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N-able Announces Second Quarter 2021 Results

N-able, Inc. (NYSE:NABL), a leading global provider of cloud-based software solutions for managed service providers, today reported results for its second quarter ended June 30, 2021.

“We are excited about our opportunity ahead as we continue on our standalone journey following completion of the spin-off from SolarWinds on July 19th. I want to express my sincere gratitude to our more than 1,300 employees around the world for their dedication in achieving this milestone," said N-able President & CEO John Pagliuca. "Our second quarter financial results exceeded the high end of our outlook, which we view as further valuation of the strength of our business model. As I look ahead, with a complete leadership team and enhanced strategic focus, I believe we are well-positioned to further execute on our mission to empower managed services providers (MSPs) to support the digital evolution of small and medium enterprises (SMEs). We believe we're still in the early stages of a large and growing opportunity for MSPs to further penetrate the global market for SME IT spending, and we have confidence in our ability to strengthen our position as the preferred partner for MSPs around the world.”

“Our total revenue growth of 16 percent year-over-year was driven by continued strong demand for our security and data protection solutions among both existing and new partners,” added N-able CFO Tim O’Brien. “Additionally, partners spending over $50,000 of ARR with N-able increased 32 percent year-over-year and now represent 46 percent of our total ARR. Our adjusted EBITDA margin was 33 percent in the second quarter. As we aim to be a ‘Rule of 50’ company over the long term, we remain focused on accelerating growth while maintaining high profit margins.”

Second quarter 2021 financial highlights:

  • Total revenue of $85.3 million, representing 16% year-over-year growth.
  • Subscription revenue of $82.8 million, representing 17% year-over-year growth.
  • GAAP gross margin of 85.0% and non-GAAP gross margin of 86.4%
  • GAAP net income of $0.5 million.
  • Adjusted EBITDA of $28.2 million, representing an adjusted EBITDA margin of 33.1%.

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

Additional highlights for the second quarter of 2021 include:

  • N-able integrated N-able™ N-central® with Microsoft Intune, a component of Microsoft 365 Business Premium, helping MSPs manage and protect their clients’ apps and devices. With this integration, N-central users can see Intune-managed devices to help maintain consistent policies and configurations directly from the N-central dashboard—strengthening data protection and streamlining monitoring and management efficiency.
  • N-able continued to expand its Technology Alliance Program (TAP), announcing that over 50 technology providers are now active within the program. TAP facilitates integration between N-able solutions and partner solutions, further empowering MSPs with the tools they need to run their businesses. The program counts well-known technology leaders such as Cisco, Sophos, and Webroot, as well as emerging tech innovators such as Liongard and Zomentum.
  • N-able entered a collaboration with DNSFilter that integrates DNSFilter’s cloud-based web filtering security solution with N-central and RMM. The integration will provide MSPs with critical protection against phishing, ransomware, and zero-day social engineering attacks. DNSFilter relies on AI-driven threat categorization that can detect malicious domains at significantly faster rates than static threat databases.
  • N-able launched MarketBuilder, a platform that provides MSPs with ready-made, customizable sales and marketing campaigns they can use to promote their own offerings. N-able also added three “Head Nerds” to provide advisory services to MSPs in effort to help MSPs understand and maximize important growth opportunities—bringing the total to five. These partner-focused developments build on the company’s commitment to provide resources and support to partners that extend beyond technology.
  • To complete its readiness as a standalone entity, N-able added members to its executive leadership team in the second quarter, including Mike Adler as Chief Technology and Product Officer, Peter Anastos as General Counsel, Dave MacKinnon as Chief Security Officer, and Jeff Nulsen as Chief Marketing Officer.

Balance Sheet

At June 30, 2021, total cash and cash equivalents were $49.6 million and total debt was $304 million. Following the completion of the spin-off from SolarWinds, on July 19, 2021, cash and cash equivalents were $50 million and total debt was $350 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, throughout the periods presented, N-able operated as part of SolarWinds and the financial results for the periods presented 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.

