N-able Announces Third Quarter 2021 Results | #emailsecurity | #phishing | #ransomware | #education | #technology | #infosec


WAKEFIELD, Mass.–(BUSINESS WIRE)–N-able, Inc. (NYSE:NABL), the purpose-built technology partner for managed services providers (MSPs), today reported results for its third quarter ended September 30, 2021.

I want to express my gratitude to the entire N-able team for their focus on operational execution in the third quarter as we finalized becoming an independent company,” said N-able President and CEO John Pagliuca. “I believe N-able is well-positioned in a dynamic industry with strong growth potential. The digital evolution is accelerating with SMEs looking to increase productivity, collaboration, and security as they look to differentiate for a new hybrid workforce. Our MSPs are looking to us to support them with both the technology and the tools that will enable them to land, expand, and retain their customers who are relying on them for proactive and recurring IT services. As the N-able brand gains traction, we continue to improve and refine the ‘Why N-able’ story by demonstrating the unique benefits of our platform to MSP partners around the world.”

We saw continued robust demand for our security and data protection offerings, contributing to total revenue growth of 16 percent year-over-year that exceeded the high end of our outlook,” added N-able Executive Vice President & CFO Tim O’Brien. “Our trailing twelve months dollar-based net retention rate remained steady at 110 percent, reflecting healthy expansion across our partner base, while our number of large customers, which we define as those with $50,000 of ARR or more on our platform at quarter-end, increased 25 percent year-over-year and now represents 46 percent of our total ARR. As we look ahead, we are optimistic that the investments we’ve been making this year will contribute to continued growth in our business in 2022. We will continue to execute on our strategic product and go-to-market initiatives to further our value to all of our stakeholders.”

Third quarter 2021 financial highlights:

  • Total revenue of $88.4 million, representing approximately 16% year-over-year growth.
  • Subscription revenue of $86.1 million, representing approximately 17% year-over-year growth.
  • GAAP gross margin of 86.1% and non-GAAP gross margin of 87.7%.
  • GAAP net income of $1.9 million, or $0.01 per diluted share, and non-GAAP net income of $17.2 million, or $0.10 per diluted share.
  • Adjusted EBITDA of $29.7 million, representing an adjusted EBITDA margin of 33.6%.

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

Additional highlights for the third quarter of 2021 include:

  • In the third quarter, N-able was awarded the Overall Category Win for Best in Class, MSP Platforms category from CRN, a brand of the Channel Company, during this year’s CRN Annual Report Card (ARC) Awards.
  • N-able’s Mail Assure email security solution received a top result in an independent test conducted by the Virus Bulletin, an industry renowned test laboratory. Mail Assure received the highest award VBSpam+ rating in September 2021, from the VBSpam test that takes into consideration various types of unwanted and dangerous email, with a malware catch rate of 100.00%, and zero false positives.
  • N-able completed its spin-off from SolarWinds Corporation on July 19th and began trading on the NYSE under ticker NABL on July 20th.

Balance Sheet

At September 30, 2021, total cash and cash equivalents were $61.6 million and total debt was $339.3 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.” In addition, through July 19, 2021, the date of completion of N-able’s separation from SolarWinds Corporation (“SolarWinds”), N-able operated as part of SolarWinds and the financial results for the periods through such date have been prepared from SolarWinds’ historical accounting records and presented on a stand-alone basis as if N-able’s business’ operations had been conducted independently from SolarWinds. While the allocations and estimates in these carve-out financials are based on assumptions that N-able’s management believes are reasonable, the financial results presented may not be indicative of the financial position, results of operations and cash flows of N-able in the future or if N-able had been a separate, stand-alone publicly traded entity during the periods presented. N-able’s financial results for the period from July 20, 2021 through September 30, 2021 are based on our reported results as a stand-alone company.

Financial Outlook

As of November 9, 2021, N-able is providing its financial outlook for the fourth quarter of 2021 and full year 2021. 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 (benefit), interest expense, net, unrealized foreign currency (gains) losses, 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.

