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

Financial Data and Key Metrics Changes - For 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 for Q4 was $39 million, reflecting a 30% margin, with full year adjusted EBITDA also at $153 million and a 30% margin [24][27] - Gross margin for Q4 was 80%, down from 82% in Q4 2024, while full year gross margin was 81%, down from 84% in 2024 [27] 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] - Customers contributing $50,000 or more of ARR increased by approximately 14% year-over-year, now representing about 61% of total ARR [25] - Dollar-based Net Revenue Retention was approximately 103% on a reported basis and 102% on a constant currency basis [26] Market Data and Key Metrics Changes - Approximately 45% of total revenue was generated outside of North America for both the quarter and the full year [26] - The company is seeing strong demand for its AI-powered solutions, particularly in the context of increasing cybersecurity threats [10][19] Company Strategy and Development Direction - The company aims to leverage AI as a core differentiator, with plans to develop an AI workflow assistant named N-zo to enhance IT and security operations [14][45] - The strategy includes expanding into the VAR channel and enhancing product offerings to address the skills gap in IT and security [15][21] - The company is focused on maintaining a balanced approach to growth and profitability, with potential for M&A and share buybacks [70][72] 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 for 2026, with guidance reflecting an 8%-9% year-over-year growth [31][32] - The management highlighted the importance of AI in enhancing customer security and operational efficiency, positioning the company well for future growth [10][36] Other Important Information - The company has received recognition in the 2026 Gartner Magic Quadrant for Endpoint Management Tools, validating its strategic execution [15] - A new cyber warranty program was introduced to bolster customer confidence and de-risk adoption [16] Q&A Session Summary Question: What gives confidence for higher constant currency ARR growth in 2026? - Management cited steady assumptions, improved gross retention, and traction from new SKUs as key factors [38] Question: Can you elaborate on the N-zo product and its expected value? - N-zo is currently in limited preview and aims to allow MSPs to assess and take action on vulnerabilities quickly using natural language [42][44] Question: What is driving the success of the Adlumin acquisition? - The AI solution's ability to assess and take action on threats quickly, along with its compatibility with various environments, has resonated well with MSPs [50][51] Question: How does the company view seasonality in 2026? - Management expects similar seasonality to 2025, with stronger performance anticipated in the second half of the year due to new product initiatives [56] Question: What are the capital allocation plans for 2026? - The company plans to balance share buybacks, organic investments, and potential M&A to meet customer needs [70][72]