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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                    
Commission File Number: 001-40297
N-able, Inc.
(Exact name of registrant as specified in its charter)
Delaware 85-4069861
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
30 Corporate Drive
Suite 400
Burlington, Massachusetts 01803
(781) 328-6490
(Address and telephone number of principal executive offices) 

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.001 par valueNABLNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     þ Yes   ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  þ  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes   þ  No
On August 8, 2022, 180,213,050 shares of common stock, par value $0.001 per share, were outstanding.



N-able, Inc.

Table of Contents
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

2


Safe Harbor Cautionary Statement
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Such statements may be signified by terms such as “aim,” “anticipate,” “believe,” “continue,” “expect,” “feel,” “intend,” “estimate,” “seek,” “plan,” “may,” “can,” “could,” “should,” “will,” “would” or similar expressions and the negatives of those terms. In this report, forward-looking statements include statements regarding our financial projections, future financial performance and plans and objectives for future operations including, without limitation, the following:
expectations regarding our financial condition and results of operations, including revenue, revenue growth, revenue mix, cost of revenue, operating expenses, operating income, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA and adjusted EBITDA margin, cash flows and effective income tax rate;
expectations regarding the impact of foreign exchange rates and macroeconomic conditions on our business;
expectations regarding investment in product development and our expectations about the results of those efforts;
expectations concerning acquisitions and opportunities resulting from our acquisitions;
expectations regarding hiring additional personnel globally in the areas of sales and marketing and research and development;
intentions regarding our international earnings;
expectations regarding our capital expenditures;
expectations regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition;
our beliefs regarding the sufficiency of our cash and cash equivalents, cash flows from operating activities and borrowing capacity; and
expectations regarding our spin-off from SolarWinds Corporation ("SolarWinds") into a newly created and separately traded public company.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially and adversely different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following:
risks related to our spin-off from SolarWinds into a newly created and separately-traded public company, including that the spin-off could disrupt or adversely affect our business, results of operations and financial condition, that the spin-off may not achieve some or all of any anticipated benefits with respect to our business; that the distribution, together with certain related transactions, may not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, which could result in N-able incurring significant tax liabilities, and, in certain circumstances, requiring us to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement;
the possibility that the global COVID-19 pandemic may continue to adversely affect our business, results of operations and financial condition or the impact of the COVID-19 pandemic on the global economy or on the business operations and financial conditions of our customers, their end customers and our prospective customers;
our ability to sell subscriptions to new MSP partners, to sell additional solutions to our existing MSP partners and to increase the usage of our solutions by our existing MSP partners, as well as our ability to generate and maintain MSP partner loyalty;
any decline in our renewal or net retention rates;
the possibility that general economic conditions or uncertainty may cause information technology spending to be reduced or purchasing decisions to be delayed, including as a result of the COVID-19 pandemic, inflation, rising interest rates, war and political unrest, military conflict (including between Russia and Ukraine), terrorism, sanctions or other geopolitical events globally, or that such factors may otherwise harm our financial condition or results of operations;
any inability to generate significant volumes of high quality sales leads from our digital marketing initiatives and convert such leads into new business at acceptable conversion rates;
any inability to successfully identify, complete and integrate acquisitions and manage our growth effectively;
risks associated with our international operations;
foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity;
3


risks that cyberattacks, including the cyberattack on SolarWinds’ Orion Software Platform and internal systems announced by SolarWinds in December 2020, or the Cyber Incident, and other security incidents may result, in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ environments, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ security, the theft or misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business;
our status as a controlled company;
our ability to attract and retain qualified employees and key personnel as a standalone public company;
the timing and success of new product introductions and product upgrades by us or our competitors;
our ability to protect and defend our intellectual property and not infringe upon others’ intellectual property;
the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business;
our indebtedness, including rising interest rates, potential restrictions on our operations and the impact of events of default;
our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States; and
such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in this Quarterly Report on Form 10-Q.
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially and adversely from those anticipated in these forward-looking statements, even if new information becomes available in the future.
In this report “N-able,” “Company,” “we,” “us” and “our” refer to N-able, Inc. and its consolidated subsidiaries, and references to “SolarWinds” and “Parent” refer to SolarWinds Corporation.
4


PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
N-able, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30,December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$86,618 $66,736 
Accounts receivable, net of allowances of $1,580 and $1,653 as of June 30, 2022 and December 31, 2021, respectively
34,087 33,041 
Income tax receivable9,092 7,250 
Prepaid and other current assets13,629 13,962 
Total current assets143,426 120,989 
Property and equipment, net36,451 38,748 
Operating lease right-of-use assets34,417 36,206 
Deferred taxes1,697 1,681 
Goodwill809,707 840,923 
Intangible assets, net3,569 8,066 
Other assets, net9,504 9,086 
Total assets$1,038,771 $1,055,699 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$4,384 $5,865 
Due to affiliates145 464 
Accrued liabilities and other26,683 30,944 
Current operating lease liabilities5,795 4,830 
Income taxes payable6,983 4,600 
Current portion of deferred revenue10,991 10,675 
Current debt obligation3,500 3,500 
Total current liabilities58,481 60,878 
Long-term liabilities:
Deferred revenue, net of current portion158 223 
Non-current deferred taxes3,121 2,632 
Non-current operating lease liabilities36,176 37,822 
Long-term debt, net of current portion334,429 335,379 
Other long-term liabilities412 410 
Total liabilities432,777 437,344 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.001 par value: 550,000,000 shares authorized and 180,146,580 and 179,049,429 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
180 179 
Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
  