Financial Outlook for the Fourth Quarter of 2021

N-able management currently expects to achieve the following results for the fourth quarter of 2021:

  • Total revenue in the range of $88.5 to $89.0 million, representing approximately 11% year-over-year growth.
  • Adjusted EBITDA in the range of $27.5 to $28.0 million, representing approximately 31.1% to 31.5% of total revenue.

Financial Outlook for Full-Year 2021

N-able management raised expectations for the full year 2021 to the following:

  • Total revenue in the range of $345.5 to $346.0 million, representing approximately 14% year-over-year growth.
  • Adjusted EBITDA in the range of $113.1 to $113.6 million, representing approximately 32.7% to 32.8% of total revenue.

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 9, 2021. A live webcast of the call will be available on the N-able Investor Relations website at http://investors.n-able.com. A live dial-in will be available domestically at (844) 200-6205 and internationally at + 44 204 525 0658. To access the live call, please dial in 5-10 minutes before the scheduled start time and enter the conference passcode 840338 to gain access to the conference call. 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 third quarter, full year 2021, and expectations for 2022. 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 identified by terms such as “aim,” “anticipate,” “believe,” “can,” “could,” “seek,” “should,” “feel,” “expect,” “will,” “would,” “plan,” “project,” “intend,” “estimate,” “continue,” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially 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 the recently completed separation of N-able 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, or 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 SolarWinds, N-able and SolarWinds stockholders being subject to 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 the global COVID-19 pandemic may adversely affect our business, results of operations and financial condition; (c) risks that cyberattacks 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; (d) risks related to the SolarWinds cyber incident disclosed in December 2020 (the “Cyber Incident”), including with respect to (1) the discovery of new or different information regarding the Cyber Incident, including with respect to its scope, the threat actor’s access to our environment and its related activities during such period, and the related impact on our systems, solutions, current or former employees and MSP partners, (2) the possibility that our mitigation and remediation efforts with respect to the Cyber Incident may not be successful, (3) the possibility that additional confidential, proprietary or personal information, including information of N-able’s current or former employees and MSP partners, was accessed and exfiltrated as a result of the Cyber Incident, (4) numerous financial, legal, reputational and other risks to us related to the Cyber Incident, including risks that the incident or SolarWinds’ response thereto, including with respect to providing notices to any impacted individuals, may result in the loss, compromise or corruption of data and proprietary information, loss of business as a result of termination or non-renewal of agreements or reduced purchases or upgrades of our solutions, severe reputational damage adversely affecting MSP partner and vendor relationships and investor confidence, increased attrition of personnel and distraction of key and other personnel, U.S. or foreign regulatory investigations and enforcement actions, litigation, indemnity obligations, damages for contractual breach, penalties for violation of applicable laws or regulations, significant costs for remediation and the incurrence of other liabilities, and (6) the possibility that our steps to secure our internal environment, improve our product development environment and protect the security and integrity of the software that we deliver to our MSP partners may not be successful or sufficient to protect against future threat actors or attacks or perceived by existing and prospective MSP partners as sufficient to address the harm caused by the Cyber Incident; (e) any of the following factors either generally or as a result of the impacts of the Cyber Incident or the global COVID-19 pandemic on the global economy or on our business operations and financial condition or on the business operations and financial conditions of our MSP partners, their end-customers and our prospective MSP partners: (1) reductions in information technology spending or delays in purchasing decisions by our MSP partners, their end-customers and our prospective MSP partners, (2) the inability to sell solutions to new MSP partners or to sell additional solutions or upgrades to our existing partners, (3) any decline in our renewal or net retention rates, (4) the 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, (5) the timing and adoption of new solutions, solutions upgrades or pricing model changes by N-able or its competitors, (6) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity, and (7) risks associated with our international operations; (f) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to support our business or expand our operations; (g) risks related to our ability to successfully identify, complete, and integrate acquisitions and manage our growth effectively; (h) our status as a controlled company; (i) risks related to our limited operating history as a stand-alone public company; and (j) risks associated with indebtedness, including potential restrictions on our operations and the impact of events of default; and (k) 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 the final Information Statement included in N-able’s registration statement on Form 10 (File No. 001-40297), which was declared effective by the SEC on June 25, 2021, a copy of which was furnished as exhibit 99.3 to the Form 8-K N-able filed with the SEC on July 12, 2021; N-able’s Quarterly Report on Form 10-Q for the period ended June 30, 2021 that N-able filed with the SEC on August 12, 2021; as well as those that will be discussed in the Quarterly Report on Form 10-Q for the period ended September 30, 2021 that N-able anticipates filing on or about November 12, 2021. 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, the 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 (loss).

