N-able, Inc. Q2 FY2025 earnings call

• N-able's mission is to protect businesses from evolving cyber threats. Its cyber resilience platform spans three pillars: unified endpoint management, security operations and data protection. - Cove, the data protection solution, has sustained momentum with over 3 million Microsoft 365 users protected, launched a new smart notification service and advanced Linux restore capabilities. - Adlumin, the security operations solution, has healthy ARR growth, expanded integrations with leading ITSM vendors and has a cloud-native AI-powered SOC. - In unified endpoint management, the vulnerability management capability was launched, and the UEM solution automates routine tasks and has customer wins. - Go-to-market motion: Expanding into the broader channel is a key growth initiative, added more resellers, strengthened relationships, and had high-impact presence at RSA and InfoSec Europe. - Appointed Vikram Ramesh as Chief Marketing Officer, who is promoting the cyber resilience story.

In the quarter, N-able surpassed $500 million of ARR, growing 14% year-over-year. Net new ARR growth was led by data protection, followed by security operation and then UEM. Cove, the data protection solution, protects over 3 million Microsoft 365 users and recorded its highest bookings quarter and highest net new ARR quarter ever in Q2, excluding annual pricing and packaging changes. Adlumin, the security operations solution, had healthy ARR growth. In unified endpoint management, the new vulnerability management capability launched in April was a meaningful addition. Revenue contribution: Total ARR was $513.7 million, total revenue was $131.2 million, subscription revenue was $129.9 million. Customers with over $50,000 of ARR now represent approximately 60% of total ARR.

• Third quarter 2025: Expected total revenue 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. Expected adjusted EBITDA in the range of $36 million to $37 million, representing an adjusted EBITDA margin of approximately 28% to 29%. - Full year 2025: Raised total revenue outlook to $500 million to $503 million, representing approximately 7% to 8% year-over-year growth on a reported and constant currency basis. Raised ARR outlook to $525 million to $530 million, representing 9% to 10% year-over-year growth or 7% to 9% on a constant currency basis. Raised adjusted EBITDA outlook to $141 million to $144 million, representing 28% to 29% adjusted EBITDA margin. Expected CapEx to be approximately 6% of total revenue for 2025, adjusted EBITDA to unlevered free cash flow conversion percentage to be approximately 68% for the full year.

Certain statements made during this call are forward-looking statements, subject to a number of risks and uncertainties, including those highlighted in today's earnings release and filings with the SEC, such as the impact of the global economic environment on the business and risks associated with non-GAAP financial measures.

Q: Can you provide some more color on the go-to-market traction you're seeing with resellers? And what has been top of mind for Vikram in his first couple of weeks in the CMO seat?

A: Our go-to-market teams are finding a nice rhythm. We're seeing nice bookings and a quarter-over-quarter doubling of the pipeline. Vikram is at Black Hat today, promoting the complete cyber resilience story for the mid-market, focusing on building the cyber resilience brand.

Q: Can you remind us where we're at with the optimization and the ASC 606 headwinds associated with moving to annual contracts? Are we getting close to seeing a baseline growth emerge here? And as customers are coming up for renewals, are they happy to sign another upfront commitment?

A: If you look at our full year ARR outlook, it quals any of the 606 or optimization noise. Customers are renewing at a very healthy clip, around 90% or so.

Q: I think you mentioned half of the MSPs aren't offering MDR. Is that true for your customer base? And how are you educating your MSP customers on the opportunity?

A: Directionally, it's true for our customer base. We're preaching to augment, leveraging our XDR technology to do heavy lifting for MSPs, allowing them to focus on strategic initiatives. Our solution is different as it's software first, giving MSPs comfort and confidence.

Q: John, I think you mentioned half of the MSPs aren't offering MDR. Is that true for your customer base? And how are you educating your MSP customers on the opportunity?

A: Directionally, we're finding it true for our customer base as well. We're preaching to augment, leveraging our XDR technology to do heavy lifting for MSPs, allowing them to focus on strategic initiatives. Our solution is different as it's software first, giving MSPs comfort and confidence.

Q: Any commentary on the device side, the RMM side?

A: It's been consistent, relatively flattish on physical devices, but seeing a nice uptick in digital assets like M365 users, virtual machines, etc.

Q: Could you give us any comments on the Adlumin contribution? Or if you don't want to give us a specific number, can you just talk about organic year-over-year growth, like kind of whether that trended up or it's stable?

A: We expect Adlumin to have about 1 point of impact on exit 2025 ARR growth and equates to about 4% or so of impact on overall growth.