QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☑ | Smaller reporting company | ||||||||||
Emerging growth company |
PART I - FINANCIAL INFORMATION | |||||||||||
Page | |||||||||||
Item 1. | |||||||||||
Item 2. | |||||||||||
Item 3. | |||||||||||
Item 4. | |||||||||||
PART II - OTHER INFORMATION | |||||||||||
Item 1. | |||||||||||
Item 1A. | |||||||||||
Item 2. | |||||||||||
Item 5. | |||||||||||
Item 6. | |||||||||||
Certifications |
March 31, | December 31, | ||||||||||
2022 | 2021 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
Income tax receivable | |||||||||||
Prepaid and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Deferred taxes | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Other assets, net | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and stockholders' equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Due to affiliates | |||||||||||
Accrued liabilities and other | |||||||||||
Current operating lease liabilities | |||||||||||
Income taxes payable | |||||||||||
Current portion of deferred revenue | |||||||||||
Current debt obligation | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
Deferred revenue, net of current portion | |||||||||||
Non-current deferred taxes | |||||||||||
Non-current operating lease liabilities | |||||||||||
Long-term debt, net of current portion | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 8) | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
Preferred stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive income | |||||||||||
Retained earnings | |||||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Revenue: | |||||||||||
Subscription and other revenue | $ | $ | |||||||||
Cost of revenue: | |||||||||||
Cost of revenue | |||||||||||
Amortization of acquired technologies | |||||||||||
Total cost of revenue | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Sales and marketing | |||||||||||
Research and development | |||||||||||
General and administrative | |||||||||||
Amortization of acquired intangibles | |||||||||||
Total operating expenses | |||||||||||
Operating income | |||||||||||
Other expense: | |||||||||||
Interest expense, net | ( | ( | |||||||||
Other income (expense), net | ( | ||||||||||
Total other expense | ( | ( | |||||||||
Income before income taxes | ( | ||||||||||
Income tax expense | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Net income (loss) per share: | |||||||||||
Basic earnings (loss) per share | $ | $ | ( | ||||||||
Diluted earnings (loss) per share | $ | $ | ( | ||||||||
Weighted-average shares used to compute net income (loss) per share: | |||||||||||
Shares used in computation of basic earnings (loss) per share: | |||||||||||
Shares used in computation of diluted earnings (loss) per share: | |||||||||||
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Other comprehensive loss: | |||||||||||
Foreign currency translation adjustment | ( | ( | |||||||||
Other comprehensive loss | ( | ( | |||||||||
Comprehensive loss | $ | ( | $ | ( |
Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||||||||||||||||||
Restricted stock units issued, net of shares withheld for taxes | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of stock | — | — | — | — | ||||||||||||||||||||||||||||||||||
Issuance of stock under employee stock purchase plan | — | — | — | |||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Parent Company Net Investment | Accumulated Other Comprehensive Income | Total | ||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | |||||||||||||||||
Net loss | ( | — | ( | |||||||||||||||||
Foreign currency translation adjustment | — | ( | ( | |||||||||||||||||
Stock-based compensation | — | |||||||||||||||||||
Net transfers from Parent | — | |||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
(Benefit from) provision for doubtful accounts | ( | ||||||||||
Stock-based compensation expense | |||||||||||
Deferred taxes | ( | ||||||||||
Amortization of debt issuance costs | |||||||||||
Operating lease right-of-use assets, net | ( | ( | |||||||||
(Gain) loss on foreign currency exchange rates | ( | ||||||||||
Other non-cash expenses | |||||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | |||||||||||
Accounts receivable | ( | ||||||||||
Income tax receivable | ( | ( | |||||||||
Prepaid expenses and other assets | ( | ( | |||||||||
Accounts payable | ( | ( | |||||||||
Due to and from affiliates | ( | ||||||||||
Accrued liabilities and other | ( | ( | |||||||||
Accrued related party interest payable | |||||||||||
Income taxes payable | ( | ||||||||||
Deferred revenue | |||||||||||
Other long-term assets | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Purchases of intangible assets | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Payments of tax withholding obligations related to restricted stock | ( | ||||||||||
Exercise of stock options | |||||||||||
Proceeds from issuance of common stock under employee stock purchase plan | |||||||||||
Repayments of borrowings from Credit Agreement | ( | ||||||||||
Net transfers from Parent | |||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
Net increase in cash and cash equivalents | |||||||||||
Cash and cash equivalents | |||||||||||
Beginning of period | |||||||||||
End of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | $ | $ | |||||||||
Supplemental disclosure of non-cash activities: | |||||||||||
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses | $ | ( | $ | ( | |||||||
Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ |
Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Income | ||||||||||
(in thousands) | |||||||||||
Balance at December 31, 2021 | $ | $ | |||||||||
Other comprehensive loss before reclassification | ( | ( | |||||||||
Net current period other comprehensive loss | ( | ( | |||||||||
Balance at March 31, 2022 | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Subscription revenue | $ | $ | |||||||||
Other revenue | |||||||||||
Total subscription and other revenue | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Revenue recognized at a point in time | $ | $ | |||||||||
Revenue recognized over time | |||||||||||
Total revenue recognized | $ | $ |
Total Deferred Revenue | |||||
(in thousands) | |||||
Balance at December 31, 2021 | $ | ||||
Deferred revenue recognized | ( | ||||
Additional amounts deferred | |||||
Balance at March 31, 2022 | $ |
Revenue Recognition Expected by Period | |||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | More than 3 years | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Expected recognition of deferred revenue | $ | $ | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Amortization of acquired technologies | $ | $ |
(in thousands) | |||||
Balance at December 31, 2021 | $ | ||||
Foreign currency translation | ( | ||||
Balance at March 31, 2022 | $ |
Three Months Ended March 31, | |||||
2021 | |||||
(in thousands) | |||||
General and administrative | $ | ||||
Research and development | |||||
Sales and marketing | |||||
Cost of revenue | |||||
Total | $ |
March 31, 2022 | |||||||||||
Amount Outstanding | Effective Rate | ||||||||||
(in thousands, except interest rates) | |||||||||||
Term loan facility | $ | % | |||||||||
Revolving credit facility | % | ||||||||||
Total principal amount | |||||||||||
Unamortized discount and debt issuance costs | ( | ||||||||||
Total debt, net | |||||||||||
Less: Current debt obligation | ( | ||||||||||