Financial Outlook

As of August 12, 2021, N-able is providing its financial outlook for the third 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 Third Quarter of 2021

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

  • Total revenue in the range of $86.5 to $87.0 million, representing 13% to 14% growth over the third quarter of 2020.
  • Adjusted EBITDA in the range of $27.5 to $28.0 million, representing approximately 32% of total revenue.

Financial Outlook for Full-Year 2021

N-able management currently expects to achieve the following results for full year 2021:

  • Total revenue in the range of $343 to $345 million, representing 13% to 14% growth over 2020 total revenue.
  • Adjusted EBITDA in the range of $109 to $111 million, representing approximately 32% 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 August 12, 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 + 44 208 0682 558. To access the live call, please dial in 5-10 minutes before the scheduled start time and enter the conference passcode 592562 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 and full year 2021. 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 lack of operating history as a stand-alone public company; and (j) 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, as well as those that will be discussed in the Quarterly Report on Form 10-Q for the period ended June 30, 2021 that N-able anticipates filing on or before August 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.
  • 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.

Combined Balance Sheets

(In thousands)

(Unaudited)

 

 

June 30,

 

December 31,

 

2021

 

2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

49,600

 

 

$

99,790

 

Accounts receivable, net of allowances of $652 and $751 as of June 30, 2021 and December 31, 2020, respectively

30,279

 

 

29,086

 

Income tax receivable

1,424

 

 

1,262

 

Prepaid and other current assets

9,491

 

 

5,584

 

Total current assets

90,794

 

 

135,722

 

Property and equipment, net

27,787

 

 

19,590

 

Operating lease right-of-use assets

33,579

 

 

13,697

 

Deferred taxes

3,313

 

 

2,982

 

Goodwill

860,496

 

 

874,083

 

Intangible assets, net

13,211

 

 

27,374

 

Other assets, net

9,611

 

 

6,287

 

Total assets

$

1,038,791

 

 

$

1,079,735

 

Liabilities and parent company net investment

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

174

 

 

$

5,542

 

Due to affiliates

20,435

 

 

8,023

 

Accrued liabilities and other

21,823

 

 

21,976

 

Current operating lease liabilities

3,157

 

 

2,860

 

Accrued related party interest payable

438

 

 

2,477

 

Income taxes payable

2,212

 

 

4,447

 

Current portion of deferred revenue

9,462

 

 

9,502

 

Total current liabilities

57,701

 

 

54,827

 

Long-term liabilities:

 

 

 

Due to affiliates

304,030

 

 

372,650

 

Deferred revenue, net of current portion

120

 

 

168

 

Non-current deferred taxes

3,796

 

 

5,846

 

Non-current operating lease liabilities

39,459

 

 

14,641

 

Other long-term liabilities

410

 

 

406

 

Total liabilities

405,516

 

 

448,538

 

Commitments and contingencies (Note 7)

 

 

 

Parent company net investment:

 

 

 

Parent company net investment

598,196

 

 

582,206

 

Accumulated other comprehensive income

35,079

 

 

48,991

 

Total parent company net investment

633,275

 

 

631,197

 

Total liabilities and parent company net investment

$

1,038,791

 

 

$

1,079,735

 

 

N-able, Inc.

Combined Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

Subscription and other revenue

$

85,340

 

 

$

73,424

 

 

$

168,530

 

 

146,692

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue

11,783

 

 

9,241

 

 

23,087

 

 

18,527

Amortization of acquired technologies

1,037

 

 

6,132

 

 

3,741

 

 

11,876

Total cost of revenue

12,820

 

 

15,373

 

 

26,828

 

 

30,403

Gross profit

72,520

 

 

58,051

 

 

141,702

 

 

116,289

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

24,498

 

 

18,939

 

 

50,212

 

 

37,407

Research and development

12,501

 

 

10,077

 

 

24,543

 

 

21,520

General and administrative

21,364

 

 

9,632

 

 