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. Management believes these measures are useful for the following reasons:

  • Stock-Based Compensation Expense and Related Employer-paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes associated with our employees’ participation in N-able’s stock-based incentive compensation plans. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock-based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, and does not necessarily correlate to the core operation of our business. Because of these unique characteristics of stock-based compensation and related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance.
  • Amortization of Acquired Intangible Assets. We provide non-GAAP information that excludes expenses related to purchased intangible assets associated with our acquisitions. We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.
  • Acquisition Related Costs. We exclude certain expense items resulting from acquisitions, such as legal, accounting and advisory fees, changes in fair value of contingent consideration, costs related to integrating the acquired businesses, deferred compensation, severance and retention expense. In addition, we exclude certain other costs including expense related to the take private transaction of SolarWinds in early 2016 and public offerings of shares of SolarWinds common stock in 2018 and 2019. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, acquisitions result in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude acquisition related costs allows investors to better review and understand the historical and current results of our continuing operations and also facilitates comparisons to our historical results and results of less acquisitive peer companies, both with and without such adjustments.
  • Spin-off Costs. We exclude certain expense items resulting from the spin-off into a newly created and separately traded public company. These costs include legal, accounting and advisory fees, system implementation costs and other incremental separation costs incurred by us related to the spin-off. The spin-off transaction results in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Diluted Share. We believe that the use of non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income (loss) is calculated as net income (loss) excluding the adjustments to non-GAAP gross profit and non-GAAP operating income, certain other non-operating gains and losses and the income tax effect of the non-GAAP exclusions. We define non-GAAP net income (loss) per diluted share as non-GAAP net income (loss) 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 (benefit), interest expense, net, unrealized foreign currency (gains) losses, 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.

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 and other costs, spin-off exploration costs, restructuring 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 (formerly SolarWinds MSP) empowers managed services providers (MSPs) to help small and medium enterprises navigate the digital evolution. With a flexible technology platform and powerful integrations, N-able makes it easy for MSPs to monitor, manage, and protect their end-customer systems, data, and networks. N-able’s growing portfolio of security, automation, and backup and recovery solutions is built for IT services management professionals. N-able simplifies complex ecosystems and enables customers to solve their most pressing challenges. N-able provides extensive, proactive support—through enriching partner programs, hands-on training, and growth resources—to help MSPs deliver exceptional value and achieve success at scale.

© 2021 N-able, Inc. All rights reserved.

Source: N-able, Inc.

Category: Financial

N-able, Inc.

Consolidated and Combined Balance Sheets

(In thousands)

(Unaudited)

 

September 30,

 

December 31,

 

2021

 

2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

61,572

 

 

$

99,790

 

Accounts receivable, net of allowances of $1,049 and $751 as of September 30, 2021 and December 31, 2020, respectively

36,254

 

 

29,086

 

Income tax receivable

2,363

 

 

1,262

 

Prepaid and other current assets

13,593

 

 

5,584

 

Total current assets

113,782

 

 

135,722

 

Property and equipment, net

33,254

 

 

19,590

 

Operating lease right-of-use assets

42,426

 

 

13,697

 

Deferred taxes

3,316

 