Additional paid-in capital616,148 602,996 
Accumulated other comprehensive (loss) income(19,889)15,053 
Retained earnings9,555 127 
Total stockholders' equity605,994 618,355 
Total liabilities and stockholders' equity$1,038,771 $1,055,699 
The accompanying notes are an integral part of these Consolidated Financial Statements.
5


N-able, Inc.
Consolidated Statements of Operations
(In thousands, except per share information)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue:
Subscription and other revenue$91,627 $85,340 $182,487 168,530 
Cost of revenue:
Cost of revenue13,624 11,783 26,905 23,087 
Amortization of acquired technologies545 1,037 1,527 3,741 
Total cost of revenue14,169 12,820 28,432 26,828 
Gross profit77,458 72,520 154,055 141,702 
Operating expenses:
Sales and marketing32,020 24,498 63,074 50,212 
Research and development15,241 12,501 30,626 24,543 
General and administrative 18,440 21,364 36,069 41,592 
Amortization of acquired intangibles1,460 4,276 2,921 10,295 
Total operating expenses67,161 62,639 132,690 126,642 
Operating income10,297 9,881 21,365 15,060 
Other expense:
Interest expense, net(3,845)(6,082)(7,371)(12,600)
Other income (expense), net175 (54)1,234 (583)
Total other expense(3,670)(6,136)(6,137)(13,183)
Income before income taxes6,627 3,745 15,228 1,877 
Income tax expense2,300 3,283 5,800 5,693 
Net income (loss) $4,327 $462 $9,428 $(3,816)
Net income (loss) per share:
    Basic earnings (loss) per share$0.02 $0.00 $0.05 $(0.02)
    Diluted earnings (loss) per share$0.02 $0.00 $0.05 $(0.02)
Weighted-average shares used to compute net income (loss) per share:
    Shares used in computation of basic earnings (loss) per share:180,034 158,124 179,948 158,124 
    Shares used in computation of diluted earnings (loss) per share:180,504 158,124 180,675 158,124 
The accompanying notes are an integral part of these Consolidated Financial Statements.
6


N-able, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income (loss) $4,327 $462 $9,428 $(3,816)
Other comprehensive (loss) income:
Foreign currency translation adjustment(25,775)5,407 (34,942)(13,912)
Other comprehensive (loss) income(25,775)5,407 (34,942)(13,912)
Comprehensive (loss) income$(21,448)$5,869 $(25,514)$(17,728)
The accompanying notes are an integral part of these Consolidated Financial Statements.



7


N-able, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands)
(Unaudited)
Three Months Ended June 30, 2022
Common Stock
SharesAmountAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal
Balance as of March 31, 2022179,916 $180 $607,261 $5,886 $5,228 $618,556 
Net income— — — — 4,327 4,327 
Foreign currency translation adjustment— — (25,775)— (25,775)
Exercise of stock options10— 11 — — 11 
Restricted stock units issued, net of shares withheld for taxes215— (991)— — (991)
Issuance of stock6— — — —  
Issuance of stock under employee stock purchase plan—  
Stock-based compensation— 9,866 — — 9,866 
Balance at June 30, 2022180,147 $180 $616,148 $(19,889)$9,555 $605,994 

Six Months Ended June 30, 2022
Common Stock
SharesAmountAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal
Balance at December 31, 2021179,049 $179 $602,996 $15,053 $127 $618,355 
Net income— — — — 9,428 9,428 
Foreign currency translation adjustment— — — (34,942)— (34,942)
Exercise of stock options23 — 27 — — 27 
Restricted stock units issued, net of shares withheld for taxes961 1 (5,543)— — (5,542)
Issuance of stock57 — — — —  
Issuance of stock under employee stock purchase plan57 — 568 568 
Stock-based compensation— 18,100 — — 18,100 
Balance at June 30, 2022180,147 $180 $616,148 $(19,889)$9,555 $605,994 

8



Three Months Ended June 30, 2021
Parent Company Net InvestmentAccumulated Other Comprehensive IncomeTotal
Balance as of March 31, 2021$585,060 $29,672 $614,732 
Net income462 — 462 
Foreign currency translation adjustment— 5,407 5,407 
Net Transfers to Parent$8,400 $— $8,400 
Stock-based compensation$4,274 $— $4,274 
Balance as of June 30, 2021$598,196 $35,079 $633,275 

Six Months Ended June 30, 2021
Parent Company Net InvestmentAccumulated Other Comprehensive IncomeTotal
Balance at December 31, 2020$582,206 $48,991 $631,197 
Net loss(3,816)— (3,816)
Foreign currency translation adjustment— (13,912)(13,912)
Net Transfers to Parent10,783 — 10,783 
Stock-based compensation9,023 — 9,023 
Balance as of June 30, 2021$598,196 $35,079 $633,275 
The accompanying notes are an integral part of these Consolidated Financial Statements
9


