N-Able’s Earnings Call: Growth Amid Challenges

N-Able, Inc. ((NABL)) has held its Q4 earnings call. Read on for the main highlights of the call.

N-Able’s recent earnings call painted a picture of robust growth tempered by certain financial challenges. The company reported strong revenue and Annualized Recurring Revenue (ARR) growth, alongside strategic acquisitions and successful product innovations. However, issues related to revenue recognition timing and net revenue retention, as well as expected pressures on EBITDA margin in 2025, were highlighted as significant headwinds.

Revenue and ARR Growth

N-Able showcased impressive financial performance with a 7% year-over-year revenue growth in the fourth quarter and a 10% increase for the full year 2024, both in constant currency. The company’s ARR reached $482 million, marking a 10% growth, underscoring the strength of its recurring revenue model.

Strategic Acquisition of Adlumin

The acquisition of Adlumin has expanded N-Able’s capabilities in the Extended Detection and Response (XDR) and Managed Detection and Response (MDR) markets. Adlumin’s cloud-native AI-powered XDR platform has become a significant contributor, joining Cove Data Protection as one of the top booking products, enhancing N-Able’s market position.

Successful Product Innovation

N-Able has launched innovative products, including immutable backups and enhanced restore through AI, achieving over 95% restore accuracy. This innovation has been recognized by Canalys, naming N-Able a 2024 RMM champion for the second consecutive year.

Strong Adjusted EBITDA

The company reported a strong adjusted EBITDA of $38.1 million for the fourth quarter, reflecting a 32.7% margin, and $169.4 million for the full year, with a 36.3% margin. These figures highlight N-Able’s ability to maintain profitability while pursuing growth.

Growth in Reseller and Channel Partnerships

N-Able has expanded its market reach by leveraging Adlumin’s North American reseller channels and is planning international expansion into markets such as the U.K., DACH, and Australia, which is expected to drive future growth.

Revenue Growth Constraints

The company anticipates a modest revenue growth of 1% to 2% year-over-year for the first quarter of 2025, facing a 5% headwind due to ASC 606-related revenue recognition timing, which presents a challenge for short-term growth.

Net Revenue Retention Challenges

N-Able’s dollar-based net revenue retention was approximately 103%, facing challenges due to the timing of long-term contract initiatives, which could impact future revenue stability.

Impact of ASC 606 on Financials

The timing of long-term contract initiatives is expected to cause transitory lumpiness in revenue, creating growth rate headwinds throughout 2025, as the company navigates the complexities of ASC 606.

Pressure on Adjusted EBITDA Margin

N-Able expects its adjusted EBITDA margin to be below the target model in 2025 due to the integration of Adlumin, investment in India, and ASC 606 timing impacts, which could affect profitability.

Forward-Looking Guidance

For fiscal year 2025, N-Able has set ambitious strategic objectives, including expanding security leadership, scaling go-to-market strategies, and enhancing customer experiences. The company forecasts total revenue to be between $486.5 million and $492.5 million, indicating a 4% to 6% year-over-year growth or 6% to 8% in constant currency. The full year ARR is projected to be between $514 million and $522 million, reflecting a 7% to 9% growth in constant currency. Adjusted EBITDA margins are anticipated to be around 27% to 28%, with expectations to surpass 30% by 2026.

In summary, N-Able’s earnings call highlighted a company on a path of growth and innovation, despite facing certain financial challenges. The company’s strategic acquisitions and product innovations have positioned it well for future success, although revenue recognition timing and EBITDA margin pressures remain areas to watch. Investors will be keenly observing how N-Able navigates these challenges while pursuing its ambitious growth objectives.