 

2,982

 

Goodwill

850,445

 

 

874,083

 

Intangible assets, net

10,571

 

 

27,374

 

Other assets, net

8,771

 

 

6,287

 

Total assets

$

1,062,565

 

 

$

1,079,735

 

Liabilities and parent company net investment

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

5,471

 

 

$

5,542

 

Due to affiliates

583

 

 

8,023

 

Accrued liabilities and other

30,897

 

 

21,976

 

Current operating lease liabilities

4,990

 

 

2,860

 

Accrued related party interest payable

 

 

2,477

 

Income taxes payable

2,377

 

 

4,447

 

Current portion of deferred revenue

10,144

 

 

9,502

 

Current debt obligation

3,500

 

 

 

Total current liabilities

57,962

 

 

54,827

 

Long-term liabilities:

 

 

 

Due to affiliates

 

 

372,650

 

Deferred revenue, net of current portion

220

 

 

168

 

Non-current deferred taxes

3,754

 

 

5,846

 

Non-current operating lease liabilities

46,464

 

 

14,641

 

Long-term debt, net of current portion

335,846

 

 

 

Other long-term liabilities

412

 

 

406

 

Total liabilities

444,658

 

 

448,538

 

Commitments and contingencies (Note 8)

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value: 550,000,000 shares authorized and 178,734,321 and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

179

 

 

 

Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

 

Parent company net investment

 

 

582,206

 

Additional paid-in capital

595,090

 

 

 

Accumulated other comprehensive income

24,567

 

 

48,991

 

Accumulated deficit

(1,929

)

 

 

Total stockholders’ equity

617,907

 

 

631,197

 

Total liabilities and stockholders’ equity

$

1,062,565

 

 

$

1,079,735

 

N-able, Inc.

Consolidated and Combined Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

Subscription and other revenue

$

88,423

 

 

$

76,299

 

 

$

256,953

 

 

222,991

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue

11,279

 

 

9,839

 

 

34,366

 

 

28,366

 

Amortization of acquired technologies

1,017

 

 

6,181

 

 

4,758

 

 

18,056

 

Total cost of revenue

12,296

 

 

16,020

 

 

39,124

 

 

46,422

 

Gross profit

76,127

 

 

60,279

 

 

217,829

 

 

176,569

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

30,178

 

 

21,017

 

 

80,390

 

 

58,424

 

Research and development

14,649

 

 

10,413

 

 

39,192

 

 

31,933

 

General and administrative

19,888

 

 

13,661

 

 

61,480

 

 

35,190

 

Amortization of acquired intangibles

1,640

 

 

6,027

 

 

11,935

 

 

17,761

 

Total operating expenses

66,355

 

 

51,118

 

 

192,997

 

 

143,308

 

Operating income

9,772

 

 

9,161

 

 

24,832

 

 

33,261

 

Other expense:

 

 

 

 

 

 

 

Interest expense, net

(3,111

)

 

(6,724

)

 

(15,711

)

 

(21,459

)

Other expense, net

(884

)

 

(292

)

 

(1,467

)

 

(458

)

Total other expense

(3,995

)

 

(7,016

)

 

(17,178

)

 

(21,917

)

Income before income taxes

5,777

 

 

2,145

 

 

7,654

 

 

11,344

 

Income tax expense

3,904

 

 

3,274

 

 

9,597

 

 

8,560

 

Net income (loss)

$

1,873

 

 

$

(1,129

)

 

$

(1,943

)

 

$

2,784

 

Net income (loss) available to common stockholders

$

1,873

 

 

$

(1,129

)

 

$

(1,943

)

 

$

2,784

 

Net income (loss) available to common stockholders per share:

 

 

 

 

 

 

 

Basic earnings (loss) per share

$

0.01

 

 

$

(0.01

)

 

$

(0.01

)

 

$

0.02

 

Diluted earnings (loss) per share

$

0.01

 

 

$

(0.01

)

 

$

(0.01

)

 

$

0.02

 

Weighted-average shares used to compute net income (loss) available to common stockholders per share:

 

 

 

 

 

 

 

Shares used in computation of basic earnings (loss) per share:

174,468

 

 

158,124

 

 

163,601

 

 

158,124

 

Shares used in computation of diluted earnings (loss) per share:

175,752

 

 

158,124

 

 

163,601

 

 

158,124

 

N-able, Inc.