N-able, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net income (loss)$9,428 $(3,816)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization12,233 19,289 
(Benefit from) provision for doubtful accounts(73)500 
Stock-based compensation expense17,966 9,023 
Deferred taxes345 (2,381)
Amortization of debt issuance costs814  
Operating lease right-of-use assets, net(424) 
(Gain) loss on foreign currency exchange rates(597)467 
Other non-cash expenses43  
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable(1,512)(1,327)
Income tax receivable(1,884)(153)
Prepaid expenses and other assets217 (6,117)
Accounts payable(839)(5,336)
Due to and from affiliates(463)12,184 
Accrued liabilities and other(1,822)5,118 
Accrued related party interest payable (2,039)
Income taxes payable1,965 (2,197)
Deferred revenue358 (126)
Other long-term assets112  
Net cash provided by operating activities35,867 23,089 
Cash flows from investing activities
Purchases of property and equipment(5,427)(12,757)
Purchases of intangible assets(2,356)(2,252)
Net cash used in investing activities(7,783)(15,009)
Cash flows from financing activities
Payments of tax withholding obligations related to restricted stock(5,543) 
Exercise of stock options27  
Proceeds from issuance of common stock under employee stock purchase plan568  
Repayments of borrowings from Credit Agreement(1,750) 
Repayments of borrowings due to affiliates (68,620)
Net transfers from Parent 10,783 
Net cash used in financing activities(6,698)(57,837)
Effect of exchange rate changes on cash and cash equivalents(1,504)(433)
Net increase (decrease) in cash and cash equivalents19,882 (50,190)
Cash and cash equivalents
Beginning of period66,736 99,790 
End of period$86,618 $49,600 
Supplemental disclosure of cash flow information:
Cash paid for interest$6,183 $14,640 
Cash paid for income taxes$3,829 $9,816 
Supplemental disclosure of non-cash activities:
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses$(583)$(2,653)
Right-of-use assets obtained in exchange for operating lease liabilities$967 $21,235 
The accompanying notes are an integral part of these Consolidated Financial Statements.
10

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)


1. 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”).
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).
11

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

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 and six months ended June 30, 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.
12

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Recently Adopted and Issued Accounting Pronouncements
As of June 30, 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 June 30, 2022 and December 31, 2021. As of June 30, 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 (Loss)
Changes in accumulated other comprehensive income (loss) by component are summarized below:
Foreign Currency Translation AdjustmentsAccumulated Other Comprehensive Income (Loss)
(in thousands)
Balance at December 31, 2021$15,053 $15,053 
Other comprehensive loss before reclassification(34,942)(34,942)
Net current period other comprehensive loss(34,942)(34,942)
Balance at June 30, 2022$(19,889)$(19,889)
13

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Revenue
Our revenue consists of the following:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Subscription revenue$89,369 $82,821 $178,004 $163,492 
Other revenue2,258 2,519 4,483 5,038 
Total subscription and other revenue$91,627 $85,340 $182,487 $168,530 

During the three month periods ended June 30, 2022 and 2021, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Revenue recognized at a point in time$14,749 $15,082 $30,263 $30,192 
Revenue recognized over time76,878 70,258 $152,224 $138,338 
Total revenue recognized$91,627 $85,340 $182,487 $168,530 

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:
Total Deferred Revenue
(in thousands)
Balance at December 31, 2021$10,898 
Deferred revenue recognized(9,701)
Additional amounts deferred9,952 
Balance at June 30, 2022$11,149 
We expect to recognize revenue related to remaining performance obligations as of June 30, 2022 as follows:
Revenue Recognition Expected by Period
TotalLess than 1 year1-3 yearsMore than 3 years
(in thousands)
Expected recognition of deferred revenue$11,149 $10,991 $158 $ 

Cost of Revenue
Amortization of Acquired Technologies. Amortization of acquired technologies included in cost of revenue relate to our subscription products as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Amortization of acquired technologies$545 $1,037 $1,527 $3,741 
14

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

3. Goodwill
The following table reflects the changes in goodwill for the six months ended June 30, 2022:
(in thousands)
Balance at December 31, 2021$840,923 
Foreign currency translation(31,216)
Balance at June 30, 2022$809,707 
4. 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 and six months ended June 30, 2021:
Three Months Ended June 30,Six Months Ended June 30,
20212021
(in thousands)
General and administrative$10,012 $19,101 
Research and development63 135 
Sales and marketing6 34 
Cost of revenue8 50 
Total$10,089 $19,320 
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 June 30, 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 in full.
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 in full.
Interest expense related to the activity with SolarWinds Holdings, Inc. was $6.1 million and $12.6 million for the three and six months ended June 30, 2021, respectively. 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 $0.1 million and $0.5 million relating to transition services provided by SolarWinds as of June 30, 2022 and December 31, 2021, respectively. Due from affiliates within accounts
15

