N-able, Inc. (NABL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance with 9% revenue growth, 8% ARR growth, and a 30% EBITDA margin. Despite a slight gross margin decline, the company demonstrates strong cash flow and customer growth. The Q&A highlights positive sentiment towards AI initiatives and cross-sell success. However, management's avoidance of specific AI monetization details slightly tempers optimism. Considering the market cap, the stock is likely to react positively within the 2% to 8% range over the next two weeks.
Key Financial Performance
Revenue Growth Both fourth quarter and full year 2025 revenue grew 9% year-over-year in constant currency. This growth reflects strong performance across key operating metrics and the successful integration of acquisitions like Adlumin.
Annual Recurring Revenue (ARR) Exited 2025 with ARR of $540 million, growing 8% year-over-year in constant currency. Growth was driven by cross-sell opportunities, particularly in data protection and security operations.
Adjusted EBITDA Fourth quarter adjusted EBITDA was $39 million, reflecting a 30% margin. Full year adjusted EBITDA was $153 million, also reflecting a 30% margin. This was achieved through disciplined investments and operational efficiencies.
Gross Margin Fourth quarter gross margin was 80%, compared to 82% in the same period in 2024. Full year 2025 gross margin was 81%, compared to 84% in 2024. The decline was attributed to increased costs associated with acquisitions and investments in AI innovation.
Unlevered Free Cash Flow Fourth quarter unlevered free cash flow was $28 million, and $101 million for the full year. This reflects strong cash generation capabilities despite ongoing investments in growth initiatives.
Customer Growth The number of customers contributing over $50,000 in ARR grew by 14% year-over-year, now representing 61% of total ARR. This growth was driven by a focus on upmarket expansion and cross-sell opportunities.
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Operating Highlights
AI-powered cybersecurity platform: Integrated AI capabilities to enhance threat detection, automate tasks, and improve scalability. AI now handles 90% of identified threats automatically, up from 70% a year ago.
N-zo AI workflow assistant: Debuted as a tool to streamline IT and security operations, enabling tasks to be completed in seconds instead of hours.
Disaster Recovery as a Service (DRaaS): Introduced to provide real-time restore capabilities and reduce costs and risks for customers.
Google Workspace workload coverage: Added to expand data protection capabilities and address customer needs in the education and cloud-first sectors.
Expansion into VAR channel: Broadened sales reach and gained traction with Unified Endpoint Management (UEM) in the VAR channel.
Adlumin acquisition: Successfully integrated, enhancing presence in the AI SOC market and driving cross-sell opportunities.
India R&D center: Opened to deepen engineering capacity and accelerate innovation.
ARR growth: Achieved $540 million in ARR, growing 8% year-over-year in constant currency.
Customer consolidation: Secured a $300,000 ARR customer by consolidating multiple solutions into N-able's platform, displacing five competitors.
AI-driven operational efficiency: AI-enabled recovery testing and automation reduced customer workload and improved efficiency.
AI as a core differentiator: Positioned AI as a fundamental driver for growth and innovation, aiming to reach $1 billion ARR.
Cyber warranty program: Introduced to bolster customer confidence and derisk adoption.
Focus on scalable growth: Leveraging AI to address IT and security skills gaps, enabling customers to achieve growth without increasing headcount.
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Risk or Challenges
Cybersecurity Threats: The increasing sophistication and scale of AI-powered cyberattacks pose significant risks to businesses, requiring constant innovation and vigilance to protect against potential breaches.
AI Integration Challenges: The integration of AI into existing workflows and systems may face hurdles, including potential inefficiencies or disruptions during the transition phase.
Economic Uncertainty: Global economic conditions could impact customer spending on IT and cybersecurity solutions, potentially affecting revenue growth.
Regulatory Compliance: Meeting stringent compliance standards in cybersecurity is critical and challenging, especially as regulations evolve.
Supply Chain Risks: Potential disruptions in the supply chain for technology components or services could impact operations and delivery timelines.
Customer Retention and Competition: Maintaining high customer retention rates and competing against other cybersecurity providers in a crowded market remains a challenge.
IT and Security Skills Gap: The industry-wide shortage of skilled IT and security professionals could hinder the ability to meet customer demands effectively.
Data Protection and Recovery: Ensuring robust data protection and recovery capabilities is critical, especially as ransomware attacks escalate and data volumes grow.
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Guidance & Outlook
Revenue Growth: For the full year 2026, total revenue is expected to be approximately $554 million to $559 million, representing 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis.
ARR Growth: Full year ARR is projected to be $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis.
Adjusted EBITDA: Full year adjusted EBITDA is expected to be $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%.
Unlevered Free Cash Flow: Unlevered free cash flow is projected to be approximately $114 million to $118 million, reflecting a 17% increase in unlevered free cash flow dollars at the high end.
CapEx: CapEx, including capitalized software development costs, is expected to be approximately 5% of total revenue for 2026.
AI and Product Innovation: The company plans to continue disciplined investments in AI and product innovation, including the development of AI-driven solutions like N-zo, an AI workflow assistant, and enhancements in security operations and data protection.
Market Expansion: The company aims to expand its channel reach, particularly in the VAR channel, and deepen customer engagement with AI-powered solutions.
New Product Introductions: Plans include launching Disaster Recovery as a Service (DRaaS) and Google Workspace workload coverage, targeting meaningful TAM expansion.
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Shareholder Return Plan
Share Repurchase: We executed $30 million of share repurchases in the year, reflecting our belief in the business and our commitment to disciplined share count management.
