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01/10 17:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects positive sentiment with strong subscription revenue growth, increased customer base, and healthy cash flow. While gross margins declined slightly, the company is investing in AI and operations, indicating future growth potential. The Q&A section highlights confidence in ARR growth, successful acquisitions, and strategic product launches, all contributing to an optimistic outlook. The market cap suggests moderate stock price movement, leading to a positive prediction.
Annual Recurring Revenue (ARR) $528 million, up 14% year-over-year. The increase is attributed to robust demand for cybersecurity and the rising strategic relevance of N-able.
Adjusted EBITDA Margin 31%, reflecting strong profitability and operational efficiency.
Total Revenue $131.7 million, representing approximately 13% year-over-year growth. This growth was driven by strong ARR performance and operational execution.
Subscription Revenue $130.5 million, representing approximately 13% year-over-year growth. This was driven by the increasing adoption of subscription-based services.
Customers contributing $50,000 or more of ARR 2,611 customers, up approximately 15% year-over-year. This growth reflects the success in scaling the business and expanding customer relationships.
Gross Margin 81.1%, compared to 83.7% in the same period in 2024. The slight decline is due to investments in scaling operations and enhancing service capabilities.
Unlevered Free Cash Flow $22.6 million in the third quarter, reflecting healthy cash generation and operational efficiency.
CapEx $9.4 million or 7.2% of revenue, including $2.8 million of capitalized software development costs.
Non-GAAP Earnings Per Share $0.13, based on 188.4 million weighted average diluted shares.
Net Leverage Approximately 1.5x, with $101 million of cash and an outstanding loan principal balance of approximately $336 million.
AI capabilities: N-able is embedding innovative AI capabilities across its platform to enhance cybersecurity solutions, leveraging data from 11 million IT assets.
Anomaly Detection as a Service: Launched to detect unauthorized access in backup environments and proactively flag indicators of compromise.
UEM Solution: Largest deal this quarter driven by UEM solution, representing an ARR win of nearly $0.5 million.
Channel-first go-to-market strategy: Expanded security capabilities and scaled channel-first approach, including reseller-driven UEM mid-market wins.
Geographic expansion: Initiated reseller motion in the U.K. with plans to expand to other regions, achieving active relationships with top U.K. partners.
ARR Growth: Third quarter ARR was $528 million, up 14% year-over-year.
Customer Retention: Gross and net retention improved year-over-year and quarter-over-quarter.
AI-driven operational efficiencies: AI used to automate workflows, reduce manual work, and enhance threat detection capabilities.
AI integration: N-able is embedding AI across its platform and establishing industry standards for AI language to enhance cybersecurity.
Proactive resilience: Shifted from reactive defense to proactive resilience with new data protection capabilities.
AI-driven cyber threats: AI is intensifying the speed, sophistication, and scale of cyber threats, making them harder to detect and more believable. This includes a 1,200% increase in phishing attacks since 2022 and the use of generative AI by cybercriminals to mimic real-world people and messages.
SMB vulnerability to cyberattacks: Small and mid-market businesses (SMBs) face enterprise-level threats without enterprise-level resources. Ransom demands are often calibrated to just under the cyber insurance deductible, making SMBs prime targets for attacks.
Regulatory compliance pressures: Insurance regulations are adapting to new cybersecurity paradigms, requiring businesses to meet tighter security standards, which could increase operational costs and complexity for compliance.
Economic pressures on SMBs: SMBs often lack the financial and technical resources to implement robust cybersecurity measures, making them more vulnerable to attacks and operational disruptions.
Complexity of IT and cybersecurity management: The increasing complexity of IT environments, including hybrid systems, multi-cloud setups, and AI-driven processes, creates challenges in managing cybersecurity effectively.
Operational risks from AI implementation: While AI offers significant opportunities, its implementation introduces risks such as fragmented and inconsistent terminology across businesses, which could hinder seamless AI automation and integration.
Dependence on channel partners: N-able's reliance on channel partners like managed service providers (MSPs) and value-added resellers (VARs) for market reach could pose risks if these partners fail to deliver or align with N-able's strategic goals.