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

receivable comprises $0.2 million and $0.1 million of receivables due from SolarWinds as of June 30, 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 one 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 $4.1 million for the three months ended June 30, 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 and six months ended June 30, 2022, we recognized $0.6 million and $1.2 million, respectively, 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 and six months ended June 30, 2022, respectively.
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 and six months ended June 30, 2022, respectively.
16

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

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 $0.4 million and $0.7 million of revenue and incurred less than $0.1 million and $0.1 million of costs under the Software OEM Agreements during the three and six months ended June 30, 2022, respectively.
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 and six months ended June 30, 2022, respectively.
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 and six months ended June 30, 2022, respectively.
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 and six months ended June 30, 2022, respectively.
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 and less than $0.1 million of revenue and incurred $0.2 million and $0.4 million of costs under the Software Cross License Agreement during the three and six months ended June 30, 2022, respectively.
5. 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.





17

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes information relating to our outstanding debt as of June 30, 2022:
June 30, 2022
Amount OutstandingEffective Rate
(in thousands, except interest rates)
Term loan facility$347,375 4.57 %
Revolving credit facility  %
Total principal amount347,375 
Unamortized discount and debt issuance costs(9,446)
Total debt, net337,929 
Less: Current debt obligation(3,500)
Long-term debt, net of current portion$334,429 
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 June 30, 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 June 30, 2022:
(in thousands)
2022$1,750 
20233,500 
20243,500 
20253,500 
20263,500 
Thereafter331,625 
Total minimum principal payments$347,375 
6. Earnings Per Share
A reconciliation of the number of shares in the calculation of basic and diluted earnings (loss) per share follows:
18

N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Basic earnings (loss) per share:
Numerator:
Net income (loss)$4,327 $462 $9,428 $(3,816)
Denominator:
Weighted-average common shares outstanding used in computing basic earnings (loss) per share180,034 158,124 179,948 158,124 
Basic earnings (loss) per share$0.02 $0.00 $0.05 $(0.02)
Diluted earnings (loss) per share:
Numerator:
Net income (loss)$4,327 $462 $9,428 $(3,816)
Denominator:
Weighted-average shares used in computing basic earnings (loss) per share180,034 158,124 179,948 158,124 
Add dilutive impact of employee equity plans470  727  
Weighted-average shares used in computing diluted earnings (loss) per share180,504 158,124 180,675 158,124 
Diluted earnings (loss) per share$0.02 $0.00 $0.05 $(0.02)
The dilutive impact of employee equity awards was not applicable to the calculation of diluted net loss per share for the three months ended June 30, 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 and six months ended June 30, 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:
Three Months Ended June 30,Six Months Ended June 30,
20222022
(in thousands)
Restricted stock units6,310 3,798 
Total anti-dilutive shares6,310 3,798 
7. Income Taxes
For the three months ended June 30, 2022 and 2021, we recorded income tax expense of $2.3 million and $3.3 million, respectively, resulting in an effective tax rate of 34.7% and 87.7%, respectively. For the six months ended June 30, 2022 and 2021, we recorded income tax expense of $5.8 million and $5.7 million, respectively, resulting in an effective tax rate of 38.1% and 303.3%, respectively. The decrease in the effective tax rate for the three and six months ended June 30, 2022 compared to the same periods 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 June 30, 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 six months ended June 30, 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 was 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. On June 16, 2022, we received correspondence from the CRA indicating the audit for Part XIII Income Tax audit of non-resident withholding for tax years 2017 through 2018 was closed without adjustments.
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N-able, Inc.
Notes to Consolidated Financial Statements (Unaudited)

8. 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.
9. Subsequent Events
On July 1, 2022, we completed the acquisition of all the outstanding equity of Spinpanel B.V. ("Spinpanel") for a total consideration of up to approximately $20.0 million, including up to $10.0 million payable upon the achievement of certain revenue metrics through July 1, 2025. We funded the transaction with cash on hand. Based in the Netherlands, Spinpanel is a multi-tenant Microsoft 365 management and automation platform built for Microsoft Cloud Solution Providers to automate the provisioning, security, and management of all Microsoft tenants, users, and licenses in a single consolidated hub. The acquisition of Spinpanel is intended to help our partners optimize the value of their Microsoft Cloud products and, in turn, give Spinpanel customers access to a wider array of IT management and security solutions.

The transaction will be accounted for using the acquisition method of accounting. Accordingly, the results of operations of Spinpanel since the acquisition date will be included in our Consolidated Financial Statements for the third quarter of 2022.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially and adversely from those anticipated in the forward-looking statements. Please see the section entitled “Safe Harbor Cautionary Statement” above and the risk factors discussed in "Item 1A. Risk Factors" below for a discussion of the uncertainties, risks and assumptions associated with these statements. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. For a description and reconciliation of the non-GAAP measures discussed in this section, see “Non-GAAP Financial Measures.”
Overview
N-able, Inc., a Delaware corporation, and its subsidiaries (“Company”, “we,” “us” and “our”) is a leading global provider of cloud-based software solutions for managed service providers ("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.
Separation from SolarWinds