Long-term debt, net of current portion | $ |
(in thousands) | |||||
2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total minimum principal payments | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Basic earnings (loss) per share: | |||||||||||
Numerator: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Denominator: | |||||||||||
Weighted-average common shares outstanding used in computing basic earnings (loss) per share | |||||||||||
Basic earnings (loss) per share | $ | $ | ( | ||||||||
Diluted earnings (loss) per share: | |||||||||||
Numerator: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Denominator: | |||||||||||
Weighted-average shares used in computing basic earnings (loss) per share | |||||||||||
Add dilutive impact of employee equity plans | |||||||||||
Weighted-average shares used in computing diluted earnings (loss) per share | |||||||||||
Diluted earnings (loss) per share | $ | $ | ( |
Three Months Ended March 31, | |||||
2022 | |||||
(in thousands) | |||||
Restricted stock units | |||||
Total anti-dilutive shares |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Subscription revenue | $ | 88,635 | 97.6 | % | $ | 80,671 | 97.0 | % | $ | 7,964 | |||||||||||||||||||
Other revenue | 2,225 | 2.4 | 2,519 | 3.0 | (294) | ||||||||||||||||||||||||
Total subscription and other revenue | $ | 90,860 | 100.0 | % | $ | 83,190 | 100.0 | % | $ | 7,670 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Cost of revenue | $ | 13,281 | 14.6 | % | $ | 11,304 | 13.6 | % | $ | 1,977 | |||||||||||||||||||
Amortization of acquired technologies | 982 | 1.1 | 2,704 | 3.3 | (1,722) | ||||||||||||||||||||||||
Total cost of revenue | $ | 14,263 | 15.7 | % | $ | 14,008 | 16.8 | % | $ | 255 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Sales and marketing | $ | 31,054 | 34.2 | % | $ | 25,714 | 30.9 | % | $ | 5,340 | |||||||||||||||||||
Research and development | 15,385 | 16.9 | 12,042 | 14.5 | 3,343 | ||||||||||||||||||||||||
General and administrative | 17,629 | 19.4 | 20,228 | 24.3 | (2,599) | ||||||||||||||||||||||||
Amortization of acquired intangibles | 1,461 | 1.6 | 6,019 | 7.2 | (4,558) | ||||||||||||||||||||||||
Total operating expenses | $ | 65,529 | 72.1 | % | $ | 64,003 | 76.9 | % | $ | 1,526 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Interest expense, net | $ | (3,526) | (3.9) | % | $ | (6,518) | (7.8) | % | $ | 2,992 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Other income (expense), net | $ | 1,059 | 1.2 | % | $ | (529) | (0.6) | % | $ | 1,588 | |||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Income before income taxes | $ | 8,601 | 9.5 | % | $ | (1,868) | (2.2) | % | $ | 10,469 | |||||||||||||||||||
Income tax expense | 3,500 | 3.9 | 2,410 | 2.9 | 1,090 | ||||||||||||||||||||||||
Effective tax rate | 40.7 | % | (129.0) | % | 169.7 | % |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands, except margin data) | |||||||||||
GAAP operating income | $ | 11,068 | $ | 5,179 | |||||||
Stock-based compensation expense and related employer-paid payroll taxes | 8,784 | 5,122 | |||||||||
Amortization of acquired technologies | 982 | 2,704 | |||||||||
Amortization of acquired intangibles | 1,461 | 6,019 | |||||||||
Spin-off costs | 534 | 6,115 | |||||||||
Restructuring costs and other | 72 | 13 | |||||||||
Non-GAAP operating income | $ | 22,901 | $ | 25,152 | |||||||
GAAP operating margin | 12.2 | % | 6.2 | % | |||||||
Non-GAAP operating margin | 25.2 | % | 30.2 | % |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands, except margin data) | |||||||||||
Net income (loss) | $ | 5,101 | $ | (4,278) | |||||||
Amortization | 3,143 | 8,722 | |||||||||
Depreciation | 3,195 | 2,608 | |||||||||
Income tax expense | 3,500 | 2,410 | |||||||||
Interest expense, net | 3,526 | 6,518 | |||||||||
Unrealized foreign currency (gains) losses | (825) | 421 | |||||||||
Spin-off costs | 534 | 6,115 | |||||||||
Stock-based compensation expense and related employer-paid payroll taxes | 8,784 | 5,122 | |||||||||
Restructuring costs and other | 72 | 13 | |||||||||
Adjusted EBITDA | $ | 27,030 | $ | 27,651 | |||||||
Adjusted EBITDA margin | 29.7 | % | 33.2 | % |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 13,130 | $ | 13,169 | |||||||
Net cash used in investing activities | (3,845) | (4,752) | |||||||||
Net cash (used in) provided by financing activities | (4,844) | 2,383 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (738) | 628 | |||||||||
Net increase in cash and cash equivalents | $ | 3,703 | $ | 11,428 |
Period | Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan or Program (in thousands) | |||||||||||||||||||
January 1 - 31, 2022 | — | $ | — | — | $ | — | |||||||||||||||||
February 1 - 28, 2022 | — | — | — | — | |||||||||||||||||||
March 1 - 31, 2022 | 1,400 | 0.00 | — | — | |||||||||||||||||||
Total | 1,400 | — |
Exhibit Number | Exhibit Title | |||||||
2.1# | ||||||||
3.1 | ||||||||
3.2 | ||||||||
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
101* | Interactive Data Files (formatted as Inline XBRL) | |||||||
101.INS | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith | ||||
** | The certifications attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing |
N-able, Inc. | |||||||||||
Dated: | May 12, 2022 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Dated: | May 12, 2022 | By: | /s/ John Pagliuca | ||||||||
John Pagliuca | |||||||||||
President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Dated: | May 12, 2022 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Dated: | May 12, 2022 | By: | /s/ John Pagliuca | ||||||||
John Pagliuca | |||||||||||
President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Dated: | May 12, 2022 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Consolidated and Combined Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Current assets: | ||
Allowance on accounts receivable | $ 1,636 | $ 1,653 |
Common stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 550,000,000 | 550,000,000 |
Common stock, shares issued (in shares) | 179,915,692 | 179,049,429 |
Common stock outstanding (in shares) | 179,915,692 | 179,049,429 |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 5,101 | $ (4,278) |
Other comprehensive loss: | ||
Foreign currency translation adjustment | (9,167) | (19,319) |
Other comprehensive loss | (9,167) | (19,319) |
Comprehensive loss | $ (4,066) | $ (23,597) |
