What N-able (NABL) Said on Its Q3 Earnings Call

Key Points

• Q3 growth was steady: Revenue rose 5% to $137 million and ARR increased 5% to $553 million. Adjusted EBITDA was $43.6 million, while non-GAAP gross margin declined to 78% from 81% a year earlier.
• Management is holding off on forecasting an acceleration: N-able expects 5% constant-currency ARR growth for 2026, with Q4 constant-currency revenue growth projected at 4% to 5%. Renewal rates were steady, and constant-currency gross retention was approximately 86%.
• New products are growth opportunities: Cove data protection remains the company’s largest growth engine, while its disaster recovery offering quickly exceeded $1 million in ARR and AI is automating more than 90% of security investigations. N-able also repurchased about 10.2 million shares for $38.7 million during the quarter.

N-able NYSE: NABL reported 5% third-quarter revenue growth and said it expects a similar pace of constant-currency annual recurring revenue growth for the full year, while investing in new products and its sales organization to support future acceleration.

The cybersecurity and data protection company reported revenue of $137 million for the third quarter of 2026, up approximately 5% from a year earlier on both a reported and constant-currency basis. Annual recurring revenue, or ARR, rose 5% to $553 million.

Adjusted EBITDA was $43.6 million, or approximately 32% of revenue. Non-GAAP earnings per share were $0.12, and unlevered free cash flow was $30 million. Non-GAAP gross margin fell to 78% from 81% a year earlier.

“We want to realize the acceleration and not forecast the acceleration,” President and CEO John Pagliuca said during the question-and-answer session, explaining that the company wants to see results from new products and sales initiatives before incorporating their impact into its outlook.

Renewals Steady as Company Targets Expansion

N-able ended the quarter with 2,716 customers contributing at least $50,000 in ARR, up approximately 4% year over year. Those customers accounted for approximately 63% of total ARR, compared with 61% a year earlier.

Dollar-based net revenue retention, measured over the trailing 12 months, was approximately 105% on a reported basis and 103% in constant currency.

EVP and CFO Tim O’Brien said renewal rates were steady in the third quarter compared with the second and that the fourth-quarter outlook assumes similar performance. “We haven’t seen an improvement there on the renewal rates to date,” he said.

O’Brien said constant-currency gross retention was approximately 86%, compared with about 87% in 2022. About half of the 14 percentage points of lost gross retention reflected managed service providers, or MSPs, leaving N-able, while the other half reflected MSPs spending less, he said.

Pagliuca said the company expects gross retention to improve but sees a larger opportunity to accelerate growth through sales of additional products to existing customers and new customer acquisition.

Data Protection and Security Products Drive Growth

Pagliuca described the company’s Cove data protection product as its largest growth engine. Cove recently surpassed 4 million Microsoft 365 mailboxes, protects more than 200,000 businesses and continues to grow faster than N-able overall, he said.

A disaster recovery as a service offering surpassed $1 million in ARR within months of its release and already has hundreds of customers, according to Pagliuca. He also said Google Workspace Backup entered preview and added thousands of users on its first day.

In security operations, ARR is solidly above $50 million, with nine figures the next planned milestone, Pagliuca said. More than 90% of investigations are automated by AI, he added, while company experts respond to threats that escalate.

N-able is also adding AI-assisted vulnerability and patch management capabilities and expanding its endpoint security offerings. Pagliuca said MSPs are adopting AI tools but are also reconsidering their IT operations, staffing structures and technology choices as the technology develops.

On sales execution, Chief Revenue Officer Russell Rosa, who joined in July, is focused on expanding channel reach, serving larger customers and improving operations. Pagliuca said the shift will take time and could create near-term variability. He identified Western European markets, including Italy and France, as opportunities where smaller businesses face rising compliance and security requirements.

Outlook and Capital Returns

For the fourth quarter, N-able expects revenue of $133 million to $134 million, representing approximately 3% to 4% reported growth and 4% to 5% constant-currency growth. It projected adjusted EBITDA of $39.6 million to $40.6 million.

For full-year 2026, the company forecast:

• Revenue of $541 million to $542 million, or approximately 6% to 7% reported growth and 5% constant-currency growth.
• ARR of $558 million to $560 million, representing 3% to 4% reported growth and 5% constant-currency growth.
• Adjusted EBITDA of $158.5 million to $159.5 million, with an approximately 29% margin.
• Unlevered free cash flow of approximately $116 million to $118 million.

O’Brien said updated foreign-exchange assumptions created an approximately $3 million headwind to full-year ARR and a $750,000 headwind to revenue relative to the prior outlook. He described the expected 2026 constant-currency ARR growth rate as the right framing for 2027 top-line performance as N-able works toward faster growth over time.

The company repurchased approximately 10.2 million shares for $38.7 million during the quarter, or about 5% of shares outstanding. Approximately $56 million remained under its authorization at quarter-end. N-able ended the quarter with approximately $92 million in cash and $397 million in outstanding loan principal; it drew the full $75 million of its delayed draw term loan after the quarter ended. A final $67 million payment for the Adlumin acquisition is due in the fourth quarter, O’Brien said.

About N-able (NYSE:NABL)

N-able, Inc is a software company that provides technology solutions to managed service providers (MSPs). Its platform helps MSPs monitor, manage, secure and support the information technology environments of small and midsize businesses through cloud-based tools and services.

The company's offerings include remote monitoring and management software, endpoint security, backup and disaster recovery, email security, password management, and other cybersecurity and data protection solutions.

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