N-Able - $NABL - Earnings Analysis: Strategic acquisition of Adlumin enhances security offerings and expands market reach.

Business Model

N-able generates revenue primarily through subscription and other revenue, offering software solutions for security, data protection, and unified endpoint management to IT service providers.

Revenue Sources

• Subscription revenue (majority of total revenue)
• Other revenue (primarily maintenance revenue from discontinued perpetual license model)

Revenue Distribution by Channel

• Relies on MSPs and broader channel of IT services providers to reach SMBs and mid-market businesses.
• Expanding presence with resellers and other channel providers.

Income Statement Analysis

• Revenue increased by 7.47% year-over-year, indicating continued growth in the company's subscription and other revenue streams.
• Total cost of revenue has increased by 32.33% year-over-year.
• Operating income decreased significantly by -26.68% year-over-year.
• Net income decreased significantly by -64.82% year-over-year.

Balance Sheet Analysis

• Total assets increased by 15.14%.
• Total liabilities increased significantly by 28.4%, potentially due to the Adlumin acquisition and related deferred consideration.
• Total stockholders' equity increased by 6.74%, indicating overall growth in the company's net worth.

Cash Flow Analysis

• Net cash provided by operating activities decreased by 16.76%, indicating a reduced ability to generate cash from core operations compared to the same period last year.
• Net cash used in investing activities increased significantly by 1964.7%, primarily driven by the acquisition of Adlumin.
• Cash and cash equivalents at the end of the period decreased by 44.34% due to the Adlumin acquisition.

Capital Allocation

N-able is focused on growth through strategic acquisitions (Adlumin), expanding its channel presence, and investing in R&D. They also aim to enhance customer experience and tailor support for higher-value accounts. The company is focusing on growing security business.

Management Commentary

Closed 2024 in a position of strength and we believe we are poised for even greater success in 2025.

Our guide calls for over $500 million of ARR and strong profit margins. We are executing at scale with a durable business model.

We are expecting both lines to improve as we go through 2025. From a trailing twelve month basis, I would expect it to bottom out in the first quarter. But from there, on a trailing twelve month basis, I would expect it to improve from Q2 onward.

Expect 2025 adjusted EBITDA margin to be below our target model as we integrate AdLumin into the business, invest in a new development site in India and realize the impact of the timing of our long term contract initiative.

Overall Sentiment: Optimistic about future growth, particularly in the security sector and through channel expansion, but acknowledges near-term margin pressures due to investments and acquisition integration.

Disclaimer: This analysis is based on company filings and public information available as of March 3, 2025. It is for informational purposes only and not financial advice. Past performance does not guarantee future results. Investing in securities involves risks, including potential loss of principal. Always conduct your own research and consult a financial professional before making investment decisions.