41,592

 

 

21,529

Amortization of acquired intangibles

4,276

 

 

5,869

 

 

10,295

 

 

11,734

Total operating expenses

62,639

 

 

44,517

 

 

126,642

 

 

92,190

Operating income

9,881

 

 

13,534

 

 

15,060

 

 

24,099

Other expense:

 

 

 

 

 

 

 

Interest expense, net

(6,082

)

 

(7,113

)

 

(12,600

)

 

(14,735)

Other (expense) income, net

(54

)

 

96

 

 

(583

)

 

(166)

Total other expense

(6,136

)

 

(7,017

)

 

(13,183

)

 

(14,901)

Income before income taxes

3,745

 

 

6,517

 

 

1,877

 

 

9,198

Income tax expense

3,283

 

 

3,293

 

 

5,693

 

 

5,286

Net income (loss)

$

462

 

 

$

3,224

 

 

$

(3,816

)

 

$3,912

Net income (loss) available to common stockholders

$

462

 

 

$

3,224

 

 

$

(3,816

)

 

$3,912

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

 

 

 

 

 

 

 

Basic earnings (loss) per share

$

0.00

 

 

$

0.02

 

 

$

(0.02

)

 

$0.02

Diluted earnings (loss) per share

$

0.00

 

 

$

0.02

 

 

$

(0.02

)

 

$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:

158,124

 

 

158,124

 

 

158,124

 

 

158,124

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

158,124

 

 

158,124

 

 

158,124

 

 

158,124

 

N-able, Inc.

Combined Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Cash flows from operating activities

 

 

 

 

 

 

 

Net income (loss)

$

462

 

 

$

3,224

 

 

$

(3,816

)

 

$

3,912

 

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

 

 

 

 

 

 

 

Depreciation and amortization

7,959

 

 

13,952

 

 

19,289

 

 

 

27,460

 

Provision for doubtful accounts

217

 

 

(239

)

 

500

 

 

 

1,389

 

Stock-based compensation expense

4,274

 

 

3,237

 

 

9,023

 

 

 

5,916

 

Deferred taxes

(931

)

 

(384

)

 

(2,381

)

 

 

(1,722

)

Loss on foreign currency exchange rates

46

 

 

627

 

 

467

 

 

 

1,086

 

Other non-cash expenses

(2

)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Accounts receivable

(1,515

)

 

(299

)

 

(1,327

)

 

 

(3,351

)

Income tax receivable

393

 

 

697

 

 

(153

)

 

 

51

 

Prepaid expenses and other assets

(2,524

)

 

708

 

 

(6,117

)

 

 

(778

)

Accounts payable

(2,022

)

 

580

 

 

(5,336

)

 

 

(235

)

Due to and from affiliates

1,607

 

 

1,934

 

 

12,184

 

 

 

5,440

 

Accrued liabilities and other

7,120

 

 

2,513

 

 

5,118

 

 

 

2,228

 

Accrued related party interest payable

(5,284

)

 

7,114

 

 

(2,039

)

 

 

6,222

 

Income taxes payable

406

 

 

139

 

 

(2,197

)

 

 

(1,993

)

Deferred revenue

(286

)

 

(214

)

 

(126

)

 

 

2

 

Net cash provided by operating activities

9,920

 

 

33,589

 

 

23,089

 

 

 

45,627

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

(10,340

)

 

(2,175

)

 

(12,757

)

 

 

(4,153

)

Purchases of intangible assets

83

 

 

(1,136

)

 

(2,252

)

 

 

(1,835

)

Net cash used in investing activities

(10,257

)

 

(3,311

)

 

(15,009

)

 

 

(5,988

)

Cash flows from financing activities

 

 

 

 

 

 

 

Repayments of borrowings due to affiliates

(68,620

)

 

 

 

(68,620

)

 

 

(21,750

)

Net transfers from Parent

8,400

 

 

3,065

 

 

10,783

 

 

 

6,763

 

