Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

N-able Announces Third Quarter 2023 Results


N-able, Inc. (NYSE:NABL), a global software company helping IT services providers deliver remote monitoring and management, data protection as-a-service, and security solutions, today reported results for its third quarter ended September 30, 2023.

"As the Age of the MSP advances, the IT outsourcing market remains strong," said N-able president and CEO John Pagliuca. "Compelling market trends are driving MSP growth, including the fast-moving shift to consolidate and modernize their environments, the movement upmarket, and increasing security standards - all centered on the need to support the expanding small and medium enterprise IT ecosystem. We added new capabilities in the third quarter to meet these evolving market needs, including exciting developments to our security suite. As we move forward, our vision is clear, and we are invigorated by the opportunity to elevate our standing as a vendor of choice for MSPs."

"Our third quarter results were strong, exceeding our guidance on the top and bottom lines," added N-able executive vice president and CFO Tim O'Brien. "Looking ahead, we believe we are uniquely positioned to benefit from an appealing market opportunity. We intend to continue to invest in product innovation that advances our strategy of empowering MSPs with purpose-built technology while maintaining cost discipline across other areas of the business."

Third quarter 2023 financial highlights:

For a reconciliation of our GAAP to non-GAAP results, please see the tables below.

Additional highlights for the third quarter of 2023 include:

Balance Sheet

At September 30, 2023, total cash and cash equivalents were $127.4 million and total debt, net of debt issuance costs, was $335.5 million.

The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until N-able files its quarterly report on Form 10-Q for the period. Information about N-able's use of non-GAAP financial measures is provided below under "Non-GAAP Financial Measures."

Financial Outlook

As of November 13, 2023, N-able is providing its financial outlook for the fourth quarter of 2023 and full-year 2023. The financial information below represents forward-looking non-GAAP financial information, including adjusted EBITDA. These non-GAAP financial measures exclude, among other items mentioned below, amortization of acquired intangible assets and developed technology, depreciation expense, income tax expense, interest expense, net, unrealized foreign currency losses (gains), acquisition related costs, spin-off costs, stock-based compensation expense and related employer-paid payroll taxes and restructuring and other costs. We have not reconciled our estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

The financial outlook provided below reflects N-able's expectations, as of the date of this release, regarding the impact on its business of changing foreign exchange rates and current macroeconomic dynamics.

Financial Outlook for the Fourth Quarter of 2023

N-able management currently expects to achieve the following results for the fourth quarter of 2023:

Financial Outlook for Full-Year 2023

N-able management currently expects to achieve the following results for the full-year 2023:

Additional details on the company's outlook will be provided on the conference call.

Conference Call and Webcast

In conjunction with this announcement, N-able will host a conference call today to discuss its financial results, business and business outlook at 8:30 a.m. ET on November 13, 2023. A live webcast of the call will be available on the N-able Investor Relations website at http://investors.n-able.com. A replay of the webcast will be available on a temporary basis shortly after the event on the N-able Investor Relations website.