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Key Q&A
Q:ARR grew about 8% on a constant currency basis in 4Q. What gives you confidence to guide to slightly higher constant currency ARR growth in 2026?
A:The guidance is based on steady assumptions, including steady to slightly improved gross retention, traction from new SKUs like AI-powered XDR, data protection, Disaster Recovery as a Service, and Google Workspace. Additionally, there is an acceleration in reach with the VAR community and a multipronged approach to growth.
Q:Can you clarify if the AI product N-zo will be released in the coming year and its value for customers?
A:N-zo is currently in limited preview with customers, receiving positive reviews. It is an in-product AI workflow assistant embedded in UEM, with plans to expand to other offerings. It allows MSPs to assess environments and take proactive actions using natural language, significantly reducing time for tasks. N-zo is part of a 3-pronged AI strategy involving AI-infused products, in-product AI agents, and AI-specific SKUs.
Q:What is driving the earlier-than-expected success of Adlumin's cross-sell to the existing customer base?
A:Adlumin's success is driven by its AI-infused technology, agnostic compatibility with various environments, and ability to assess and act on threats quickly. Compliance needs and ongoing cyber threats are also driving demand. Additionally, 70-75% of opportunities are from greenfield perspectives, and the solution is becoming a standard part of MSPs' service offerings.
Q:What are the guidance assumptions for constant currency growth in Q1 versus the full year, and is there any seasonality to consider?
A:There is expected seasonality in Q1, with stronger growth anticipated in the second half of the year. This is due to the impact of new product initiatives, some of which will be in customer preview in the first half and are expected to contribute more to net new ARR in the second half.
Q:How does the company view the impact of AI adoption on its 3 pillars and overall business?
A:AI adoption enhances security and efficiency across all 3 pillars: data protection, XDR, and UEM. AI helps improve metrics like RTO and RPO, enables efficient posture management, and addresses labor bottlenecks for MSPs. The company sees AI as a catalyst for MSPs to scale and service more SMEs and larger accounts, driving a bigger TAM and SAM.
Q:What is the capital allocation strategy for 2026, balancing growth and profitability?
A:The company plans a balanced approach, including share buybacks, R&D investments, OEM arrangements, and acquisitions. The focus is on solutions that meet SME needs for security and compliance. The strong balance sheet provides flexibility to pursue these options.
Q:Can you quantify the monetization opportunity of AI and its impact on device headwinds?
A:AI is expected to increase the ASP per MSP and per user by offering more AI-infused SKUs, expanding the economic stack beyond the current $30 per device per month. The SME market is seen as insulated from device headwinds due to its focus on sectors like healthcare and education. AI-specific SKUs will further expand revenue opportunities.
Q:Review of Unclear Management Responses
A:Management avoided directly quantifying the monetization opportunity of AI, providing only general optimism about increasing ASP and expanding the economic stack. Additionally, while discussing capital allocation, they did not provide specific details on the proportion of investments in R&D, OEM, or acquisitions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI cybersecurity
AI security
AI tailwind
AI workflow
ARR dollar
Adlumin
DRaaS Google
Disaster Recovery
Google Workspace
Recovery Service
VAR channel
ability outcome
action
advantage
algorithm
attack
belief
benefit
brand
currency ARR
cybersecurity platform
debate
domain expertise
endpoint security
engine
expectation
facility
flow dollar
holiday
logo
market product
plan
result term
skill gap
task
tool
upmarket
warranty
workflow assistant
NABL Transcript
N-able, Inc. (NABL) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call shows strong financial performance with 9% revenue growth, 8% ARR growth, and a 30% EBITDA margin. Despite a slight gross margin decline, the company demonstrates strong cash flow and customer growth. The Q&A highlights positive sentiment towards AI initiatives and cross-sell success. However, management's avoidance of specific AI monetization details slightly tempers optimism. Considering the market cap, the stock is likely to react positively within the 2% to 8% range over the next two weeks.
N-able, Inc. (NABL) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call reflects positive sentiment with strong subscription revenue growth, increased customer base, and healthy cash flow. While gross margins declined slightly, the company is investing in AI and operations, indicating future growth potential. The Q&A section highlights confidence in ARR growth, successful acquisitions, and strategic product launches, all contributing to an optimistic outlook. The market cap suggests moderate stock price movement, leading to a positive prediction.
N-able, Inc. (NABL) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call indicates strong financial performance with a 14% ARR growth and a 10% revenue increase. Despite a slight decline in gross margin, the company maintains a high adjusted EBITDA margin and positive free cash flow. The Q&A section reveals positive market reception and strategic focus, with promising growth in MSP markets and new product bundles. The share repurchase program further boosts confidence. Given the market cap, the stock is expected to react positively, likely within the 2% to 8% range, reflecting the overall strong financial and strategic outlook.
N-able, Inc. (NYSE:NABL) Q4 2024 Earnings Call Transcript
Unknown3-4
The earnings call reflects a mixed sentiment. While financial performance shows solid growth with a 10% revenue increase and positive EBITDA margins, concerns arise from declining gross margins, regulatory challenges, and economic headwinds. The lack of a shareholder return plan and significant debt also weigh negatively. However, the optimistic guidance and positive reception of the Adlumin acquisition balance these concerns. Given the company's market cap, the stock is likely to remain stable, resulting in a neutral prediction for the next two weeks.
NABL Slides
NABL Report
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