N-able Reports Strong Growth with Emphasis on Security Solutions

N-able, Inc. (NABL), a prominent provider of cloud-based software solutions for managed service providers (MSPs), recently announced impressive financial results for the second quarter of 2024. The company reported a revenue of $119.4 million, reflecting a 13% year-over-year growth.

This robust performance was driven by the success of their security solutions and data protection services. In particular, N-able’s focus on securing long-term contracts has played a critical role, with approximately 40% of revenues now derived from annual and multi-year agreements. The company also offered positive guidance for the upcoming third quarter and the full year, anticipating ongoing growth.

### Key Takeaways
– N-able’s Q2 revenue hit $119.4 million, a 13% YoY increase.
– Growth was largely fueled by its security solutions and data protection products, especially Cove.
– Long-term contracts now account for 40% of revenue, indicating strong customer commitment.
– Subscription revenue grew by 14% YoY, totaling $117.4 million.
– The company ended Q2 with 2,194 partners contributing $50,000 or more in annual recurring revenue (ARR).
– Dollar-based net revenue retention was around 108%, or 106% when adjusted for constant currency.
– Gross margin was recorded at 84.7%, with adjusted EBITDA increasing by 34% YoY to $46.8 million.
– Q3 revenue is forecasted to range between $114.5 million and $115 million, with full-year revenue projected between $463 million and $465 million.

### Company Outlook
– N-able expects a 6% to 7% YoY growth for Q3 revenue.
– Projected full-year revenue growth stands at 10% YoY.
– The company aims to enhance its IT management platform and expand security product offerings.
– A more normalized net dollar retention rate is anticipated for the second half of 2025.

### Bearish Highlights
– The company encountered challenges with its net dollar retention rate due to changes in pricing, packaging, and contract rationalization.
– Additional pressure on net revenue retention is expected.

### Bullish Highlights
– Bookings increased by 20% YoY, driven by new customer acquisitions and sales of new products.
– The MSP market is expanding, with growing opportunities in services such as Cove and managed detection and response (MDR).
– The shift towards annual commitments has been positively received by customers, fostering predictability and flexibility.

### Misses
– There was only a 1% YoY increase in partners contributing $50,000 or more in ARR.

### Q&A Highlights
– CEO John Pagliuca emphasized the trend of companies switching to the MSP model for IT services, driven by hiring difficulties and cost considerations.
– MSPs are increasingly servicing larger enterprises, including Fortune 1000 companies.
– The MSP sector is viewed as recession-resilient, providing essential services and cost savings.

N-able’s performance in the second quarter underlines its strong position in the MSP market, driven by effective security solutions and a focus on long-term contracts with customers. Despite facing some challenges regarding net dollar retention, the company’s outlook remains optimistic, with expectations for continued growth and market expansion. The resilience of the MSP industry, coupled with the growing trend of outsourcing IT services, creates a favorable environment for N-able’s future offerings.