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 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 Consolidated Financial Statements prepared on a “carve-out” basis. Our financial statements for the period from July 20, 2021 forward are Consolidated Financial Statements based on our reported results as a standalone company. The Consolidated Financial Statements at June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 are unaudited, but in our opinion include all normal recurring adjustments necessary for a fair statement of the results for the interim periods presented. The Consolidated Balance Sheet at December 31, 2021 was derived from audited financial statements. The results reported in these Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein 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 and the financial statements and notes in our registration statement on Form 10 (File No. 001-40297), initially filed with the Securities and Exchange Commission (“SEC”) on March 29, 2021, as amended by Amendment No. 1 filed on April 6, 2021, Amendment No. 2 filed on April 14, 2021, Amendment No. 3 filed on May 27, 2021, and Amendment No. 4 filed on June 15, 2021 (the "Form 10"). The Form 10 includes a preliminary information statement that describes the Distribution and provides information regarding our business and management. The Registration Statement was declared effective by the SEC at 3:00 p.m. Central Time on June 25, 2021. The final information statement was furnished as exhibit 99.3 to the Form 8-K we filed with the SEC on July 12, 2021 (the "Information Statement"). See Note 2. Summary of Significant Accounting Policies and Note 4. Relationship with Parent and Related Entities of the Notes to Consolidated Financial Statements for further details.
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Impacts of COVID-19 
The impact from the rapidly changing market and economic conditions due to the coronavirus disease 2019 ("COVID-19") pandemic on our business is uncertain. Prior to the Separation and Distribution, SolarWinds, of which we were a part, initially responded to the COVID-19 pandemic by executing its business continuity plan and transitioning nearly all of its workforce to a remote work environment to prioritize the safety of its personnel. We have maintained a similar plan following the Separation and Distribution, and substantially all of our workforce is still working remotely and, to date, we have not incurred significant disruptions to our business operations as a result of this transition.
We believe that the COVID-19 pandemic creates both opportunities and challenges for our business. As a result of the pandemic, we have seen an acceleration of digital transformation efforts among SMEs with increased demand for secure, modern remote work environments. We believe this will support long-term demand for services offered by our MSP partners. The pandemic also has resulted in significant volatility, uncertainty and disruption in the global economy, in particular for SMEs. As a result of the impact of the COVID-19 pandemic, we experienced a deceleration in our year-over-year subscription revenue growth rate in the second quarter of 2020 as compared to our growth rates in prior periods. We attribute this deceleration primarily to increased churn and downgrades from existing MSP partners and slower MSP partner adds. Beginning in the third quarter of 2020, and continuing through the second quarter of 2022, we have seen the impact on revenue growth continue to dissipate.
We are unable to predict the long-term impact that the pandemic may have on our business, results of operations and financial condition due to numerous uncertainties, including the duration of the pandemic, actions that may be taken by governmental authorities around the world in response to the pandemic, the impacts on the businesses of our MSP partners and their customers and other factors identified in the section entitled Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021. We will continue to evaluate the nature and extent of the impacts of the COVID-19 pandemic on our business, results of operations and financial condition.
SolarWinds Cyber Incident
As previously disclosed, SolarWinds was the victim of a cyberattack on its Orion Software Platform and internal systems, or the Cyber Incident. SolarWinds has confirmed to us that it has concluded its internal investigations related to the Cyber Incident. SolarWinds has not identified Sunburst in any of its more than 70 non-Orion products and tools, including, as previously disclosed, any of our N-able solutions. SolarWinds, together with its partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident. As SolarWinds previously disclosed in its investigatory updates, it has substantially completed this process and believes the threat actor is no longer active in its environments.
In response to the Cyber Incident and in connection with the Separation and Distribution, we are working to further enhance security, monitoring and authentication of our solutions. Specifically, we have implemented in-product security enhancements to the N-able portfolio of products, including, multi-factor authentication, unified single sign-on services, and secure secret vaults. We have also introduced new identity and access controls, scanning and remediation technologies and standards and monitoring tooling across our enterprise IT and production environments. We expect to incur additional expenses in future periods related to continued enhancements to our security measures across our solutions.
Of the expenses SolarWinds recorded related to the Cyber Incident through the Separation and Distribution date of July 19, 2021, none have been allocated to the N-able business and, as a result of the indemnification provisions under the Separation and Distribution Agreement entered into in connection with the Separation and Distribution (the “Separation and Distribution Agreement”), we have not recorded any contingent liabilities with respect to the Cyber Incident as of June 30, 2022. In addition, as a result of the Cyber Incident, SolarWinds is subject to numerous lawsuits and governmental investigations or inquiries. To date, we have not been separately named in such lawsuits and investigations, but in the future we may become subject to lawsuits, investigations or inquiries related to the Cyber Incident. In such event, subject to the terms of the Separation and Distribution Agreement, SolarWinds would indemnify us for costs we may incur.
