the growing compliance needs among MSPs [50][52] Question: How do you expect seasonality to impact growth in 2026? - Management expects similar seasonality as in 2025, with stronger performance anticipated in the second half of the year due to new product initiatives [56] Question: How does the company plan to balance growth and profitability in capital allocation? - The company plans to continue share buybacks, invest in organic growth, and explore M&A opportunities to meet customer needs [70][72]