Organization and Nature of Operations |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations Background On August 6, 2020, SolarWinds Corporation ("SolarWinds" or "Parent") announced that its board of directors had authorized management to explore a potential spin-off of its managed service provider ("MSP") business into our company, a newly created and separately traded public company, and separate into two distinct, publicly traded companies (the "Separation"). On July 19, 2021, SolarWinds completed the Separation through a pro-rata distribution (the "Distribution") of all the outstanding shares of our common stock it held to the stockholders of record of SolarWinds as of the close of business on July 12, 2021 (the "Record Date"). Each SolarWinds stockholder of record received one share of our common stock, $0.001 par value, for every two shares of SolarWinds common stock, $0.001 par value, held by such stockholder as of the close of business on the Record Date. SolarWinds distributed 158,020,156 shares of our common stock in the Distribution, which was effective at 11:59 p.m., Eastern Time, on July 19, 2021. The Distribution reflected 316,040,312 shares of SolarWinds common stock outstanding on July 12, 2021 at a distribution ratio of one share of our common stock for every two shares of SolarWinds common stock. In addition, on July 19, 2021, and prior to completion of the Distribution, we issued 20,623,282 newly-issued shares of our common stock in connection with a private placement of N-able’s common stock (the “Private Placement”). As a result of the Distribution, we became an independent public company and our common stock is listed under the symbol "NABL" on the New York Stock Exchange. Our financial statements for the periods through the Separation and Distribution date of July 19, 2021 are prepared on a “carve-out” basis as described below. Description of Business N-able, Inc., a Delaware corporation, together with its subsidiaries is a leading global provider of cloud-based software solutions for MSPs, enabling them to support digital transformation and growth for small and medium-sized enterprises ("SMEs"), which we define as those enterprises having less than 1,000 employees. With a flexible technology platform and powerful integrations, N-able makes it easy for MSPs to monitor, manage, and protect their end-customer systems, data, and networks. Our growing portfolio of security, automation, and backup and recovery solutions is built for IT services management professionals. N-able simplifies complex ecosystems and enables customers to solve their most pressing challenges. In addition, we provide extensive, proactive support—through enriching partner programs, hands-on training, and growth resources—to help MSPs deliver exceptional value and achieve success at scale. Through our multi-dimensional land and expand model and global presence, we are able to drive strong recurring revenue growth and profitability. N-able qualifies as an “emerging growth company” (“EGC”) as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation Our interim Consolidated Financial Statements do not include all of the information and footnotes required by United States of America generally accepted accounting principles ("GAAP") for complete financial statements. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. Prior to the Separation from SolarWinds Our financial statements for the periods through the Separation and Distribution date of July 19, 2021 are Consolidated Financial Statements prepared on a “carve-out” basis. The Consolidated Statements of Operations include all revenues and costs directly attributable to N-able as well as an allocation of expenses related to facilities, functions and services provided by SolarWinds prior to the Separation and Distribution. These corporate expenses have been allocated to us based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount. See Note 4. Relationship with Parent and Related Entities for further details. The allocated costs were deemed to be settled by N-able to SolarWinds in the period in which the expense was recorded in the Consolidated Statements of Operations and these settlements were reflected in cash flows from operating activities in the Consolidated Statements of Cash Flows. Current and deferred income taxes and related tax expense have been determined based on the stand-alone results of N-able by applying Accounting Standards Codification No. 740, Income Taxes (“ASC 740”), to N-able’s operations in each country as if it were a separate taxpayer (i.e. following the Separate Return Methodology). SolarWinds maintains various stock-based compensation plans at a corporate level. N-able employees participated in those programs prior to the Separation and Distribution and a portion of the compensation cost associated with those plans is included in N-able’s Consolidated Statements of Operations. The stock-based compensation expense is included within Parent company net investment for periods prior to the Separation and Distribution, with the accumulated balance included within Parent company net investment being transferred to additional paid-in capital upon consummation of the Separation and Distribution. The amounts presented in the Consolidated Financial Statements are not necessarily indicative of future awards. See Note 4. Relationship with Parent and Related Entities for further details. SolarWinds' third party debt and the related interest have not been allocated to us for any of the applicable periods presented because SolarWinds' borrowings were primarily for corporate cash purposes and were not directly attributable to N-able. In addition, none of the N-able legal entities guaranteed the debt nor were they jointly and severally liable for SolarWinds' debt. Any transactions which have been included in the Consolidated Financial Statements from legal entities which are not exclusively operating as N-able legal entities are considered to be effectively settled in the Consolidated Financial Statements at the time the transaction is recorded between SolarWinds and the N-able business. The total net effect of the settlement of these intercompany transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity. See Note 4. Relationship with Parent and Related Entities for further details. All of the allocations and estimates in the Consolidated Financial Statements are based on assumptions that management believes are reasonable. However, the Consolidated Financial Statements included herein may not be indicative of the results of operations and cash flows of N-able in the future or if N-able had been a separate, stand-alone publicly traded entity during the applicable periods presented. Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Going forward, we may perform these functions using our own resources or outsourced services. For a period following the Separation and Distribution, however, some of these functions continue to be provided by SolarWinds under a Transition Services Agreement. Additionally, we provide some services to SolarWinds under such Transition Services Agreement. See Note 4. Relationship with Parent and Related Entities for further details regarding allocated shared costs with SolarWinds. Following the Separation from SolarWinds Our financial statements for periods from July 20, 2021 forward are Consolidated Financial Statements based on our reported results as a standalone company. We prepared our Consolidated Financial Statements in conformity with GAAP and the reporting regulations of the Securities and Exchange Commission ("SEC"). The accompanying Consolidated Financial Statements include the accounts of N-able, Inc. and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions. Use of Estimates The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019 ("COVID-19") pandemic on our business, results of operations and financial condition is uncertain. We have made estimates of the impact of the COVID-19 pandemic within our financial statements as of and for the three months ended March 31, 2022 and 2021 which did not result in material adjustments. The estimates assessed included, but were not limited to, allowances for credit losses, the carrying values of goodwill and intangible assets and other long-lived assets, valuation allowances for tax assets and revenue recognition and may change in future periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include: •the valuation of goodwill, intangibles, long-lived assets and contingent consideration; •revenue recognition; •income taxes; and •management’s assessment of allocations of expenses prior to the Separation and Distribution. Recently Adopted and Issued Accounting Pronouncements As of March 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that are expected to have a material impact on our consolidated financial position, results of operations, or cash flows. Fair Value Measurements We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis. The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us. Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1. Level 3: Inputs that are unobservable in the marketplace and significant to the valuation. The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. Our related party debt with SolarWinds Holdings, Inc. prior to the Separation is not carried at fair value. See Note 4. Relationship with Parent and Related Entities for further details regarding our related party debt. The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. We held no financial instruments as of March 31, 2022 and December 31, 2021. As of March 31, 2022 and December 31, 2021, the carrying value of our outstanding debt approximates its estimated fair value as the interest rate on the debt is adjusted for changes in market rates. See Note 5. Debt for additional information regarding our debt. Accumulated Other Comprehensive Income Changes in accumulated other comprehensive income by component are summarized below:
Revenue Our revenue consists of the following:
During the three month periods ended March 31, 2022 and 2021, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:
Deferred Revenue Deferred revenue primarily consists of transaction prices allocated to remaining performance obligations from annually billed subscription agreements and maintenance services associated with our historical sales of perpetual license products which are delivered over time. Certain of our maintenance agreements are billed annually in advance for services to be performed over a 12-month period. We initially record the amounts allocated to maintenance performance obligations as deferred revenue and recognize these amounts ratably on a daily basis over the term of the maintenance agreement. Details of our total deferred revenue balance was as follows:
We expect to recognize revenue related to remaining performance obligations as of March 31, 2022 as follows:
Cost of Revenue Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our subscription products as follows:
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Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Goodwill | Goodwill The following table reflects the changes in goodwill for the three months ended March 31, 2022:
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Relationship with Parent and Related Entities |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Relationship with Parent and Related Entities | Relationship with Parent and Related Entities Prior to the Separation and Distribution, the N-able business was managed and operated in the normal course of business consistent with other affiliates of SolarWinds. Accordingly, certain shared costs for the periods through the Separation and Distribution date of July 19, 2021 have been allocated to N-able and reflected as expenses in the Consolidated Financial Statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the historical SolarWinds expenses attributable to N-able for purposes of the stand-alone financial statements. However, the expenses reflected in the Consolidated Financial Statements may not be indicative of the actual expenses that would have been incurred during the periods presented if N-able historically operated as a separate, stand-alone entity. In addition, the expenses reflected in the Consolidated Financial Statements may not be indicative of related expenses that will be incurred in the future by N-able. General Corporate Overhead For the periods through the Separation and Distribution date of July 19, 2021, SolarWinds provided facilities, information technology services and certain corporate and administrative services to the N-able business. Expenses relating to these services have been allocated to N-able and are reflected in the Consolidated Financial Statements. Where direct assignment is not possible or practical, these costs were allocated based on headcount. The following table summarizes the components of general allocated corporate expenses for the three months ended March 31, 2021:
Due to and from Affiliates In connection with the Separation and Distribution, we repaid all related party debt due to SolarWinds Holdings, Inc. and had no remaining related party debt due to SolarWinds Holdings, Inc. as of March 31, 2022 and December 31, 2021. On February 25, 2016, we entered into a loan agreement with SolarWinds Holdings, Inc. with an original principal amount of $250.0 million and a maturity date of February 25, 2023. Borrowings under the loan agreement bear interest at a floating rate which is equal to an adjusted London Interbank Offered Rate ("LIBOR") for a three-month interest period plus 9.8%. Prepayments of borrowings under the loan are permitted. In connection with the Separation and Distribution, we repaid this debt and no borrowings were outstanding as of March 31,2022 and December 31, 2021. On May 27, 2016, we entered into an additional loan agreement with SolarWinds Holdings, Inc. The loan agreement, as amended, has an original principal amount of $200.0 million and a maturity date of May 27, 2026. Borrowings under the loan agreement bear interest at a fixed rate of 2.24%. Prepayments of borrowings under the loan are permitted. In connection with the Separation and Distribution, we repaid this debt and no borrowings were outstanding as of March 31, 2022 and December 31, 2021. Interest expense related to the activity with SolarWinds Holdings, Inc. was $6.5 million for the three months ended March 31, 2021. The repayment of principal for these related party borrowings is reflected as a financing activity in the Consolidated Statements of Cash Flows. Due to affiliates within current liabilities primarily comprises less than $0.1 million and $0.5 million relating to transition services provided by SolarWinds as of March 31, 2022 and December 31, 2021, respectively. Due from affiliates within accounts receivable comprises less than $0.1 million and $0.1 million of receivables due from SolarWinds as of March 31, 2022 and December 31, 2021, respectively. Equity-Based Incentive Plans Prior to the Separation and Distribution, certain of our employees participated in Parent’s equity-based incentive plans. Under the SolarWinds Corporation 2016 Equity Incentive Plan (the "2016 Plan"), our employees, consultants, directors, managers and advisors were awarded stock-based incentive awards in a number of forms, including non-qualified stock options. The ability to grant any future equity awards under the 2016 Plan terminated in October 2018. Under the SolarWinds Corporation 2018 Equity Incentive Plan, our employees were eligible to be awarded stock-based incentive awards, including non-statutory stock options or incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other cash-based or share-based awards. Awards granted to our