We believe the Cyber Incident has caused reputational harm to SolarWinds and also had an adverse impact on our reputation, new subscription sales and net retention rates. In 2021, we experienced an adverse impact to new subscription sales and expansion rates relative to historical levels. We believe this was due in part to our decision in response to the Cyber Incident to temporarily reduce investments in demand generation activities through January 2021, as well as a result of certain MSP partners delaying their purchasing decisions as they assessed the potential impact of the Cyber Incident. However, we also have seen consistency among renewal rates with our larger MSP partners and have not observed material adverse trends with respect to the usage of our solutions. In addition, following our resumption of regular demand generation activities in February 2021, we were encouraged by engagements with both prospective and existing MSP partners. In general our sales cycles and time from contract to revenue recognition are primarily short in nature and based on trends through the six months ended June 30, 2022, we believe that the adverse impacts of the Cyber Incident on our financial results will diminish over time in the absence of new discoveries or events. Nevertheless, there is risk that the Cyber Incident may continue to have an adverse
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impact on our business in future periods, and to the extent such impact continues, including as a result of new discoveries or events, it could have an adverse effect on our business, results of operations, cash flows or financial position.
Results of Operations
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. Our financial statements for the period from July 20, 2021 forward are Consolidated Financial Statements based on our reported results as a standalone company. Through the Separation and Distribution date of July 19, 2021, we operated as a part of SolarWinds. Therefore, stand-alone financial statements were not historically prepared for us. The accompanying historical Consolidated Financial Statements have been prepared from SolarWinds’ historical accounting records and are presented on a stand-alone basis as if our business’ operations had been conducted independently from SolarWinds. The Consolidated Financial Statements present our historical results of operations in accordance with GAAP.
Prior to the Separation and Distribution, N-able comprised certain stand-alone legal entities for which discrete financial information was available. As SolarWinds recorded transactions at the legal entity level, for the legal entities which were shared between the N-able business and other SolarWinds operations for which discrete financial information was not available, allocation methodologies were applied to certain accounts to allocate amounts to us as discussed in Note 1. Organization and Nature of Operations in the Notes to Consolidated Financial Statements.
The Consolidated Statements of Operations include all revenue 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 our business based on direct usage or benefit, where identifiable, with the remainder allocated based on headcount where appropriate. These allocations are primarily reflected within operating expenses in our Consolidated Statements of Operations. We believe the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to, or the benefit received by, us during the periods presented. However, these allocations may not be indicative of the actual expenses we would have incurred as a stand-alone company during the periods prior to the Separation and Distribution or of the costs we will incur in the future. See Note 4. Relationship with Parent and Related Entities of the Notes to Consolidated Financial Statements for further details of the allocated costs.
Second Quarter Financial Highlights
Revenue
We deliver a platform of integrated solutions that enables our MSP partners to manage and secure the IT environments and assets for their SME end customers, as well as more efficiently manage their own businesses. Our total revenue was $91.6 million and $85.3 million for the three months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, we had approximately 25,000 customers. Additionally, as of June 30, 2022, we had 1,818 MSP partners with annualized recurring revenue ("ARR") over $50,000 on our platform, up from 1,647 as of June 30, 2021, representing an increase of 10.4%. Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 46% of our total ARR as of June 30, 2021 to approximately 50% of our total ARR as of June 30, 2022. We determine ARR as the annualized recurring revenue as of the last month of a given period. We calculate ARR by multiplying the recurring revenue and related usage revenue, excluding the impacts of credits and reserves, recognized during the final month of the reporting period from both long-term and month-to-month subscriptions by twelve. We use ARR, and in particular, ARR attributable to MSP partners with over $50,000 of ARR, to enhance the understanding of our business performance and the growth of our relationships with our MSP partners.
Profitability
We have grown while maintaining high levels of operating efficiency. Our net income for the three months ended June 30, 2022 was $4.3 million compared to net income of $0.5 million for the three months ended June 30, 2021. The increase in net income for the three months ended June 30, 2022 was primarily due to an increase in revenue, a decrease in amortization of both acquired technologies and intangibles, and a decrease in interest expense. Our Adjusted EBITDA, calculated as net income of $4.3 million and net income of $0.5 million for the three months ended June 30, 2022 and 2021, respectively, excluding amortization of acquired intangible assets and developed technology of $2.7 million and $5.3 million, respectively, depreciation expense of $3.2 million and $2.6 million, respectively, income tax expense of $2.3 million and $3.3 million, respectively, interest expense, net of $3.8 million and $6.1 million, respectively, unrealized foreign currency losses of $0.2 million and less than $0.1 million, respectively, acquisition related costs of $0.3 million and $(0.1) million, respectively, spin-off costs of $0.4 million and $6.0 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $10.0 million and $4.4 million, respectively, and restructuring costs and other of $0.4 million and $0.1 million, respectively, was $27.6 million and $28.2 million for the three months ended June 30, 2022 and 2021, respectively.
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Cash Flow
We have built our business to generate strong cash flow over the long term. For the three months ended June 30, 2022 and 2021, cash flows from operations were $22.7 million and $9.9 million, respectively. Our cash flows from operations were reduced by cash payments for interest of $3.1 million and $11.4 million for the three months ended June 30, 2022 and 2021, respectively, and cash payments for income taxes of $3.1 million and $2.6 million for the three months ended June 30, 2022 and 2021, respectively.