Net cash (used in) provided by financing activities

(60,220

)

 

3,065

 

 

(57,837

)

 

 

(14,987

)

Effect of exchange rate changes on cash and cash equivalents

(1,061

)

 

(1,104

)

 

(433

)

 

 

(2,387

)

Net (decrease) increase in cash and cash equivalents

(61,618

)

 

32,239

 

 

(50,190

)

 

 

22,265

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

111,218

 

 

29,374

 

 

99,790

 

 

 

39,348

 

End of period

$

49,600

 

 

$

61,613

 

 

$

49,600

 

 

 

$

61,613

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

Cash paid for interest

$

11,367

 

 

$

 

 

$

14,640

 

 

 

$

8,517

 

Cash paid for income taxes

$

2,634

 

 

$

2,701

 

 

$

9,816

 

 

 

$

8,237

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

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

$

21,235

 

 

$

499

 

 

$

21,235

 

 

 

$

5,765

 

 

N-able, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands, except margin data)

GAAP cost of revenue

$

12,820

 

 

$

15,373

 

 

$

26,828

 

 

$

30,403

 

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

(155

)

 

(168

)

 

(340

)

 

(300

)

Amortization of acquired technologies

(1,037

)

 

(6,132

)

 

(3,741

)

 

(11,876

)

Acquisition related costs

 

 

 

 

 

 

(2

)

Non-GAAP cost of revenue

$

11,628

 

 

$

9,073

 

 

$

22,747

 

 

$

18,225

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

72,520

 

 

$

58,051

 

 

$

141,702

 

 

$

116,289

 

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

155

 

 

168

 

 

340

 

 

300

 

Amortization of acquired technologies

1,037

 

 

6,132

 

 

3,741

 

 

11,876

 

Acquisition related costs

 

 

 

 

 

 

2

 

Non-GAAP gross profit

$

73,712

 

 

$

64,351

 

 

$

145,783

 

 

$

128,467

 

GAAP gross margin

85.0

%

 

79.1

%

 

84.1

%

 

79.3

%

Non-GAAP gross margin

86.4

%

 

87.6

%

 

86.5

%

 

87.6

%

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

24,498

 

 

$

18,939

 

 

$

50,212

 

 

$

37,407

 

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

(1,006

)

 

(1,024

)

 

(2,276

)

 

(1,635

)

Acquisition related costs

 

 

(1

)

 

 

 

(1

)

Spin-off costs

(20

)

 

 

 

(359

)

 

 

Non-GAAP sales and marketing expense

$

23,472

 

 

$

17,914

 

 

$

47,577

 

 

$

35,771

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

12,501

 

 

$

10,077

 

 

$

24,543

 

 

$

21,520

 

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

(549

)

 

(745

)

 

(1,326

)

 

(1,425

)

Restructuring costs and other

(63

)

 

 

 

(68

)

 

 

Spin-off costs

(80

)

 

 

 

(231

)

 

 

Non-GAAP research and development expense

$

11,809

 

 

$

9,332

 

 

$

22,918

 

 

$

20,095

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

21,364

 

 

$

9,632

 

 

$

41,592

 

 

$

21,529

 

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

(2,640

)

 

(1,334

)

 

(5,530

)

 

(2,622

)

Acquisition related costs

87

 

 

(9

)

 

87

 

 

(37

)

Restructuring costs and other

(55

)

 

7

 

 

(63

)

 

(67

)

Spin-off costs

(5,932

)

 

 

 

(11,557

)

 

 

Non-GAAP general and administrative expense

$

12,824

 

 

$

8,296

 

 

$

24,529

 

 

$

18,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

$

9,881

 

 

$

13,534

 

 

$

15,060

 

 

$

24,099

 

Amortization of acquired technologies

1,037

 

 

6,132

 

 

3,741

 

 

11,876

 

Amortization of acquired intangibles

4,276

 

 

5,869

 

 

10,295

 

 

11,734

 

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

4,350

 

 

3,271

 

 