employees under the Parent incentive plans generally vested over periods ranging from to five years. We measure stock-based compensation for all stock-based incentive awards at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. For the periods through the Separation and Distribution date of July 19, 2021, compensation costs associated with our employees’ participation in Parent's incentive plans have been specifically identified for employees who exclusively supported our operations and were allocated to us as part of the cost allocations from Parent. Total costs charged to us related to our employees’ participation in Parent’s incentive plans were $4.6 million for the three months ended March 31, 2021. In connection with the Separation and Distribution, all of the vested and outstanding and unvested SolarWinds equity awards held by our employees were converted to N-able awards through the Conversion. The modification of these equity awards resulted in incremental compensation expense to the extent the estimated fair value of the awards immediately following the modification exceeded the estimated fair value of the awards immediately prior to the modification. This expense is to be recognized upfront for all vested and outstanding awards and over the remaining vesting term for all unvested awards. For the three months ended March 31, 2022, we recognized $0.6 million of incremental expense in connection with the Conversion. We include stock-based compensation expense in operating expense (general and administrative, sales and marketing and research and development) and cost of revenue on our Consolidated Statements of Operations, depending on the nature of the employee’s role in our operations. Agreements with SolarWinds In connection with the completion of the Separation and Distribution on July 19, 2021, we entered into several agreements with SolarWinds that, among other things, provide a framework for our relationship with SolarWinds after the Separation and Distribution. The following summarizes some of the most significant agreements and relationships that we continue to have with SolarWinds. Separation and Distribution Agreement The Separation and Distribution Agreement sets forth our agreements with SolarWinds regarding the principal actions taken in connection with the Separation and Distribution. It also sets forth other agreements that govern aspects of our relationship with SolarWinds following the Separation and Distribution, including (i) the manner in which legal matters and claims are allocated and certain liabilities are shared between N-able and SolarWinds; (ii) other matters including transfers of assets and liabilities, treatment or termination of intercompany arrangements and the settlement or extinguishment of certain liabilities and other obligations between N-able and SolarWinds; and (iii) mutual indemnification clauses. The Separation and Distribution Agreement also provides that SolarWinds will be liable and obligated to indemnify us for all liabilities based upon, arising out of, or relating to the Cyber Incident other than certain specified expenses for which we will be responsible. The term of the Separation and Distribution Agreement is indefinite and it may only be terminated with the prior written consent of both N-able and SolarWinds. Transition Services Agreement We entered into a Transition Services Agreement pursuant to which N-able and SolarWinds provide various services to each other. Under this agreement, SolarWinds continues to provide us with certain corporate and shared services, such as engineering, marketing, internal audit and travel support in exchange for the fees specified in the agreement. The Transition Services Agreement will terminate on the expiration of the term of the last service provided under it, which N-able anticipates to be on or around December 31, 2022. We incurred less than $0.1 million of costs under the Transition Services Agreement during the three months ended March 31, 2022. Tax Matters Agreement We entered into a Tax Matters Agreement with SolarWinds that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. Costs incurred under the Tax Matters Agreement were insignificant during the three months ended March 31, 2022. Software OEM Agreements We entered into Software OEM Agreements with SolarWinds pursuant to which SolarWinds granted to N-able, and N-able granted to SolarWinds, a non-exclusive and royalty-bearing license to market, advertise, distribute and sublicense certain SolarWinds and N-able software products, respectively, to customers on a worldwide basis. Each agreement has a two year term, and may be terminated by the applicable licensor in certain instances. We earned $0.3 million of revenue and incurred less than $0.1 million of costs, respectively, under the Software OEM Agreements during the three months ended March 31, 2022. Employee Matters Agreement We entered into an Employee Matters Agreement with SolarWinds that governs N-able's and SolarWinds’ compensation and employee benefit obligations with respect to the employees and other service providers of each company, and generally allocated liabilities and responsibilities relating to employment matters and employee compensation and benefit plans and programs. Costs incurred under the Employee Matters Agreement were insignificant during the three months ended March 31, 2022. Intellectual Property Matters Agreement We entered into an Intellectual Property Matters Agreement with SolarWinds pursuant to which each party granted to the other party a generally irrevocable, non-exclusive, worldwide, and royalty-free license to use certain intellectual property rights retained by the other party. Under the Intellectual Property Matters Agreement, the term for the licensed or sublicensed know-how is perpetual and the term for each licensed or sublicensed patent is until expiration of the last valid claim of such patent. The Intellectual Property Matters Agreement will terminate only if N-able and SolarWinds agree in writing to terminate it. Costs incurred under the Intellectual Property Matters Agreement were insignificant during the three months ended March 31, 2022. Trademark License Agreement We entered into a Trademark License Agreement with SolarWinds pursuant to which SolarWinds granted to N-able a generally limited, worldwide, non-exclusive and royalty-free license to use certain trademarks retained by SolarWinds that were used by SolarWinds in the conduct of its business prior to the Separation and Distribution. The Trademark License Agreement will terminate once we cease to use all of the licensed trademarks. Costs incurred under the Trademark License Agreement were insignificant during the three months ended March 31, 2022. Software Cross License Agreement We entered into a Software Cross License Agreement with SolarWinds pursuant to which each party granted to the other party a generally perpetual, irrevocable, non-exclusive, worldwide and, subject to certain exceptions, royalty-free license to certain software libraries and internal tools for limited uses. The term of the Software Cross License Agreement will be perpetual unless N-able and SolarWinds agree in writing to terminate the agreement. We earned less than $0.1 million of revenue and incurred $0.2 million of costs, respectively, under the Software Cross License Agreement during the three months ended March 31, 2022.