Components of Our Results of Operations
Revenue
Our revenue consists of the following:
Subscription Revenue. We primarily derive subscription revenue from the sale of subscriptions to the SaaS solutions that we host and manage on our platform. Our subscriptions provide access to the latest versions of our software platform, technical support and unspecified software upgrades and updates. Subscription revenue for our SaaS solutions is generally recognized ratably over the subscription term once the service is made available to the MSP partner or when we have the right to invoice for services performed. In addition, our subscription revenue includes sales of our self-managed solutions, which are hosted and managed by our MSP partners. Subscriptions of our self-managed solutions include term licenses, technical support and unspecified software upgrades. Revenue from the license performance obligation of our self-managed solutions is recognized at a point in time upon delivery of the access to the licenses and revenue from the performance obligation related to the technical support and unspecified software upgrades of our subscription-based license arrangements is recognized ratably over the agreement period. We generally invoice subscription agreements monthly based on usage or in advance over the subscription period on either a monthly or annual basis.
Other Revenue. Other revenue consists primarily of revenue from the sale of our maintenance services associated with the historical sales of perpetual licenses. MSP partners with maintenance agreements are entitled to receive technical support and unspecified upgrades or enhancements to new versions of their solutions on a when-and-if-available basis for the specified agreement period. We expect maintenance revenue to decrease as a proportion of our total revenue over time.
Cost of Revenue
Cost of Revenue. Cost of revenue consists of technical support personnel costs, public cloud infrastructure and hosting fees, royalty fees and an allocation of overhead costs for our subscription revenue and maintenance services. We allocate facilities, depreciation, benefits and IT costs based on headcount.
Amortization of Acquired Technologies. We amortize to cost of revenue capitalized costs of technologies acquired in connection with the take private transaction of SolarWinds in early 2016 and our acquisitions.
Operating Expenses
Operating expenses consist of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Personnel costs include salaries, bonuses and stock-based compensation and related employer-paid payroll taxes, as well as an allocation of our facilities, depreciation, benefits and IT costs. 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 us. Expenses relating to these services have been allocated to N‑able and are reflected in the Consolidated Financial Statements. The total number of employees fully dedicated to our business was 1,448, 1,399, and 1,327 as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively. Our stock-based compensation expense increased during the three and six months ended June 30, 2022 as compared to the corresponding period of the prior fiscal year primarily due to the impact of both the conversion of existing unvested and unexercised equity awards in connection with the Separation and Distribution and new equity awards granted to employees following the Separation and Distribution through June 30, 2022. Our travel costs increased during the three and six months ended June 30, 2022 as compared to the corresponding period of the prior fiscal year, which reflected reduced travel due to COVID-19.
Sales and Marketing. Sales and marketing expenses primarily consist of related personnel costs, including our sales, marketing, partner success and product management teams. Sales and marketing expenses also include the cost of digital marketing programs such as paid search, search engine optimization and management and website maintenance and design, as well as the cost of events for existing and prospective customers. We expect to continue to grow our sales and marketing organization domestically and internationally to drive new MSP partner adds, expand with existing MSP partners and pursue initiatives designed to help our MSP partners succeed and grow.
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Research and Development. Research and development expenses primarily consist of related personnel costs. We expect to continue to grow our research and development organization domestically and internationally and also to incur additional expenses associated with bringing new product offerings to market and our enhancements of security, monitoring and authentication of our solutions.
General and Administrative. General and administrative expenses primarily consist of personnel costs for executives, finance, legal, human resources, business applications and other administrative personnel, general restructuring charges and other acquisition-related costs, professional fees and other general corporate expenses. We expect our general and administrative expense to increase primarily as a result of the increased costs associated with being a stand-alone public company and costs associated with the Separation and Distribution.
Amortization of Acquired Intangibles. We amortize to operating expenses capitalized costs of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016 and our acquisitions.
Other Expense
Other expense primarily consists of interest expense related to our credit agreement and related party debt and gains (losses) resulting from changes in exchange rates on foreign currency denominated accounts. See Item 3. Quantitative and Qualitative Disclosures About Market Risk for additional information on how interest rates impact our financial results.
Foreign Currency
As a global company, we face exposure to adverse movements in foreign currency exchange rates. Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See Item 3. Quantitative and Qualitative Disclosures About Market Risk for additional information on how foreign currency impacts our financial results.
Income Tax Expense
Income tax expense consists of domestic and foreign corporate income taxes related to the sale of subscriptions. Our effective tax rate will be affected by many factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, valuation allowance, uncertain tax positions, stock based compensation, permanent nondeductible book and tax differences, shifts in the allocation of income earned throughout the world and changes in overall levels of income before tax.
Comparison of the Three Months Ended June 30, 2022 and 2021
Revenue
Three Months Ended June 30,
20222021