Competitive pressures in cybersecurity: The cybersecurity market is highly competitive, with many players vying for market share. N-able must continuously innovate to maintain its competitive edge.
Data protection and recovery challenges: Ensuring data is always protected and recoverable is critical, but challenges remain in detecting unauthorized access and preventing data loss before it occurs.
Revenue Outlook: For the fourth quarter of 2025, total revenue is expected to range between $126.5 million and $127.5 million, representing approximately 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. For the full year 2025, total revenue is projected to be approximately $507.7 million to $508.7 million, representing approximately 9% year-over-year growth on a reported basis and 8% on a constant currency basis.
ARR (Annual Recurring Revenue) Projections: Full year ARR is expected to be in the range of $530 million to $531 million, representing 10% year-over-year growth or 8% on a constant currency basis. Adjusted net new ARR dollar growth in the fourth quarter is anticipated to be slightly higher than the average quarterly year-to-date results.
Adjusted EBITDA Margin: For the fourth quarter of 2025, adjusted EBITDA is expected to range between $33.6 million and $34.6 million, representing an adjusted EBITDA margin of approximately 27%. For the full year 2025, adjusted EBITDA is projected to be between $148.2 million and $149.2 million, representing a 29% adjusted EBITDA margin. The company remains committed to returning adjusted EBITDA margin to 30% in FY 2026.
Capital Expenditures: CapEx, including capitalized software development costs, is expected to be approximately 6% of total revenue for 2025.
Unlevered Free Cash Flow: Unlevered free cash flow is projected to be in line with previous guidance of approximately $96 million to $98 million for the full year 2025.
AI and Cybersecurity Investments: The company plans to continue investing in AI-driven solutions and cybersecurity capabilities to capitalize on the growing demand and structural advantages in the market. This includes embedding AI into the platform to automate workflows, enhance threat detection, and deliver near-autonomous IT and cyber defense solutions.
Market Trends and Strategic Positioning: N-able anticipates that AI will expand the scope of software capabilities and increase the demand for cybersecurity solutions. The company is leveraging its scale, platform breadth, and data ownership to position itself as a leader in the evolving cybersecurity landscape. The channel-led approach and investments in AI are expected to drive growth and competitive differentiation.
Share Repurchase Program: We also executed on our share repurchase program, underscoring our confidence in the long-term value of the N-able business.
The earnings call reflects positive sentiment with strong subscription revenue growth, increased customer base, and healthy cash flow. While gross margins declined slightly, the company is investing in AI and operations, indicating future growth potential. The Q&A section highlights confidence in ARR growth, successful acquisitions, and strategic product launches, all contributing to an optimistic outlook. The market cap suggests moderate stock price movement, leading to a positive prediction.
The earnings call indicates strong financial performance with a 14% ARR growth and a 10% revenue increase. Despite a slight decline in gross margin, the company maintains a high adjusted EBITDA margin and positive free cash flow. The Q&A section reveals positive market reception and strategic focus, with promising growth in MSP markets and new product bundles. The share repurchase program further boosts confidence. Given the market cap, the stock is expected to react positively, likely within the 2% to 8% range, reflecting the overall strong financial and strategic outlook.
The earnings call reflects a mixed sentiment. While financial performance shows solid growth with a 10% revenue increase and positive EBITDA margins, concerns arise from declining gross margins, regulatory challenges, and economic headwinds. The lack of a shareholder return plan and significant debt also weigh negatively. However, the optimistic guidance and positive reception of the Adlumin acquisition balance these concerns. Given the company's market cap, the stock is likely to remain stable, resulting in a neutral prediction for the next two weeks.
The earnings call summary shows mixed signals: strong revenue growth and optimistic guidance, yet declining gross margins and integration risks. The Q&A reveals potential headwinds and lack of clarity on key initiatives, which may cause investor caution. The company's market cap suggests moderate stock price sensitivity. Overall, the sentiment is neutral, with no strong catalysts to drive significant price movement.
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