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Debt |
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Debt | Debt In connection with the Separation and Distribution, on July 19, 2021, certain subsidiaries of the Company, including N-able International Holdings I, Inc. (as guarantor) and N-able International Holdings II, Inc. (as borrower), entered into a credit agreement (the "Credit Agreement") with JPMorgan Chase, Bank, N.A. as administrative agent and collateral agent and the lenders from time to time party thereto. N-able International Holdings I, Inc. is a holding company with no other operations, cash flows, material assets or liabilities other than the equity interests in N-able International Holdings II, Inc. The Credit Agreement provides for $410.0 million of first lien secured credit facilities (the "Credit Facilities"), consisting of a $60.0 million revolving credit facility (the "Revolving Facility"), and a $350.0 million term loan facility (the "Term Loan"). On July 19, 2021, prior to the completion of the Distribution, the Company distributed approximately $16.5 million, representing the proceeds from the Term Loan, net of the repayment of related party debt due to SolarWinds Holdings, Inc., payment of intercompany trade payables, and fees and other transaction-related expenses, to SolarWinds. The Revolving Facility will primarily be available for general corporate purposes. The following table summarizes information relating to our outstanding debt as of March 31, 2022:
Borrowings denominated in U.S. dollars under the Revolving Facility bear interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%. The borrowings denominated in Euros under the Revolving Facility bear interest at a floating rate of an Adjusted EURIBOR rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%. Borrowings under the Term Loan bear interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.5%) for a specified interest period plus an applicable margin of 3.00%. Each margin is subject to reductions to 2.75% and 1.75%, respectively, based on our first lien net leverage ratio. In addition to paying interest on loans outstanding under the Revolving Facility, we are required to pay a commitment fee of 0.375% per annum in respect of unused commitments thereunder, subject to a reduction to 0.25% per annum based on our first lien net leverage ratio. The Term Loan requires quarterly repayments equal to 0.25% of the original principal amount, commencing in December 2021 through June 2028. The final maturity dates of the Revolving Facility and Term Loan are July 18, 2026 and July 18, 2028, respectively. The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; create liens; engage in mergers or consolidations; sell or transfer assets; pay dividends and distributions or repurchase our capital stock; make investments, loans, or advances; prepay certain junior indebtedness; engage in certain transactions with affiliates; and enter into negative pledge agreements. In addition, the Revolving Facility is subject to a financial covenant requiring compliance with a maximum first lien net leverage ratio of 7.50 to 1.00 at the end of each fiscal quarter, which will trigger when loans outstanding under the Revolving Facility exceed 35% of the aggregate commitments under the Revolving Facility. The Credit Agreement contains certain customary events of default, including, among others, failure to pay principal, interest or other amounts; inaccuracy of representations and warranties; violation of covenants; cross events of default; certain bankruptcy and insolvency events; certain ERISA events; certain undischarged judgments; and change of control. As of March 31, 2022, we were in compliance with all covenants of the Credit Agreement. The following table summarizes the remaining future minimum principal payments under Credit Agreement as of March 31, 2022:
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share A reconciliation of the number of shares in the calculation of basic and diluted earnings (loss) per share follows:
The dilutive impact of employee equity awards was not applicable to the calculation of diluted net loss per share for the three months ended March 31, 2021 as the effect would have been anti-dilutive. The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the three months ended March 31, 2022 because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period:
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Income Taxes |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the three months ended March 31, 2022 and 2021, we recorded income tax expense of $3.5 million and $2.4 million, respectively, resulting in an effective tax rate of 40.7% and (129.0)%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to an increase in income before income taxes and a decrease in the amount of the unbenefited loss in the U.S. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. At March 31, 2022, we did not have any accrued interest and penalties related to unrecognized tax benefits. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2013 through 2021 tax years generally remain open and subject to examination by federal, state and foreign tax authorities. We are currently under examination by the IRS for the tax years 2013 through the period ending February 2016. During the three months ended March 31, 2021, we finalized a settlement agreement with the IRS for the tax years 2011 to 2012. We are currently under audit by the Texas Comptroller for the 2015 through 2018 tax years. The Massachusetts Department of Revenue audit for the 2015 through February 2016 tax years closed with immaterial adjustments. On March 31, 2022, we received correspondence from the Canadian Revenue Agency (“CRA”) indicating that we are under Part XIII Income Tax audit of non-resident withholding for tax years 2017 through 2018.
