Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- N-able Inc (NABL, Financial) reported a revenue of $116.4 million for Q3 2024, representing an 8% year-over-year growth.
- The company achieved an adjusted EBITDA of $44.8 million, with an approximately 39% adjusted EBITDA margin, exceeding quarterly guidance.
- N-able Inc (NABL)'s Cove product is the fastest-growing and largest recurring revenue product group, indicating strong market demand.
- The company has seen steady demand for its security suite, which includes comprehensive offerings like EDR, email protection, and managed detection and response services.
- N-able Inc (NABL) has over 50% of its monthly recurring revenue under long-term contracts, which is expected to drive higher retention and expansion over time.
Negative Points
- The company faces short-term financial pressure due to customers optimizing their estates before entering long-term contracts.
- Pricing headwinds from 2023's inflationary environment are expected to persist into the first half of 2025.
- N-able Inc (NABL) experienced a decline in gross margin to 83.7% from 84.6% in the same period last year.
- The transition of existing customers to long-term contracts, particularly those on-premise, is lower than expected, impacting revenue.
- The company anticipates a slight negative impact on revenue and adjusted EBITDA in Q4 2024 due to changes in revenue recognition under ASC 606.
Q & A Highlights
Q: What are you seeing from a macro perspective in your installed base, particularly regarding MSPs?
A: John Pagliuca, President and CEO, noted that the channel is quite healthy, with the majority of MSPs planning to grow, driven by demand in security and disaster recovery. MSPs are also being pulled into larger enterprises, indicating a healthy environment with plans for growth.
Q: How sustainable is the cost rationalization, particularly in sales and marketing and G&A?
A: Timothy O'Brien, CFO, stated that G&A spend is sustainable, and sales and marketing will grow in line with revenue. The focus is on investing in R&D to bring new products to market, which will drive more cost-effective sales and marketing efforts.
Q: Can you clarify the updated guidance regarding long-term contracts?
A: Timothy O'Brien explained that the mix of new customers is shifting more towards hosted and SaaS offerings, rather than on-premise, which affects revenue recognition. The expected conversion of existing customers to long-term contracts is lower than previously assumed.
Q: What is the current mix between on-premise and SaaS in your business?
A: The business is primarily subscription-based, with about 15% on-premise. This is trending downward as more customers move to SaaS offerings, which is seen as a positive shift towards more modernized offerings.
Q: Are the headwinds from estate optimization and pricing expected to continue into 2025?
A: Yes, these headwinds are expected to persist through the first half of 2025, as the optimization that occurred in the first half of 2024 will carry through for the following 12 months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
