10-Q: N-able Reports Q1 2025 Results: Revenue Up, Acquisition Costs Impact Profitability

N-able's Q1 2025 revenue increased, but net income declined due to acquisition-related expenses.

Summary

• N-able, Inc. reported its financial results for the quarter ended March 31, 2025.
• Total revenue increased to $118.2 million, a 3.9% increase compared to $113.7 million in Q1 2024.
• Subscription revenue grew by 4.8% to $116.8 million.
• The company experienced a net loss of $7.2 million, a decrease from the net income of $7.5 million in the same period last year.
• The decrease in net income was primarily due to increased operating expenses and cost of revenue, largely driven by the acquisition of Adlumin, Inc.
• Adjusted EBITDA was $31.6 million, compared to $39.6 million in Q1 2024.
• Annual Recurring Revenue (ARR) reached $492.7 million, a 10.3% increase year-over-year.
• The company had 2,398 customers with ARR over $50,000, up from 2,187 in the previous year.
• Cash flow from operations was $19.7 million, compared to $4.2 million in the same period last year.

Sentiment

Score: 5

Explanation: The report shows revenue growth, but profitability is down due to acquisition costs. The net revenue retention rate is also a concern. Overall, the sentiment is neutral.

Positives

• Revenue increased by 3.9% to $118.2 million.
• Subscription revenue increased by 4.8% to $116.8 million.
• ARR increased by 10.3% to $492.7 million.
• The number of customers with ARR over $50,000 increased by 9.6% to 2,398.
• Cash flow from operations increased to $19.7 million from $4.2 million in the same period last year.

Negatives

• Net loss was $7.2 million, compared to a net income of $7.5 million in Q1 2024.
• Adjusted EBITDA decreased to $31.6 million from $39.6 million in Q1 2024.
• The dollar-based net revenue retention rate for subscription products was approximately 101%, reflecting pressure from pricing changes and rationalization related to the Long-Term Contract Initiative.

Risks

• The company's future performance is subject to various risks and uncertainties, including adverse economic conditions, ability to retain customers, cyberattacks, and ability to manage international operations.
• Fluctuations in foreign currency exchange rates could adversely impact financial results.
• Increased borrowing costs resulting from rising interest rates could impact profitability.
• The company's indebtedness could potentially restrict operations and impact events of default.

Future Outlook

The company expects to continue growing its sales and marketing and research and development organizations to drive new customer acquisition, retain and expand existing customer relationships, and pursue initiatives designed to help customers succeed and grow.

Industry Context

N-able operates in the competitive market for cloud-based security, data protection, and unified endpoint management software solutions for IT service providers. The company's performance is influenced by factors such as the demand for managed services, cybersecurity threats, and the adoption of cloud technologies by SMBs and mid-market businesses.

Comparison to Industry Standards

• N-able's revenue growth of 3.9% is relatively low compared to other high-growth SaaS companies, which often see growth rates of 20% or more.
• Comparatively, companies like CrowdStrike and SentinelOne, which focus on cybersecurity, have historically demonstrated higher revenue growth rates, but also operate with higher cost structures.
• N-able's adjusted EBITDA margin of 26.8% is solid, but lower than some of its peers, potentially due to the impact of recent acquisitions and investments in growth.
• The net revenue retention rate of 101% is lower than the industry benchmark for successful SaaS companies, which typically aim for rates above 110%.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and adjusted EBITDA.
• Employees may be affected by potential restructuring or changes in strategy related to the acquisition of Adlumin.
• Customers should expect continued investment in the company's product offerings and support services.

Key Dates

Keywords

financial results, N-able, ARR, revenue, EBITDA, acquisition, Adlumin, MSP, cybersecurity, cloud, software