N-able, Inc. (NABL) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
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.
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Operating Highlights
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.
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Risk or Challenges
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.
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Guidance & Outlook
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.
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Shareholder Return Plan
Share Repurchase Program: We also executed on our share repurchase program, underscoring our confidence in the long-term value of the N-able business.
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Key Q&A
Q:ARR revenue both accelerated quarter-over-quarter on a constant currency basis for several quarters now. Could you talk to some of the keys behind that building momentum? What's really been maybe the incremental the last several quarters? And then maybe with guidance for the fourth quarter here, the FX impact and Lumen anniversarying, I think it's the case, but should we still be thinking of more growth in the second half than the first half?
A:The acceleration is attributed to executing on the Albumin acquisition strategy, cross-selling to the customer base, and expanding channel presence with new distributors and resellers. FX impacts are weighing in, but more growth is expected in the second half of the year than the first half. Q3 was the best quarter for sequential ARR growth, and Q4 is expected to be above average for the year.
Q:NRR trends up year-over-year, quarter-over-quarter, same as last quarter. Maybe talk to some of the trends around the metric there. How confident are you that maybe it bottomed in the first quarter there and could be building at this point?
A:Confidence is high that NRR bottomed in Q1 and has been building due to the Adlumin acquisition and cross-selling into the MSP customer base. GRR has also improved, with long-term contract renewals around 90%. XDR penetration rates are climbing, and additional SKUs and revenue per device are contributing to NRR growth.
Q:Sticking on the ARR guidance, the sequential [indiscernible] on a constant currency basis that is implied here, how much of that is based off of lapping the [indiscernible] contribution compared to conservative or conservatism? And what other factors are you considering there?
A:The Adlumin acquisition impact is quantified in the 4%-5% range, primarily related to lapping the acquisition. Sequential ARR growth for Q4 is impacted by FX dynamics, with Q4 growth ex-currency being about $10 million higher if Q3 rates are assumed.
Q:Great to see the launches of Cat-MIP and Anomaly Detection as a Service. Are these offerings that MSPs were specifically asking for? And do you view anomaly detection more as an upsell lever for existing Cove deployments or as a key piece to get customers over the finish line on the initial adoption?
A:Both. Anomaly detection helps transition Cove data protection to include threat detection, increasing value and win rates. It aids in monetization and larger account penetration. Cat-MIP standardizes connections for MSPs, enhancing efficiency and innovation, and aligns with AI strategy.
Q:It's been almost a year since the Adlumin acquisition. Can you talk a little bit about how that business is performing relative to your initial expectations? And then what are any key learnings about the market or the business that you've had after operating it for a year?
A:The acquisition thesis is holding true, resonating with MSPs and VARs. Adlumin's endpoint-agnostic nature fits well with MSPs' hybrid environments. The offering scales efficiently due to AI technology, and demand is strong. It enables cross-selling and provides a complete cyber resiliency story, appealing to VARs and mid-market customers.
Q:2025 has been somewhat of an investment year. It sounds like maybe a new priority is to invest a little bit more heavily in AI. Should we think about those 30% EBITDA margins as a floor? And how are you thinking about the investment in AI?
A:AI investment is a priority, leveraging data from UEM, data protection, and XDR to enhance efficiency and monetization. The 30% EBITDA margin is a good target, with potential for accretive growth as the business scales. AI investments include introducing Agentic agents and expanding go-to-market efforts.
Q:Review of Unclear Management Responses
A:No questions were identified where management avoided giving a direct answer or lacked clarity in their responses.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
AI cyber
AI solution
AI today
AI world
ARR outlook
Adlumin
CRN
Cyber
Today
access
advantage
application
approach AI
attack
business channel
capability AI
challenge
client
compliance
cybersecurity environment
date result
demand cybersecurity
dollar date
effort
end cyber
enterprise level
example
gold AI
hour week
hundred
layer
model AI
opportunity AI
orchestration
paradigm
payment
proof
regard
regulation
resilience platform
security team
shift
standard
vendor
vision
win
NABL Transcript
N-able, Inc. (NABL) Q1 2026 Earnings Call Transcript
Positive5-8
The earnings call highlights strong financial performance with 13% revenue growth and improved net retention. The company is well-positioned with AI-driven solutions and expanding product offerings, like DRaaS, which are receiving positive feedback. While there are concerns over lengthening sales cycles, the company remains optimistic about its TCO benefits. The market strategy is robust, with no significant macroeconomic impact observed. The Q&A section reinforced the positive outlook, with management addressing concerns effectively. Given the market cap, the stock is likely to see a positive movement of 2% to 8%.
N-able, Inc. (NABL) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call shows strong financial performance with 9% revenue growth, 8% ARR growth, and a 30% EBITDA margin. Despite a slight gross margin decline, the company demonstrates strong cash flow and customer growth. The Q&A highlights positive sentiment towards AI initiatives and cross-sell success. However, management's avoidance of specific AI monetization details slightly tempers optimism. Considering the market cap, the stock is likely to react positively within the 2% to 8% range over the next two weeks.
N-able, Inc. (NABL) Q3 2025 Earnings Call Transcript
Positive11-6
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.
N-able, Inc. (NABL) Q2 2025 Earnings Call Transcript
Positive8-8
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.
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