Consolidated and Combined Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Cash flows from operating activities

 

 

 

 

 

 

 

Net (loss) income

$

1,873

 

 

$

(1,129

)

 

$

(1,943

)

 

$

2,784

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

5,769

 

 

14,300

 

 

25,058

 

 

41,760

 

Provision for doubtful accounts

1,049

 

 

 

 

1,549

 

 

1,389

 

Stock-based compensation expense

11,939

 

 

6,165

 

 

20,962

 

 

12,081

 

Deferred taxes

(45

)

 

(872

)

 

(2,426

)

 

(2,594

)

Amortization of debt issuance costs

324

 

 

 

 

324

 

 

 

Operating lease right-of-use assets, net

(3,428

)

 

879

 

 

1,807

 

 

(2,797

)

Loss on foreign currency exchange rates

728

 

 

273

 

 

1,195

 

 

1,359

 

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

 

 

 

 

 

 

 

Accounts receivable

(6,908

)

 

203

 

 

(8,235

)

 

(3,194

)

Income tax receivable

(947

)

 

(576

)

 

(1,100

)

 

(546

)

Prepaid expenses and other assets

(4,184

)

 

967

 

 

(10,301

)

 

172

 

Accounts payable

3,598

 

 

726

 

 

(1,738

)

 

498

 

Due to and from affiliates

(20,018

)

 

828

 

 

(7,834

)

 

5,902

 

Accrued liabilities and other

12,763

 

 

3,878

 

 

12,646

 

 

5,414

 

Accrued related party interest payable

(438

)

 

(1,585

)

 

(2,477

)

 

4,636

 

Income taxes payable

181

 

 

1,013

 

 

(2,016

)

 

(980

)

Deferred revenue

814

 

 

499

 

 

688

 

 

497

 

Other long-term liabilities

 

 

(363

)

 

 

 

3,132

 

Net cash provided by operating activities

3,070

 

 

25,206

 

 

26,159

 

 

69,513

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

(6,652

)

 

(2,263

)

 

(19,409

)

 

(6,418

)

Purchases of intangible assets

(668

)

 

(913

)

 

(2,920

)

 

(2,746

)

Net cash used in investing activities

(7,320

)

 

(3,176

)

 

(22,329

)

 

(9,164

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from Private Placement, net of $9,000 of issuance costs

216,000

 

 

 

 

216,000

 

 

 

Distribution of net proceeds from Private Placement to Parent

(216,000

)

 

 

 

(216,000

)

 

 

Payments of tax withholding obligations related to restricted stock

(381

)

 

 

 

(381

)

 

 

Exercise of stock options

18

 

 

 

 

18

 

 

 

Proceeds from Credit Agreement

350,000

 

 

 

 

350,000

 

 

 

Payments for debt issuance costs

(10,075

)

 

 

 

(10,075

)

 

 

Repayments of borrowings due to affiliates

(304,030

)

 

 

 

(372,650

)

 

(21,750

)

Net transfers (to) from Parent

(18,161

)

 

4,414

 

 

(7,378

)

 

11,172

 

Net cash used in financing activities

17,371

 

 

4,414

 

 

(40,466

)

 

(10,578

)

Effect of exchange rate changes on cash and cash equivalents

(1,149

)

 

1,640

 

 

(1,582

)

 

(747

)

Net (decrease) increase in cash and cash equivalents

11,972

 

 

26,759

 

 

(38,218

)

 

49,024

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

49,600

 

 

61,613

 

 

99,790

 

 

39,348

 

