N-able, Inc. (NABL) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Annual Recurring Revenue (ARR) $513.7 million, growing at 14% year-over-year on a reported basis and 12% on a constant currency basis. Growth attributed to strong operations, record bookings for Cove, and adoption of Adlumin security solutions.
Total Revenue $131.2 million, representing approximately 10% year-over-year growth on a reported basis and 8% on a constant currency basis. Revenue outperformance driven by higher-than-forecasted foreign exchange rates and strong operations.
Subscription Revenue $129.9 million, representing approximately 11% year-over-year growth on a reported basis and 9% on a constant currency basis. Growth supported by strong customer adoption and operational performance.
Customers with ARR over $50,000 2,540 customers, up approximately 16% year-over-year. These customers now represent approximately 60% of total ARR, up from 56% a year ago, indicating increased wallet share.
Dollar-based Net Revenue Retention Approximately 102% on a reported basis and 101% on a constant currency basis, reflecting strong customer retention and expansion.
Gross Margin 81.8%, compared to 84.7% in the same period in 2024. Decline attributed to operational investments and changes in cost structure.
Adjusted EBITDA $41.6 million, representing approximately 31.7% adjusted EBITDA margin. Growth attributed to revenue outperformance and operational efficiency.
Unlevered Free Cash Flow $33.3 million, with CapEx at $6.8 million or 5.2% of revenue. Reflects disciplined capital allocation and operational efficiency.
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Operating Highlights
Cove Data Protection Solution: Cove now protects over 3 million Microsoft 365 users and recorded its highest bookings and net new ARR quarter ever. New features include a smart notification service and advanced Linux restore capabilities. Cove achieved 25% year-over-year ARR growth in AI-powered enhanced restore capabilities.
Adlumin Security Operations: Adlumin, an XDR and MDR offering, showed healthy ARR growth. Expanded integrations with ITSM vendors and enhanced threat detection capabilities were introduced. Threat hunting activity increased over 100-fold.
Unified Endpoint Management (UEM): New vulnerability management capability launched in April, addressing vulnerability exploitation issues. UEM solution automates routine tasks and improves efficiency, with a notable customer win leveraging AI-powered chatbot integration.
Channel Expansion: Expanded into broader channels, including resellers, system integrators, and distributors. Added more resellers and strengthened relationships, with a notable deal with a large UK reseller. Reseller pipeline nearly doubled quarter-over-quarter.
ARR Growth: Surpassed $500 million in ARR, growing 14% year-over-year. Total revenue was $131.2 million, representing 10% year-over-year growth.
Profitability: Achieved 32% adjusted EBITDA margin and $41.6 million in adjusted EBITDA, exceeding guidance.
Customer Growth: Ended the quarter with 2,540 customers contributing $50,000 or more in ARR, up 16% year-over-year.
Cyber Resilience Platform: Focused on delivering end-to-end cyber resilience through unified endpoint management, security operations, and data protection. Platform approach reduces vendor sprawl and closes coverage gaps.
Go-to-Market Strategy: Aimed at expanding presence in mid-market companies through channel strategies and reseller partnerships. High-impact presence at industry events like RSA and InfoSec Europe.
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Risk or Challenges
Cybersecurity Threats: The worsening threat environment and increasing complexity of cyber threats pose significant risks to businesses, requiring constant innovation and investment in cybersecurity solutions.
Economic Uncertainties: The global economic environment and foreign exchange rate fluctuations could impact revenue and financial performance.
Competitive Pressures: Competition from large-scale competitors in the cybersecurity and data protection space could challenge market share and pricing strategies.
Regulatory Compliance: Adhering to evolving regulatory requirements in different regions could increase operational complexity and costs.
Supply Chain and Operational Risks: Establishing new development centers and integrating acquisitions like Adlumin could pose operational challenges and risks.
Customer Retention and Expansion: Maintaining high dollar-based net revenue retention and expanding customer base in a competitive market is critical but challenging.
Technological Advancements: Keeping pace with rapid technological changes, such as AI and machine learning, is essential to remain competitive but requires significant investment.
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Guidance & Outlook
Revenue Outlook for Q3 2025: Total revenue is expected to be in the range of $127 million to $128 million, representing approximately 9% to 10% year-over-year growth on a reported and constant currency basis.
