N-able Grows 5% but Won't Forecast the Turn It Promises

N-able posted $137 million in third-quarter revenue, up about 5% year over year on both a reported and constant-currency basis, and annual recurring revenue of $553 million, also up 5%. The cybersecurity and data protection vendor for managed service providers reported non-GAAP EPS of $0.12, adjusted EBITDA of $43.6 million, and unlevered free cash flow of $30 million. Non-GAAP gross margin, however, fell to 78% from 81% a year earlier — a three-point slide the company did not dwell on.

What did management actually commit to?

President and CEO John Pagliuca drew a firm line between ambition and arithmetic. "We want to realize the acceleration and not forecast the acceleration," he said on the call, explaining that N-able will wait for results from new products and sales investments before baking them into guidance. That is a disciplined stance. It also means the promised acceleration has, by the company's own admission, not yet appeared in the numbers.

Retention tells a similar story of stability without inflection. EVP and CFO Tim O'Brien said renewal rates held steady against the second quarter, and the fourth-quarter outlook assumes no change. "We haven't seen an improvement there on the renewal rates to date," he said. Constant-currency gross retention ran at roughly 86%, down from about 87% in 2022; of the 14 percentage points lost, roughly half came from MSPs leaving and half from MSPs spending less.

Where is the growth coming from?

The customer base is concentrating modestly. N-able ended the quarter with 2,716 customers contributing at least $50,000 in ARR, up about 4% year over year. Those customers carried approximately 63% of total ARR, against 61% a year earlier. Trailing-12-month dollar-based net revenue retention stood near 105% reported and 103% in constant currency — expansion, but hardly breakout velocity.

Pagliuca named the Cove data protection product as the company's largest growth engine:

• Cove surpassed 4 million Microsoft 365 mailboxes and protects more than 200,000 businesses, growing faster than N-able overall.
• A disaster-recovery-as-a-service offering crossed $1 million in ARR within months of release and already counts hundreds of customers.
• Google Workspace Backup entered preview and added thousands of users on its first day.

Security operations ARR sits solidly above $50 million, with nine figures named as the next milestone. More than 90% of investigations are automated by AI, with company experts handling escalated threats. N-able is also adding AI-assisted vulnerability and patch management and expanding endpoint security. Pagliuca noted MSPs are adopting AI tools while rethinking staffing and technology choices — a shift whose financial payoff remains unquantified.

Can the sales overhaul deliver without disruption?

Chief Revenue Officer Russell Rosa, who joined in July, is expanding channel reach, serving larger customers and improving operations. Pagliuca conceded the shift will take time and could create near-term variability. He flagged Western Europe, including Italy and France, where small businesses face rising compliance and security requirements.

What does the outlook say?

For the fourth quarter, N-able guided to:

• Revenue of $133 million to $134 million, roughly 3%–4% reported growth and 4%–5% in constant currency.
• Adjusted EBITDA of $39.6 million to $40.6 million.

For full-year 2026, the company forecast:

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

O'Brien said updated foreign-exchange assumptions cut roughly $3 million from full-year ARR guidance and $750,000 from revenue. He framed the 2026 constant-currency ARR growth rate as the right baseline for 2027 — an admission, in effect, that faster growth remains a target rather than a fact.

The company repurchased about 10.2 million shares for $38.7 million in the quarter, roughly 5% of shares outstanding, with approximately $56 million left under authorization. It ended the quarter with about $92 million in cash and $397 million in outstanding loan principal, and drew the full $75 million delayed draw term loan after quarter-end. A final $67 million payment for the Adlumin acquisition falls due in the fourth quarter.

N-able is buying back stock and building products faster than its top line is moving; the acceleration story starts when the numbers say so.