Forward-Looking Statements

This press release contains "forward-looking" statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the second quarter and full year 2023 and the impact of macroeconomic conditions on our business. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be signified by terms such as "aim," "anticipate," "believe," "continue," "expect," "feel," "intend," "estimate," "seek," "plan," "may," "can," "could," "should," "will," "would" or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially and adversely different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) risks related to our spin-off from SolarWinds into a newly created and separately-traded public company, including that the spin-off could disrupt or adversely affect our business, results of operations and financial condition, that the spin-off may not achieve some or all of any anticipated benefits with respect to our business; that the distribution, together with certain related transactions, may not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, which could result in N-able incurring significant tax liabilities, and, in certain circumstances, requiring us to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement; (b) the possibility that a worsening of the global COVID-19 pandemic or a new pandemic or other public health crisis may adversely affect our business, results of operations and financial condition or that the impact of such occurrences could negatively affect the global economy or the business operations and financial conditions of our customers, their end customers and our prospective customers; (c) the impact of adverse economic conditions; (d) our ability to sell subscriptions to new managed service provider ("MSP") partners, to sell additional solutions to our existing MSP partners and to increase the usage of our solutions by our existing MSP partners, as well as our ability to generate and maintain MSP partner loyalty; (e) any decline in our renewal or net retention rates; (f) the possibility that general economic conditions or uncertainty may cause information technology spending to be reduced or purchasing decisions to be delayed, including as a result of the COVID-19 pandemic, inflation, actions taken by central banks to counter inflation, rising interest rates, the impact of bank failures and related financial services industry uncertainty, war and political unrest, military conflict (including between Russia and Ukraine), terrorism, sanctions or other geopolitical events globally, or that such factors may otherwise harm our business, financial condition or results of operations; (g) any inability to generate significant volumes of high-quality sales leads from our digital marketing initiatives and convert such leads into new business at acceptable conversion rates; (h) any inability to successfully identify, complete and integrate acquisitions and manage our growth effectively; (i) risks associated with our international operations including, but not limited to, regulatory, political, tax and labor conditions; (j) foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; (k) risks that cyberattacks, including the cyberattack on SolarWinds' Orion Software Platform and internal systems announced by SolarWinds in December 2020, or the Cyber Incident, and other security incidents may result in compromises or breaches of our, our MSP partners', or their SME customers' systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners', or their SME customers' environments, the exploitation of vulnerabilities in our, our MSP partners', or their SME customers' security, the theft or misappropriation of our, our MSP partners', or their SME customers' proprietary and confidential information, and interference with our, our MSP partners', or their SME customers' operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business; (l) our status as a controlled company; (m) our ability to attract and retain qualified employees and key personnel as a standalone public company; (n) the timing and success of new product introductions and product upgrades by us or our competitors; (o) our ability to protect and defend our intellectual property and not infringe upon others' intellectual property; (p) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (q) our indebtedness, including increased borrowing costs resulting from rising interest rates, potential restrictions on our operations and the impact of events of default; (r) our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States; (s) increased costs associated with the loss of emerging growth company status as of the end of 2023; and (t) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in N-able's Annual Report on Form 10-K for the year ended December 31, 2022, that N-able filed with the SEC on March 14, 2023. All information provided in this release is as of the date hereof and N-able undertakes no duty to update this information except as required by law.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business.

N-able also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non-GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income.

N-able's management and board of directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Set forth in the tables below are the corresponding GAAP financial measures for each non-GAAP financial measure presented. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.

Non-GAAP Gross Margin, Non-GAAP Operating Income and Non-GAAP Operating Margin. We provide non-GAAP total cost of revenue, non-GAAP gross margin, non-GAAP operating expense and non-GAAP operating income and related non-GAAP gross and operating margins excluding such items as stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangible assets, acquisition related costs, spin-off costs and restructuring costs and other. We define non-GAAP gross and operating margins as non-GAAP gross profit and operating income divided by total revenue. Management believes these measures are useful for the following reasons:

Non-GAAP Net Income and Non-GAAP Net Income Per Diluted Share. We believe that the use of non-GAAP net income and non-GAAP net income per diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income is calculated as net income excluding the adjustments to non-GAAP gross profit and non-GAAP operating income and the income tax effect of the non-GAAP exclusions. We define non-GAAP net income per diluted share as non-GAAP net income divided by the weighted average outstanding common shares.

Adjusted EBITDA and Adjusted EBITDA Margin. We regularly monitor adjusted EBITDA and adjusted EBITDA margin, as they are measures we use to assess our operating performance. We define adjusted EBITDA as net income or loss, excluding amortization of acquired intangible assets and developed technology, depreciation expense, income tax expense, interest expense, net, unrealized foreign currency losses (gains), acquisition related costs, spin-off costs, stock-based compensation expense and related employer-paid payroll taxes and restructuring and other costs. We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include: although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our related party debt; adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Non-GAAP Revenue on a Constant Currency Basis. We provide non-GAAP revenue on a constant currency basis to provide a framework for assessing our performance excluding the effect of foreign currency rate fluctuations. To present this information, current period results for revenue contracts denominated in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect during the corresponding prior period presented. We believe that providing non-GAAP revenue on a constant currency basis facilitates the comparison of non-GAAP revenue to prior periods.

Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate cash flow from operations, after the deduction of capital expenditures and prior to the impact of our capital structure, acquisition-related costs, restructuring costs, spin-off costs, employer-paid payroll taxes on stock awards and other one-time items, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

About N-able

N-able fuels IT services providers with powerful software solutions to monitor, manage, and secure their customers' systems, data, and networks. Built on a scalable platform, we offer secure infrastructure and tools to simplify complex ecosystems, as well as resources to navigate evolving IT needs. We help partners excel at every stage of growth, protect their customers, and expand their offerings with an ever-increasing, flexible portfolio of integrations from leading technology providers. n-able.com

© 2023 N-able, Inc. All rights reserved.

Source: N-able, Inc.
Category: Financial

N-able, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

September 30,

 

December 31,

 

2023

 

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

127,433

 

 

$

98,847

 

Accounts receivable, net of allowances of $1,717 and $1,330 as of September 30, 2023 and December 31, 2022, respectively

 

39,141

 

 

 

34,798

 

Income tax receivable

 

16,665

 

 

 

7,814

 

Prepaid and other current assets

 

20,710

 

 

 

12,697

 

Total current assets

 

203,949

 

 

 

154,156

 

Property and equipment, net

 

36,220

 

 

 

37,404

 

Operating lease right-of-use assets

 

30,170

 

 

 

31,752

 

Deferred taxes

 

1,527

 

 

 

795

 

Goodwill

 

821,954

 

 

 

828,795

 

Intangible assets, net

 

6,851

 

 

 

8,873

 

Other assets, net

 

21,991

 

 

 

17,082

 

Total assets

$

1,122,662

 

 

$

1,078,857

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,606

 

 

$

3,544

 

Accrued liabilities and other

 

43,907

 

 

 

35,630

 

Current operating lease liabilities

 

5,789

 

 

 

5,771

 

Income taxes payable

 

11,299

 

 

 

1,629

 

Current portion of deferred revenue

 

11,525

 

 

 

11,740

 

Current debt obligation

 

3,500

 

 

 

3,500

 

Total current liabilities

 

79,626

 

 

 

61,814

 

Long-term liabilities:

 

 

 

Deferred revenue, net of current portion

 

161

 

 

 

387

 

Non-current deferred taxes

 

1,920

 

 

 

2,783

 

Non-current operating lease liabilities

 

30,910

 

 

 

33,110

 

Long-term debt, net of current portion

 

331,980

 

 

 

333,488

 

Other long-term liabilities

 

3,385

 

 

 

5,204

 

Total liabilities

 

447,982

 

 

 

436,786

 

Commitments and contingencies

 

 

 

Stockholders' equity:

 

 

 

Common stock, $0.001 par value: 550,000,000 shares authorized and 182,918,788 and 180,849,537 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

183

 

 

 

181

 

Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

?

 

 

 

?

 

Additional paid-in capital

 

657,522

 

 

 

632,871

 

Accumulated other comprehensive loss

 

(13,920

)

 

 

(7,815

)

Retained earnings

 

30,895

 

 

 

16,834

 

Total stockholders' equity

 

674,680

 

 

 

642,071

 

Total liabilities and stockholders' equity

$

1,122,662

 

 

$

1,078,857

 

N-able, Inc.

Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Revenue:

 

 

 

 

 

 

 

Subscription and other revenue

$

107,567

 

 

$

93,527

 

 

$

313,465

 

 

$

276,014

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue

 

16,893

 

 

 

14,587

 

 

 

49,205

 

 

 

41,492

 

Amortization of acquired technologies

 

463

 

 

 

516

 

 

 

1,382

 

 

 

2,043

 

Total cost of revenue

 

17,356

 

 

 

15,103

 

 

 

50,587

 

 

 

43,535

 

Gross profit

 

90,211

 

 

 

78,424

 

 

 

262,878

 

 

 

232,479

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

33,660

 

 

 

31,149

 

 

 

101,112

 

 

 

94,223

 

Research and development

 

19,752

 

 

 

16,038

 

 

 

58,796

 

 

 

46,664

 

General and administrative

 