AmountPercentage of RevenueAmountPercentage of RevenueChange
(in thousands, except percentages)
Subscription revenue$89,369 97.5 %$82,821 97.0 %$6,548 
Other revenue2,258 2.5 2,519 3.0 (261)
Total subscription and other revenue$91,627 100.0 %$85,340 100.0 %$6,287 
Total revenue increased $6.3 million, or 7.4%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily driven by our security and data protection solutions. Based on MSP partner location, revenue from the United States was approximately 48.4% and 45.1% of total revenue for the three months ended June 30, 2022 and 2021, respectively. Revenue from the United Kingdom was approximately 10.4% and 11.1% of total revenue for the three months ended June 30, 2022 and 2021, respectively. Other than the United States and the United Kingdom, no single country accounted for 10% or more of our total revenue during these periods.
Subscription Revenue. Subscription revenue increased $6.5 million, or 7.9%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Our increase in subscription revenue was driven by the addition of new MSP partners and an increase in revenue from existing MSP partners as they added new SME customers and adopted new solutions. Our subscription revenue increased slightly as a percentage of our total revenue for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
Our annual dollar-based net revenue retention rate for our subscription products was approximately 106% and 110% for the trailing twelve-month periods ended June 30, 2022 and 2021, respectively, and was driven primarily by strong customer retention and expansion in our MSP products. To calculate our annual dollar-based net revenue retention rate, we first identify
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the MSP partners with active paid subscriptions in the last month of the prior-year period, or the base partners. We then divide the subscription revenue in the last month of the current-year period attributable to the base partners by the revenue attributable to those base partners in the last month of the prior-year period. Our dollar-based net revenue retention rate for a particular period is then obtained by averaging the rates from that particular period with the results from each of the prior eleven months. Our calculation includes any expansion revenue and is net of any contraction or cancellation, but excludes credits and revenue attributable to any MSP partner who was not a partner with a paid subscription in the prior period.
Other Revenue. Other revenue decreased by $0.3 million, or 10.4%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, due to decreases in sales of maintenance agreements for our perpetual licenses. During the three months ended March 31, 2020, we discontinued perpetual license upgrades.
Cost of Revenue
Three Months Ended June 30,
20222021
AmountPercentage of RevenueAmountPercentage of RevenueChange
(in thousands, except percentages)
Cost of revenue$13,624 14.9 %$11,783 13.8 %$1,841 
Amortization of acquired technologies545 0.6 1,037 1.2 (492)
Total cost of revenue$14,169 15.5 %$12,820 15.0 %$1,349 
Total cost of revenue increased $1.3 million, or 10.5%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily due to an increase in royalties and public cloud infrastructure and hosting fees of $1.0 million, an increase in personnel costs of $0.3 million, which includes an increase in stock-based compensation expense of $0.1 million, an increase in allocated costs of $0.3 million, and an increase in depreciation and other amortization of $0.3 million, partially offset by a decrease of $0.5 million in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016.
Operating Expenses
Three Months Ended June 30,
20222021
AmountPercentage of RevenueAmountPercentage of RevenueChange
(in thousands, except percentages)
Sales and marketing$32,020 34.9 %$24,498 28.7 %$7,522 
Research and development15,241 16.6 12,501 14.6 2,740 
General and administrative18,440 20.1 21,364 25.0 (2,924)
Amortization of acquired intangibles1,460 1.6 4,276 5.0 (2,816)
Total operating expenses$67,161 73.3 %$62,639 73.3 %$4,522 
Sales and Marketing. Sales and marketing expenses increased $7.5 million, or 30.7%, primarily due to a net increase in personnel costs of $4.8 million, which includes an increase in stock-based compensation expense of $6.0 million, an increase of $1.0 million in allocated facilities and IT costs to support our standalone domestic and international operations following our separation from SolarWinds, an increase in marketing program costs of $1.0 million, an increase in travel costs of $0.3 million, and an increase in professional fees of $0.2 million. We increased our sales and marketing employee headcount to support the sales of additional solutions and drive growth in the business.
Research and Development. Research and development expenses increased $2.7 million, or 21.9%, primarily due to an increase in personnel costs of $1.8 million, which includes an increase in stock-based compensation expense of $1.0 million, an increase of $0.5 million in subscription costs, an increase of $0.4 million in allocated facilities and IT costs to support our standalone domestic and international operations following our separation from SolarWinds, and an increase of $0.3 million in contract services costs, partially offset by an increase in capitalized internal-use software costs of $0.3 million and a decrease in professional fees of $0.3 million. We increased our worldwide research and development employee headcount to expedite delivery of enhancements and new solutions to our MSP partners.
General and Administrative. General and administrative expenses decreased $2.9 million, or 13.7%, primarily due to a decrease in costs associated with our separation from SolarWinds of $6.3 million, partially offset by an increase of $1.6 million
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in personnel costs, which includes an increase in stock-based compensation expense of $2.0 million, an increase of $1.5 million in depreciation of leasehold improvements, computers, furniture and equipment to support our domestic and international office locations following our separation from SolarWinds, and an increase of $0.2 million in contract services costs. We increased our worldwide general and administrative employee headcount in connection with the Separation and Distribution.
Amortization of Acquired Intangibles. Amortization of acquired intangibles decreased $2.8 million, or 65.9%, primarily due to a decrease in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016 and the impact of changes in foreign currency exchange rates.
Interest Expense, Net
Three Months Ended June 30,
20222021
AmountPercentage of RevenueAmountPercentage of RevenueChange
(in thousands, except percentages)
Interest expense, net$(3,845)(4.2)%$(6,082)