9,472

 

 

5,982

 

Acquisition related costs

(87

)

 

10

 

 

(87

)

 

40

 

Restructuring costs and other

117

 

 

(7

)

 

130

 

 

67

 

Spin-off costs

6,033

 

 

 

 

12,148

 

 

 

Non-GAAP operating income

$

25,607

 

 

$

28,809

 

 

$

50,759

 

 

$

53,798

 

GAAP operating margin

11.6

%

 

18.4

%

 

8.9

%

 

16.4

%

Non-GAAP operating margin

30.0

%

 

39.2

%

 

30.1

%

 

36.7

%

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

462

 

 

$

3,224

 

 

$

(3,816

)

 

$

3,912

 

Amortization of acquired technologies

1,037

 

 

6,132

 

 

3,741

 

 

11,876

 

Amortization of acquired intangibles

4,276

 

 

5,869

 

 

10,295

 

 

11,734

 

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

4,350

 

 

3,271

 

 

9,472

 

 

5,982

 

Acquisition related costs

(87

)

 

10

 

 

(87

)

 

40

 

Restructuring costs and other

117

 

 

(7

)

 

130

 

 

67

 

Spin-off costs

6,033

 

 

 

 

12,148

 

 

 

Tax benefits associated with above adjustments

(1,273

)

 

(2,648

)

 

(3,498

)

 

(5,297

)

Non-GAAP net income

$

14,915

 

 

$

15,851

 

 

$

28,385

 

 

$

28,314

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

 

 

$

0.02

 

 

$

(0.02

)

 

$

0.02

 

Non-GAAP diluted earnings per share

$

0.09

 

 

$

0.10

 

 

$

0.18

 

 

$

0.18

 

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands)

Net income (loss)

$

462

 

 

$

3,224

 

 

$

(3,816

)

 

$

3,912

 

Amortization

5,313

 

 

12,001

 

 

14,036

 

 

23,611

 

Depreciation

2,646

 

 

1,951

 

 

5,252

 

 

3,850

 

Income tax expense

3,283

 

 

3,293

 

 

5,693

 

 

5,286

 

Interest expense, net

6,082

 

 

7,113

 

 

12,600

 

 

14,735

 

Unrealized foreign currency losses

46

 

 

627

 

 

467

 

 

1,086

 

Acquisition related costs

(87

)

 

10

 

 

(87

)

 

40

 

Spin-off costs

6,033

 

 

 

 

12,148

 

 

 

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

4,350

 

 

3,271

 

 

9,472

 

 

5,982

 

Restructuring costs and other

117

 

 

(7

)

 

130

 

 

67

 

Adjusted EBITDA

$

28,245

 

 

$

31,483

 

 

$

55,895

 

 

$

58,569

 

Adjusted EBITDA margin

33.1

%

 

42.9

%

 

33.2

%

 

39.9

%

 

Reconciliation of Unlevered Free Cash Flow

 

 

Three Months

Ended June 30,

 

Six Months

Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(in thousands)

Net cash provided by operating activities

$

9,920

 

 

$

33,589

 

 

$

23,089

 

 

$

45,627

 

Capital expenditures(1)

(10,257

)

 

(3,311

)

 

(15,009

)

 

(5,988

)

Free cash flow

(337

)

 

30,278

 

 

8,080

 

 

39,639

 

Cash paid for interest, net of cash interest received

11,367

 

 

(1

)

 

14,640

 

 

8,513

 

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

6,920

 

 

194

 

 

13,247

 

 

902

 

Unlevered free cash flow (excluding forfeited tax shield)

17,950

 

 

30,471

 

 

35,967

 

 

49,054

 

Forfeited tax shield related to interest payments(2)

(2,965

)

 

 

 

(3,833

)

 

(1,777

)

Unlevered free cash flow

$

14,985

 

 

$

30,471

 

 

$

32,134

 

 

$

47,277

 

_______________

(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 six months ended June 30, 2021 and 2020.

 

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