18,438

 

 

 

18,050

 

 

 

53,877

 

 

 

54,119

 

Amortization of acquired intangibles

 

11

 

 

 

1,465

 

 

 

585

 

 

 

4,386

 

Total operating expenses

 

71,861

 

 

 

66,702

 

 

 

214,370

 

 

 

199,392

 

Operating income

 

18,350

 

 

 

11,722

 

 

 

48,508

 

 

 

33,087

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

 

(7,802

)

 

 

(5,088

)

 

 

(22,532

)

 

 

(12,459

)

Other (expense) income, net

 

(423

)

 

 

(1,795

)

 

 

1,569

 

 

 

(561

)

Total other expense, net

 

(8,225

)

 

 

(6,883

)

 

 

(20,963

)

 

 

(13,020

)

Income before income taxes

 

10,125

 

 

 

4,839

 

 

 

27,545

 

 

 

20,067

 

Income tax expense

 

4,112

 

 

 

4,545

 

 

 

13,484

 

 

 

10,345

 

Net income

$

6,013

 

 

$

294

 

 

$

14,061

 

 

$

9,722

 

Net income per share:

 

 

 

 

 

 

 

Basic earnings per share

$

0.03

 

 

$

0.00

 

 

$

0.08

 

 

$

0.05

 

Diluted earnings per share

$

0.03

 

 

$

0.00

 

 

$

0.08

 

 

$

0.05

 

Weighted-average shares used to compute net income per share:

 

 

 

 

 

 

 

Shares used in computation of basic earnings per share:

 

182,710

 

 

 

180,323

 

 

 

182,135

 

 

 

180,072

 

Shares used in computation of diluted earnings per share:

 

186,221

 

 

 

181,145

 

 

 

185,506

 

 

 

180,966

 

N-able, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

6,013

 

 

$

294

 

 

$

14,061

 

 

$

9,722

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

5,329

 

 

 

6,037

 

 

 

16,142

 

 

 

18,270

 

Provision for doubtful accounts

 

458

 

 

 

211

 

 

 

387

 

 

 

138

 

Stock-based compensation expense

 

11,298

 

 

 

10,112

 

 

 

32,893

 

 

 

28,078

 

Deferred taxes

 

(34

)

 

 

(132

)

 

 

(20

)

 

 

213

 

Amortization of debt issuance costs

 

405

 

 

 

405

 

 

 

1,197

 

 

 

1,219

 

Operating lease right-of-use assets, net

 

(538

)

 

 

(729

)

 

 

(1,050

)

 

 

(1,153

)

Loss on foreign currency exchange rates

 

1,582

 

 

 

1,486

 

 

 

2,137

 

 

 

889

 

(Gain) loss on contingent consideration

 

(631

)

 

 

166

 

 

 

(958

)

 

 

166

 

Other non-cash expenses

 

?

 

 

 

?

 

 

 

128

 

 

 

43

 

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:

 

 

 

 

 

 

 

Accounts receivable

 

(215

)

 

 

1,790

 

 

 

(6,121

)

 

 

278

 

Income tax receivable

 

(955

)

 

 

(918

)

 

 

(8,874

)

 

 

(2,802

)

Prepaid expenses and other assets

 

(2,207

)

 

 

(614

)

 

 

(8,021

)

 

 

(397

)

Accounts payable

 

(490

)

 

 

(1,598

)

 

 

382

 

 

 

(2,437

)

Due to and from affiliates

 

?

 

 

 

61

 

 

 

?

 

 

 

(402

)

Accrued liabilities and other

 

4,287

 

 

 

4,948

 

 

 

8,684

 

 

 

3,126

 

Income taxes payable

 

3,510

 

 

 

(4,875

)

 

 

9,491

 

 

 

(2,910

)

Deferred revenue

 

(28

)

 

 

135

 

 

 

(443

)

 

 

493

 

Other long-term assets

 

(288

)

 

 

369

 

 

 

(1,206

)

 

 

481

 

Other long-term liabilities

 

16

 

 

 

?

 

 

 

60

 

 

 

?