End of period

$

61,572

 

 

$

88,372

 

 

$

61,572

 

 

$

88,372

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

Cash paid for interest

$

3,156

 

 

$

8,314

 

 

$

17,796

 

 

$

16,827

 

Cash paid for income taxes

$

4,699

 

 

$

3,255

 

 

$

14,985

 

 

$

11,492

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

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

$

9,844

 

 

$

 

 

$

31,079

 

 

$

5,765

 

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

$

1,542

 

 

$

(103

)

 

$

1,542

 

 

$

19

 

N-able, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands, except margin data)

GAAP cost of revenue

$

12,296

 

 

$

16,020

 

 

$

39,124

 

 

$

46,422

 

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

(425

)

 

(192

)

 

(765

)

 

(492

)

Amortization of acquired technologies

(1,017

)

 

(6,181

)

 

(4,758

)

 

(18,057

)

Acquisition related costs

 

 

 

 

 

 

(2

)

Non-GAAP cost of revenue

$

10,854

 

 

$

9,647

 

 

$

33,601

 

 

$

27,871

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

76,127

 

 

$

60,279

 

 

$

217,829

 

 

$

176,569

 

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

425

 

 

192

 

 

765

 

 

492

 

Amortization of acquired technologies

1,017

 

 

6,181

 

 

4,758

 

 

18,057

 

Acquisition related costs

 

 

 

 

 

 

2

 

Non-GAAP gross profit

$

77,569

 

 

$

66,652

 

 

$

223,352

 

 

$

195,120

 

GAAP gross margin

86.1

%

 

79.0

%

 

84.8

%

 

79.2

%

Non-GAAP gross margin

87.7

%

 

87.4

%

 

86.9

%

 

87.5

%

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

30,178

 

 

$

21,017

 

 

$

80,390

 

 

$

58,424

 

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

(4,161

)

 

(1,367

)

 

(6,437

)

 

(3,002

)

Acquisition related costs

 

 

 

 

 

 

(1

)

Restructuring costs and other

(1

)

 

 

 

(1

)

 

 

Spin-off costs

(89

)

 

(115

)

 

(448

)

 

(115

)

Non-GAAP sales and marketing expense

$

25,927

 

 

$

19,535

 

 

$

73,504

 

 

$

55,306

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

14,649

 

 

$

10,413

 

 

$

39,192

 

 

$

31,933

 

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

(2,183

)

 

(942

)

 

(3,509

)

 

(2,367

)

Restructuring costs and other

 

 

 

 

(68

)

 

 

Spin-off costs

(76

)

 

 

 

(307

)

 

 

Non-GAAP research and development expense

$

12,390

 

 

$

9,471

 

 

$

35,308

 

 

$

29,566

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

19,888

 

 

$

13,661

 

 

$

61,480

 

 

$

35,190

 

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

(5,116

)

 

(3,704

)

 

(10,646

)

 

(6,326

)

Acquisition related costs

 

 

 

 

87

 

 

(37

)

Restructuring costs and other

 

 

(235

)

 

(63

)

 

(302

)

Spin-off costs

(2,238

)

 

(1,365

)

 

(13,795

)

 

(1,365

)

Non-GAAP general and administrative expense

$

12,534

 

 

$

8,357

 

 

$

37,063

 

 

$

27,160

 

 

 

 

 

 

 

 

 

GAAP operating income

$

9,772

 

 

$

9,161

 

 

$

24,832

 

 

$

33,261

 

Amortization of acquired technologies

1,017

 

 

6,181

 

 

4,758

 

 

18,057

 

Amortization of acquired intangibles

1,640

 

 

6,027

 

 

11,935

 

 

17,761

 

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

11,885

 

 

6,205

 

 

21,357

 

 

12,187

 

Acquisition related costs

 

 

 

 

(87

)

 

38

 

Restructuring costs and other

1

 

 

235

 

 

132

 

 

302

 

Spin-off costs

2,404

 