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Commitments and Contingencies |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings From time to time, we have been and may be involved in various legal proceedings arising in our ordinary course of business. In the opinion of management, resolution of any pending claims (either individually or in the aggregate) is not expected to have a material adverse impact on our Consolidated Financial Statements, cash flows or financial position and it is not possible to provide an estimated amount of any such loss. However, the outcome of disputes is inherently uncertain. Therefore, although management considers the likelihood of such an outcome to be remote, an unfavorable resolution of one or more matters could materially affect our future results of operations or cash flows, or both, in a particular period.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsWe have evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in our Consolidated Financial Statements. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Our interim Consolidated Financial Statements do not include all of the information and footnotes required by United States of America generally accepted accounting principles ("GAAP") for complete financial statements. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. Prior to the Separation from SolarWinds Our financial statements for the periods through the Separation and Distribution date of July 19, 2021 are Consolidated Financial Statements prepared on a “carve-out” basis. The Consolidated Statements of Operations include all revenues and costs directly attributable to N-able as well as an allocation of expenses related to facilities, functions and services provided by SolarWinds prior to the Separation and Distribution. These corporate expenses have been allocated to us based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount. See Note 4. Relationship with Parent and Related Entities for further details. The allocated costs were deemed to be settled by N-able to SolarWinds in the period in which the expense was recorded in the Consolidated Statements of Operations and these settlements were reflected in cash flows from operating activities in the Consolidated Statements of Cash Flows. Current and deferred income taxes and related tax expense have been determined based on the stand-alone results of N-able by applying Accounting Standards Codification No. 740, Income Taxes (“ASC 740”), to N-able’s operations in each country as if it were a separate taxpayer (i.e. following the Separate Return Methodology). SolarWinds maintains various stock-based compensation plans at a corporate level. N-able employees participated in those programs prior to the Separation and Distribution and a portion of the compensation cost associated with those plans is included in N-able’s Consolidated Statements of Operations. The stock-based compensation expense is included within Parent company net investment for periods prior to the Separation and Distribution, with the accumulated balance included within Parent company net investment being transferred to additional paid-in capital upon consummation of the Separation and Distribution. The amounts presented in the Consolidated Financial Statements are not necessarily indicative of future awards. See Note 4. Relationship with Parent and Related Entities for further details. SolarWinds' third party debt and the related interest have not been allocated to us for any of the applicable periods presented because SolarWinds' borrowings were primarily for corporate cash purposes and were not directly attributable to N-able. In addition, none of the N-able legal entities guaranteed the debt nor were they jointly and severally liable for SolarWinds' debt. Any transactions which have been included in the Consolidated Financial Statements from legal entities which are not exclusively operating as N-able legal entities are considered to be effectively settled in the Consolidated Financial Statements at the time the transaction is recorded between SolarWinds and the N-able business. The total net effect of the settlement of these intercompany transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity. See Note 4. Relationship with Parent and Related Entities for further details. All of the allocations and estimates in the Consolidated Financial Statements are based on assumptions that management believes are reasonable. However, the Consolidated Financial Statements included herein may not be indicative of the results of operations and cash flows of N-able in the future or if N-able had been a separate, stand-alone publicly traded entity during the applicable periods presented. Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Going forward, we may perform these functions using our own resources or outsourced services. For a period following the Separation and Distribution, however, some of these functions continue to be provided by SolarWinds under a Transition Services Agreement. Additionally, we provide some services to SolarWinds under such Transition Services Agreement. See Note 4. Relationship with Parent and Related Entities for further details regarding allocated shared costs with SolarWinds. Following the Separation from SolarWinds Our financial statements for periods from July 20, 2021 forward are Consolidated Financial Statements based on our reported results as a standalone company. We prepared our Consolidated Financial Statements in conformity with GAAP and the reporting regulations of the Securities and Exchange Commission ("SEC"). The accompanying Consolidated Financial Statements include the accounts of N-able, Inc. and the accounts of its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.
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Use of Estimates | The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019 ("COVID-19") pandemic on our business, results of operations and financial condition is uncertain. We have made estimates of the impact of the COVID-19 pandemic within our financial statements as of and for the three months ended March 31, 2022 and 2021 which did not result in material adjustments. The estimates assessed included, but were not limited to, allowances for credit losses, the carrying values of goodwill and intangible assets and other long-lived assets, valuation allowances for tax assets and revenue recognition and may change in future periods. The actual results that we experience may differ materially from our estimates. The accounting estimates that require our most significant, difficult and subjective judgments include: •the valuation of goodwill, intangibles, long-lived assets and contingent consideration; •revenue recognition; •income taxes; and •management’s assessment of allocations of expenses prior to the Separation and Distribution.
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Recently Adopted Accounting Pronouncements | As of March 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that are expected to have a material impact on our consolidated financial position, results of operations, or cash flows. |
Fair Value Measurements | We apply the authoritative guidance on fair value measurements for financial assets and liabilities that are measured at fair value on a recurring basis and non-financial assets and liabilities, such as goodwill, intangible assets and property, plant and equipment that are measured at fair value on a non-recurring basis. The guidance establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by us. Level 2: Inputs that are observable in the marketplace other than those inputs classified as Level 1. Level 3: Inputs that are unobservable in the marketplace and significant to the valuation. The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. Our related party debt with SolarWinds Holdings, Inc. prior to the Separation is not carried at fair value. See Note 4. Relationship with Parent and Related Entities for further details regarding our related party debt. The carrying amounts reported in our Consolidated Balance Sheets for cash, accounts receivable, accounts payable and other accrued expenses approximate fair value due to relatively short periods to maturity. We held no financial instruments as of March 31, 2022 and December 31, 2021. As of March 31, 2022 and December 31, 2021, the carrying value of our outstanding debt approximates its estimated fair value as the interest rate on the debt is adjusted for changes in market rates. See Note 5. Debt for additional information regarding our debt.
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Deferred Revenue | Deferred revenue primarily consists of transaction prices allocated to remaining performance obligations from annually billed subscription agreements and maintenance services associated with our historical sales of perpetual license products which are delivered over time. Certain of our maintenance agreements are billed annually in advance for services to be performed over a 12-month period. We initially record the amounts allocated to maintenance performance obligations as deferred revenue and recognize these amounts ratably on a daily basis over the term of the maintenance agreement. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in accumulated other comprehensive income by component | Changes in accumulated other comprehensive income by component are summarized below:
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Disaggregation of revenue | Our revenue consists of the following:
During the three month periods ended March 31, 2022 and 2021, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:
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Details of total deferred revenue balance | Details of our total deferred revenue balance was as follows:
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Remaining performance obligations for revenue recognition | We expect to recognize revenue related to remaining performance obligations as of March 31, 2022 as follows:
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Amortization of acquired technologies | Amortization of acquired technologies included in cost of revenue relate to our subscription products as follows:
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Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Schedule of goodwill | The following table reflects the changes in goodwill for the three months ended March 31, 2022:
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Relationship with Parent and Related Entities (Tables) |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the components of general allocated corporate expenses | The following table summarizes the components of general allocated corporate expenses for the three months ended March 31, 2021:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of debt | The following table summarizes information relating to our outstanding debt as of March 31, 2022:
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Schedule of maturities of long-term debt | The following table summarizes the remaining future minimum principal payments under Credit Agreement as of March 31, 2022:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of shares in basic and diluted earnings per share calculation | A reconciliation of the number of shares in the calculation of basic and diluted earnings (loss) per share follows:
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Weighted average shares excluded from earnings per share computation | The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the three months ended March 31, 2022 because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period:
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Organization and Nature of Operations (Details) |
3 Months Ended | ||
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Jul. 19, 2021
$ / shares
shares
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Mar. 31, 2022
employee
$ / shares
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Dec. 31, 2021
$ / shares
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Schedule of Investments [Line Items] | |||
Spinoff transaction, conversion ratio | 1 | ||
Common stock, par or stated value per share (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 |
Maximum threshold of number of employees for consideration of a small and medium-sized enterprise | employee | 1,000 | ||
Private Placement | |||
Schedule of Investments [Line Items] | |||
Sale of stock, number of shares issued in transaction (in shares) | 20,623,282 | ||
SolarWinds Holdings, Inc. | |||
Schedule of Investments [Line Items] | |||
Spinoff transaction, conversion ratio | 2 | ||
Common stock, par or stated value per share (in dollars per share) | $ / shares | $ 0.001 | ||
Stock issued during period distributed for spinoff (in shares) | 158,020,156 | ||
Common stock outstanding after distribution due to spinoff (in shares) | 316,040,312 |
Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
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AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | $ 618,355 | $ 631,197 |
Other comprehensive loss before reclassification | (9,167) | |
Other comprehensive loss | (9,167) | (19,319) |
Balance at end of period | 618,555 | 614,732 |
Foreign Currency Translation Adjustments | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | 15,053 | |
Other comprehensive loss before reclassification | (9,167) | |
Other comprehensive loss | (9,167) | |
Balance at end of period | 5,886 | |
Accumulated Other Comprehensive Income | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | 15,053 | 48,991 |
Balance at end of period | $ 5,886 | $ 29,672 |
Summary of Significant Accounting Policies - Revenue Disaggregation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2022 |
Mar. 31, 2021 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 90,860 | $ 83,190 |
Revenue recognized at a point in time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 15,514 | 15,111 |
Revenue recognized over time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 75,346 | 68,079 |
Subscription revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 88,635 | 80,671 |
Other revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 2,225 | $ 2,519 |
Summary of Significant Accounting Policies - Changes in Deferred Revenue (Details) $ in Thousands |
3 Months Ended |
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Mar. 31, 2022
USD ($)
| |
Movement in Deferred Revenue [Roll Forward] | |
Balance at December 31, 2021 | $ 10,898 |
Deferred revenue recognized | (4,661) |
Additional amounts deferred | 5,308 |
Balance at March 31, 2022 | $ 11,545 |
Summary of Significant Accounting Policies - Cost of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2022 |
Mar. 31, 2021 |
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Product Information [Line Items] | ||
Amortization of acquired technologies | $ 982 | $ 2,704 |
Subscription and other revenue | ||
Product Information [Line Items] | ||
Amortization of acquired technologies | $ 982 | $ 2,704 |
Goodwill (Details) $ in Thousands |
3 Months Ended |
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Mar. 31, 2022
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at beginning of period | $ 840,923 |
Foreign currency translation | (7,430) |
Balance at end of period | $ 833,493 |
Relationship with Parent and Related Entities - Components of General Allocated Corporate Expenses (Details) - Affiliated Entity - SolarWinds Holdings, Inc. $ in Thousands |
3 Months Ended |
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Mar. 31, 2021
USD ($)
| |
Related Party Transaction [Line Items] | |
Expenses from transactions with related party | $ 9,231 |
General and administrative | |
Related Party Transaction [Line Items] | |
Expenses from transactions with related party | 9,090 |
Research and development | |
Related Party Transaction [Line Items] | |
Expenses from transactions with related party | 71 |
Sales and marketing | |
Related Party Transaction [Line Items] | |
Expenses from transactions with related party | 28 |
Cost of revenue | |
Related Party Transaction [Line Items] | |
Expenses from transactions with related party | $ 42 |
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
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Debt Instrument [Line Items] | ||
Total principal amount | $ 348,250 | |
Unamortized discount and debt issuance costs | (9,848) | |
Total debt, net | 338,402 | |
Less: Current debt obligation | (3,500) | $ (3,500) |
Long-term debt, net of current portion | 334,902 | $ 335,379 |
Secured Debt | Credit Agreement | ||
Debt Instrument [Line Items] | ||
Total principal amount | $ 348,250 | |
Effective Rate | 3.51% | |
Total debt, net | $ 348,250 | |
Line of Credit | Revolving Credit Facility | Credit Agreement | ||
Debt Instrument [Line Items] | ||
Total principal amount | $ 0 | |
Effective Rate | 0.00% |
Debt - Summary of Future Minimum Principal Payments of Debt (Details) $ in Thousands |
Mar. 31, 2022
USD ($)
|
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Debt Instrument [Line Items] | |
Total debt, net | $ 338,402 |
Credit Agreement | Secured Debt | |
Debt Instrument [Line Items] | |
2022 | 2,625 |
2023 | 3,500 |
2024 | 3,500 |
2025 | 3,500 |
2026 | 3,500 |
Thereafter | 331,625 |
Total debt, net | $ 348,250 |
Earnings Per Share - Reconciliation of Shares in the Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
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Mar. 31, 2022 |
Mar. 31, 2021 |
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Numerator: | ||
Net income (loss) | $ 5,101 | $ (4,278) |
Denominator: | ||
Weighted-average common shares outstanding used in computing basic earnings (loss) per share (in shares) | 179,460 | 158,124 |
Basic earnings (loss) per share (in dollars per share) | $ 0.03 | $ (0.03) |
Net income (loss) | $ 5,101 | $ (4,278) |
Add dilutive impact of employee equity plans (in shares) | 724 | 0 |
Weighted-average shares used in computing diluted earnings (loss) per share (in shares) | 180,184 | 158,124 |
Diluted earnings (loss) per share (in dollars per share) | $ 0.03 | $ (0.03) |
Earnings Per Share - Weighted Average Outstanding Shares of Common Stock Equivalents Excluded (Details) shares in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2022
shares
| |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Total anti-dilutive shares (in shares) | 3,116 |
Restricted stock units | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Total anti-dilutive shares (in shares) | 3,116 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 3,500 | $ 2,410 |
Effective income tax rate | 40.70% | (129.00%) |
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