 

Net cash provided by operating activities

 

27,512

 

 

 

17,148

 

 

 

58,869

 

 

 

53,015

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(3,518

)

 

 

(4,263

)

 

 

(10,487

)

 

 

(9,690

)

Purchases of intangible assets

 

(2,006

)

 

 

(1,156

)

 

 

(6,675

)

 

 

(3,512

)

Acquisitions, net of cash acquired

 

?

 

 

 

(9,302

)

 

 

?

 

 

 

(9,302

)

Net cash used in investing activities

 

(5,524

)

 

 

(14,721

)

 

 

(17,162

)

 

 

(22,504

)

Cash flows from financing activities

 

 

 

 

 

 

 

Payments of tax withholding obligations related to restricted stock units

 

(1,988

)

 

 

(810

)

 

 

(10,228

)

 

 

(6,353

)

Exercise of stock options

 

46

 

 

 

4

 

 

 

72

 

 

 

31

 

Proceeds from issuance of common stock under employee stock purchase plan

 

910

 

 

 

747

 

 

 

1,681

 

 

 

1,315

 

Deferred acquisition payments

 

(850

)

 

 

?

 

 

 

(850

)

 

 

?

 

Repayments of borrowings from Credit Agreement

 

(875

)

 

 

(875

)

 

 

(2,625

)

 

 

(2,625

)

Net cash used in financing activities

 

(2,757

)

 

 

(934

)

 

 

(11,950

)

 

 

(7,632

)

Effect of exchange rate changes on cash and cash equivalents

 

(988

)

 

 

(382

)

 

 

(1,171

)

 

 

(1,886

)

Net increase in cash and cash equivalents

 

18,243

 

 

 

1,111

 

 

 

28,586

 

 

 

20,993

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

109,190

 

 

 

86,618

 

 

 

98,847

 

 

 

66,736

 

End of period

$

127,433

 

 

$

87,729

 

 

$

127,433

 

 

$

87,729

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

$

7,416

 

 

$

4,065

 

 

$

21,119

 

 

$

10,248

 

Cash paid for income taxes

$

1,156

 

 

$

9,328

 

 

$

11,046

 

 

$

13,157

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses

$

(1,509

)

 

$

11

 

 

$

(553

)

 

$

(572

)

Right-of-use assets obtained in exchange for operating lease liabilities

$

1,835

 

 

$

?

 

 

$

2,318

 

 

$

967

 

 

 

 

 

 

 

 

 

N-able, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

17,356

 

 

$

15,103

 

 

$

50,587

 

 

$

43,535

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(354

)

 

 

(335

)

 

 

(1,071

)

 

 

(955

)

Amortization of acquired technologies

 

(463

)

 

 

(516

)

 

 

(1,382

)

 

 

(2,043

)

Restructuring costs and other

 

(21

)

 

 

(11

)

 

 

(38

)

 

 

(41

)

Non-GAAP cost of revenue

$

16,518

 

 

$

14,241

 

 

$

48,096

 

 

$

40,496

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

90,211

 

 

$

78,424

 

 

$

262,878

 

 

$

232,479

 

Stock-based compensation expense and related employer-paid payroll taxes

 

354

 

 

 

335

 

 

 

1,071

 

 

 

955

 

Amortization of acquired technologies

 

463

 

 

 

516

 

 

 

1,382

 

 

 

2,043

 

Restructuring costs and other

 

21

 

 

 

11

 

 

 

38

 

 

 

41

 

Non-GAAP gross profit

$

91,049

 

 

$

79,286

 

 

$

265,369

 

 

$

235,518

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

33,660

 

 

$

31,149

 

 

$

101,112

 

 

$

94,223

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(3,914

)

 

 

(3,235

)

 

 

(11,572

)

 

 

(9,581

)

Acquisition related costs

 

(4

)

 

 

(4

)

 

 

(28

)

 

 

(18

)

Restructuring costs and other

 

(3

)

 

 

(10

)

 

 

(27

)

 

 

(12

)

Non-GAAP sales and marketing expense

$

29,739

 

 

$

27,900

 

 

$

89,485

 

 

$

84,612

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

19,752

 

 

$

16,038

 

 

$

58,796

 

 

$

46,664

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(2,375

)

 

 

(1,706

)

 

 

(6,770

)

 

 

(4,937

)

Acquisition related costs

 

?