Adjusted EBITDA for Q3 2025: Expected to be in the range of $36 million to $37 million, representing an adjusted EBITDA margin of approximately 28% to 29%.
Full Year 2025 Revenue Outlook: Total revenue is projected to be in the range of $500 million to $503 million, representing approximately 7% to 8% year-over-year growth on a reported and constant currency basis.
Full Year 2025 ARR Outlook: ARR is expected to be in the range of $525 million to $530 million, representing 9% to 10% year-over-year growth or 7% to 9% on a constant currency basis.
Full Year 2025 Adjusted EBITDA Outlook: Adjusted EBITDA is projected to be in the range of $141 million to $144 million, representing 28% to 29% adjusted EBITDA margin.
Capital Expenditures for 2025: CapEx, including capitalized software development costs, is expected to be approximately 6% of total revenue for 2025.
Unlevered Free Cash Flow Conversion for 2025: Expected to be approximately 68% of adjusted EBITDA for the full year.
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Shareholder Return Plan
share repurchase program: As part of our capital allocation strategy, we began executing on our share repurchase program, reflecting our confidence in the business and the opportunity ahead.
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Key Q&A
Q:Can you provide more color on the go-to-market traction with resellers and Vikram's focus as the new CMO?
A:The go-to-market teams are finding a rhythm with the XDR platform, which has three pillars to market. This is widening the strike zone for direct markets and resellers, leading to increased bookings and opportunities, especially in markets like Germany. Vikram, the new CMO, is focusing on promoting N-able's cyber resilience story, particularly in the mid-market, and is currently at Black Hat to build the brand.
Q:Where are we with the optimization and ASC 606 headwinds associated with moving to annual contracts? Are customers happy to renew upfront commitments?
A:The full-year ARR outlook accounts for the ASC 606 and optimization noise. Customers are renewing at a healthy clip of around 90%, showing willingness to recommit.
Q:Was there anything pulled into this quarter that made ARR results look strong, or is the back half of the year conservative?
A:There were FX dynamics affecting Q2 and the full-year outlook. Neutralizing FX impact shows the second half of the year implies more growth than the first half in constant currency terms.
Q:Can you provide an update on new pricing and packaging bundles and their impact on cross-sell across the three pillars?
A:The bundling strategy is resonating with customers dealing with tech stack fatigue and vendor sprawl. It is still in an experimental phase but showing good traction, with plans to continue into 2026.
Q:Is it true that half of MSPs aren't offering MDR, and how are you educating them on the opportunity?
A:Yes, it is directionally true for the customer base. N-able is educating MSPs to augment their services using XDR technology, which leverages AI and automation for efficient threat detection and response. The offering is resonating, and XDR/MDR is one of the fastest-growing SKUs.
Q:What do you attribute the strength in the 50,000 customer adds to?
A:The strength is attributed to a focus on larger MSPs, cross-selling the portfolio, and landing new customers, particularly in the MSP market. Adlumin's contribution is also noted, but the primary driver is success in the MSP market.
Q:What is the overall health of the SMB IT market, and are there any trends in the RMM side?
A:The SMB IT market appears healthy, with strong demand for data protection and security. MSPs are growing and adding services. On the RMM side, physical devices are flat, but there is growth in digital assets like M365 users and virtual machines.
Q:Can you provide comments on the Adlumin contribution or organic year-over-year growth?
A:Adlumin is expected to contribute about 1 point of growth to exit 2025 ARR and represents about 4% of overall growth. The velocity of the Adlumin business adds approximately 1 point of growth to the overall equation for the year.
Q:Review of Unclear Management Responses
A:Management avoided providing specific organic year-over-year growth figures when asked about Adlumin's contribution, instead offering general percentages and historical consistency without detailed clarity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
ARR outlook
Adlumin
LLC Research
Markets Research
OBrien
Research Division
UEM solution
Verizon
Vikram
area
backup protection
beat
breach
channel initiative
channel market
confidence opportunity
customer protection
defense event
device
ecosystem
initiative resellers
insight
market customer
market motion
mission
outperformance
premise
pressure
price
problem
record
resilience platform
restore capability
result ARR
security team
stage
threat
today landscape
traction
vendor
vulnerability
workload
NABL Transcript
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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.
NABL Slides
NABL Report
Frequently Asked Questions
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