 

1,480

 

 

14,550

 

 

1,480

 

Non-GAAP operating income

$

26,719

 

 

$

29,289

 

 

$

77,477

 

 

$

83,086

 

GAAP operating margin

11.1

%

 

12.0

%

 

9.7

%

 

14.9

%

Non-GAAP operating margin

30.2

%

 

38.4

%

 

30.2

%

 

37.3

%

 

 

 

 

 

 

 

 

GAAP net income

$

1,873

 

 

$

(1,129

)

 

$

(1,943

)

 

$

2,784

 

Amortization of acquired technologies

1,017

 

 

6,181

 

 

4,758

 

 

18,057

 

Amortization of acquired intangibles

1,640

 

 

6,027

 

 

11,935

 

 

17,761

 

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

11,885

 

 

6,205

 

 

21,357

 

 

12,187

 

Acquisition related costs

 

 

 

 

(87

)

 

38

 

Restructuring costs and other

1

 

 

235

 

 

132

 

 

302

 

Spin-off costs

2,404

 

 

1,480

 

 

14,550

 

 

1,480

 

Tax benefits associated with above adjustments

(1,647

)

 

(3,004

)

 

(5,145

)

 

(8,301

)

Non-GAAP net income

$

17,173

 

 

$

15,995

 

 

$

45,557

 

 

$

44,308

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

0.01

 

 

$

(0.01

)

 

$

(0.01

)

 

$

0.02

 

Non-GAAP diluted earnings per share

$

0.10

 

 

$

0.10

 

 

$

0.28

 

 

$

0.28

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands)

Net income (loss)

$

1,873

 

 

$

(1,129

)

 

$

(1,943

)

 

$

2,784

 

Amortization

3,225

 

 

12,208

 

 

17,261

 

 

35,817

 

Depreciation

2,544

 

 

2,092

 

 

7,796

 

 

5,942

 

Income tax expense

3,904

 

 

3,274

 

 

9,597

 

 

8,560

 

Interest expense, net

3,111

 

 

6,724

 

 

15,711

 

 

21,459

 

Unrealized foreign currency losses

728

 

 

273

 

 

1,195

 

 

1,359

 

Acquisition related costs

 

 

 

 

(87

)

 

40

 

Spin-off costs

2,404

 

 

1,480

 

 

14,550

 

 

1,480

 

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

11,885

 

 

6,205

 

 

21,357

 

 

12,187

 

Restructuring costs and other

1

 

 

235

 

 

132

 

 

302

 

Adjusted EBITDA

$

29,675

 

 

$

31,362

 

 

$

85,569

 

 

$

89,930

 

Adjusted EBITDA margin

33.6

%

 

41.1

%

 

33.3

%

 

40.3

%

Reconciliation of Unlevered Free Cash Flow

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands)

Net cash provided by operating activities

$

3,070

 

 

$

25,206

 

 

$

26,159

 

 

$

69,513

 

Capital expenditures(1)

(7,320

)

 

(3,176

)

 

(22,329

)

 

(9,164

)

Free cash flow

(4,250

)

 

22,030

 

 

3,830

 

 

60,349

 

Cash paid for interest, net of cash interest received

3,156

 

 

8,314

 

 

17,796

 

 

16,827

 

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

2,434

 

 

2,211

 

 

15,681

 

 

3,113

 

Unlevered free cash flow (excluding forfeited tax shield)

1,340

 

 

32,555

 

 

37,307

 

 

80,289

 

Forfeited tax shield related to interest payments(2)

 

 

(2,202

)

 

(3,833

)

 

(3,979

)

Unlevered free cash flow

$

1,340

 

 

$

30,353

 

 

$

33,474

 

 

$

76,310

 

_______________

(1)

Includes purchases of property and equipment and purchases of intangible assets.

(2)

Forfeited tax shield related to interest payments assumes a statutory rate of 26.5% for the three and nine months ended September 30, 2021 and 2020.

 



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