 

 

 

?

 

 

 

(8

)

 

 

(32

)

Restructuring costs and other

 

(49

)

 

 

(238

)

 

 

(839

)

 

 

(350

)

Non-GAAP research and development expense

$

17,328

 

 

$

14,094

 

 

$

51,179

 

 

$

41,345

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

18,438

 

 

$

18,050

 

 

$

53,877

 

 

$

54,119

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(4,932

)

 

 

(4,946

)

 

 

(14,812

)

 

 

(13,507

)

Acquisition related costs

 

613

 

 

 

(233

)

 

 

654

 

 

 

(456

)

Restructuring costs and other

 

(509

)

 

 

(292

)

 

 

(714

)

 

 

(577

)

Spin-off costs

 

(166

)

 

 

(394

)

 

 

(623

)

 

 

(1,348

)

Non-GAAP general and administrative expense

$

13,444

 

 

$

12,185

 

 

$

38,382

 

 

$

38,231

 

 

 

 

 

 

 

 

 

GAAP operating income

$

18,350

 

 

$

11,722

 

 

$

48,508

 

 

$

33,087

 

Amortization of acquired technologies

 

463

 

 

 

516

 

 

 

1,382

 

 

 

2,043

 

Amortization of acquired intangibles

 

11

 

 

 

1,465

 

 

 

585

 

 

 

4,386

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,575

 

 

 

10,222

 

 

 

34,225

 

 

 

28,980

 

Acquisition related costs

 

(609

)

 

 

237

 

 

 

(618

)

 

 

506

 

Restructuring costs and other

 

582

 

 

 

551

 

 

 

1,618

 

 

 

980

 

Spin-off costs

 

166

 

 

 

394

 

 

 

623

 

 

 

1,348

 

Non-GAAP operating income

$

30,538

 

 

$

25,107

 

 

$

86,323

 

 

$

71,330

 

GAAP operating margin

 

17.1

%

 

 

12.5

%

 

 

15.5

%

 

 

12.0

%

Non-GAAP operating margin

 

28.4

%

 

 

26.8

%

 

 

27.5

%

 

 

25.8

%

 

 

 

 

 

 

 

 

GAAP net income

$

6,013

 

 

$

294

 

 

$

14,061

 

 

$

9,722

 

Amortization of acquired technologies

 

463

 

 

 

516

 

 

 

1,382

 

 

 

2,043

 

Amortization of acquired intangibles

 

11

 

 

 

1,465

 

 

 

585

 

 

 

4,386

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,575

 

 

 

10,222

 

 

 

34,225

 

 

 

28,980

 

Acquisition related costs

 

(609

)

 

 

237

 

 

 

(618

)

 

 

506

 

Restructuring costs and other

 

582

 

 

 

551

 

 

 

1,618

 

 

 

980

 

Spin-off costs

 

166

 

 

 

394

 

 

 

623

 

 

 

1,348

 

Tax benefits associated with above adjustments (1)

 

(1,041

)

 

 

(1,383

)

 

 

(3,480

)

 

 

(4,098

)

Non-GAAP net income

$

17,160

 

 

$

12,296

 

 

$

48,396

 

 

$

43,867

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

0.03

 

 

$

0.00

 

 

$

0.08

 

 

$

0.05

 

Non-GAAP diluted earnings per share

$

0.09

 

 

$

0.07

 

 

$

0.26

 

 

$

0.24

 

 

 

 

 

 

 

 

 

Shares used in computation of diluted earnings per share:

 

186,221

 

 

 

181,145

 

 

 

185,506

 

 

 

180,966

 

_________________

(1) The tax benefits associated with non-GAAP adjustments for the three and nine months ended September 30, 2023, and 2022, respectively, is calculated utilizing the Company's individual statutory tax rates for each impacted subsidiary.

N-able, Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income

$

6,013

 

 

$

294

 

 

$

14,061

 

 

$

9,722

 

Amortization

 

1,437

 

 

 

2,711

 

 

 

4,825

 

 

 

8,548

 

Depreciation

 

3,892

 

 

 

3,326

 

 

 

11,317

 

 

 

9,722

 

Income tax expense

 

4,112

 

 

 

4,545

 

 

 

13,484

 

 

 

10,345

 

Interest expense, net

 

7,802

 

 

 

5,088

 

 

 

22,532

 

 

 

12,459

 

Unrealized foreign currency losses

 

1,582

 

 

 

1,486

 

 

 

2,137

 

 

 

889

 

Acquisition related costs

 

(609

)

 

 

237

 

 

 

(618

)

 

 

506

 

Spin-off costs

 

166

 

 

 

394

 

 

 

623

 

 

 

1,348

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,575

 

 

 

10,222

 

 

 

34,225

 

 

 

28,980

 

Restructuring costs and other

 

582

 

 

 

551

 

 

 

1,618

 

 

 

980

 

Adjusted EBITDA

$

36,552

 

 

$

28,854

 

 

$

104,204

 

 

$

83,499

 

Adjusted EBITDA margin

 

34.0

%

 

 

30.9

%

 

 

33.2

%

 

 

30.3

%

N-able, Inc.

Reconciliation of GAAP Revenue to Non-GAAP Revenue on a Constant Currency Basis

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

Growth
Rate

 

2023

 

2022

 

Growth
Rate

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenue

$

105,208

 

 

$

91,213

 

 

15.3

%

 

$

306,005

 

 

$

269,217

 

 

13.7

%

Estimated foreign currency impact (1)

 

(1,934

)

 

 

?

 

 

(2.1

)

 

 

1,892

 

 

 

?

 

 

0.7

 

Non-GAAP subscription revenue on a constant currency basis

$

103,274

 

 

$

91,213

 

 

13.2

%

 

$

307,897

 

 

$

269,217

 

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other revenue

$

2,359

 

 

$

2,314

 

 

1.9

%

 

$

7,460

 

 

$

6,797

 

 

9.8

%

Estimated foreign currency impact (1)

 

(4

)

 

 

?

 

 

(0.2

)

 

 

53

 

 

 

?

 

 

0.8

 

Non-GAAP other revenue on a constant currency basis

$

2,355

 

 

$

2,314

 

 

1.8

%

 

$

7,513

 

 

$

6,797

 

 

10.5

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription and other revenue

$

107,567

 

 

$

93,527

 

 

15.0

%

 

$

313,465

 

 

$

276,014

 

 

13.6

%

Estimated foreign currency impact (1)

 

(1,938

)

 

 

?

 

 

(2.1

)

 

 

1,945

 

 

 

?

 

 

0.7

 

Non-GAAP subscription and other revenue on a constant currency basis

$

105,629

 

 

$

93,527

 

12.9

%

 

$

315,410

 

$

276,014

 

14.3

%

_________________

(1) The estimated foreign currency impact is calculated using the average foreign currency exchange rates in the comparable prior year monthly periods and applying those rates to foreign-denominated revenue in the corresponding monthly periods in the three and nine months ended September 30, 2023.

N-able, Inc.

Reconciliation of Unlevered Free Cash Flow

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

27,512

 

 

$

17,148

 

 

$

58,869

 

 

$

53,015

 

Purchases of property and equipment

 

(3,518

)

 

 

(4,263

)

 

 

(10,487

)

 

 

(9,690

)

Purchases of intangible assets

 

(2,006

)

 

 

(1,156

)

 

 

(6,675

)

 

 

(3,512

)

Free cash flow

 

21,988

 

 

 

11,729

 

 

 

41,707

 

 

 

39,813

 

Cash paid for interest, net of cash interest received

 

7,416

 

 

 

4,065

 

 

 

21,119

 

 

 

10,248

 

Cash paid for acquisition related costs, restructuring costs, spin-off costs, employer-paid payroll taxes on stock awards and other one-time items

 

833

 

 

 

2,885

 

 

 

4,885

 

 

 

7,204

 

Unlevered free cash flow

$

30,237

 

 

$

18,679

 

 

$

67,711

 

 

$

57,265

 

 


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