N-Able Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 07:16

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 our Consolidated Financial Statements and related notes thereto included elsewhere in this report. 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" and "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, 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" below.
Overview
N-able, Inc., a Delaware corporation, together with its subsidiaries ("Company", "we," "us" and "our"), protects businesses from evolving cyberthreats. Our AI powered cybersecurity platform delivers business resilience to more than 500,000 organizations worldwide, leveraging advanced end-to-end capabilities, simplified workflows, market-leading integrations, and flexible deployment options to improve efficiency and drive critical security outcomes. Our partner-first approach pairs our technology with experts, training, and peer-led events that empower customers to be secure, resilient, and successful.
First Quarter Financial Highlights
Revenue
Our total revenue was $133.7 million and $118.2 million for the three months ended March 31, 2026 and 2025, respectively. See Note 2. Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for further details regarding revenue recognized from subscription and other services.
Annual Recurring Revenue
Total annual recurring revenue ("ARR") as of March 31, 2026 was $548.0 million, compared to $492.7 million as of March 31, 2025, representing an increase of 11.2%. This increase was primarily due to steady demand for our solutions.
As of March 31, 2026, we had 2,710 customers with ARR over $50,000 on our platform, up from 2,398 as of March 31, 2025, representing an increase of 13.0%. Over the same period, customers with over $50,000 of ARR on our platform grew from approximately 58% of our total ARR as of March 31, 2025 to approximately 62% of our total ARR as of March 31, 2026.
We calculate ARR by annualizing the recurring revenue and related usage revenue inclusive of discounts, excluding the impacts of credits and reserves, recognized during the last day of the reporting period from both long-term and month-to-month subscriptions. We use ARR, and in particular ARR attributable to customers with over $50,000 of ARR, to enhance the understanding of our business performance and the growth of our relationships with our customers.
Profitability
Our operating income for the three months ended March 31, 2026 was $12.5 million, compared to operating income of $1.8 million for the three months ended March 31, 2025. Our net loss for the three months ended March 31, 2026 was $0.6 million, compared to net loss of $7.2 million for the three months ended March 31, 2025. The decrease in net loss for the three months ended March 31, 2026 was primarily due to an increase in revenue and a decrease in general and administrative expense, offset in part by increases in cost of revenue, other expense, net, research and development expense, sales and marketing expense, income tax expense, and amortization of developed technologies. Our Adjusted EBITDA, calculated as net loss of $0.6 million and $7.2 million for the three months ended March 31, 2026 and 2025, respectively, excluding amortization of acquired intangibles and developed technology of $6.6 million and $6.2 million, respectively, depreciation expense of $4.8 million and $4.2 million, respectively, income tax expense of $4.8 million and $3.3 million, respectively, interest expense, net of $7.6 million and $7.1 million, respectively, unrealized foreign currency losses (gains) of $1.1 million and $(0.8) million, respectively, transaction related costs of $0.2 million and $6.3 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $11.8 million and $12.7 million, respectively, and restructuring costs and other of $0.5 million and $(0.1) million, respectively, was $36.7 million and $31.6 million for the three months ended March 31, 2026 and 2025, respectively. For a description and reconciliation of the non-GAAP measures discussed in this section, see Non-GAAP Financial Measures below.
Cash Flow
We have built our business to generate strong cash flow over the long term. For the three months ended March 31, 2026 and 2025, cash flows from operations were $17.5 million and $19.7 million, respectively. Our cash flows from operations were reduced by cash payments for interest of $6.9 million and $6.4 million for the three months ended March 31, 2026 and 2025, respectively, and cash payments for income taxes of $5.6 million and $2.2 million for the three months ended March 31, 2026 and 2025, 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 customer 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 customers. 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 and revenue from professional services. Customers 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.
Cost of Revenue
•Cost of Revenue. Cost of revenue consists of public cloud infrastructure and hosting fees, an allocation of overhead costs for our subscription revenue and maintenance services, royalty fees, and personnel costs for technical support and our security operations center. We allocate facilities, depreciation, IT and benefits costs based on headcount.
•Amortization of Acquired Technologies. We amortize to cost of revenue capitalized costs of technologies acquired in connection with the July 1, 2022 acquisition of Spinpanel B.V. ("Spinpanel") and November 20, 2024 acquisition of Adlumin, Inc. ("Adlumin").
Operating Expenses
Operating expenses consist of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Generally, personnel costs are the most significant component of operating expenses and include salaries, bonuses and stock-based compensation and related employer-paid payroll taxes, as well as an allocation of our facilities, depreciation, IT and benefits costs. We had total employees of 1,863, 1,852, and 1,800 as of March 31, 2026, December 31, 2025, and March 31, 2025, respectively. Our stock-based compensation expense decreased during the three months ended March 31, 2026 as compared to the corresponding period of the prior fiscal year primarily due a decrease in the fair value of equity awards granted to employees as a result of a decline in our stock price during the three months ended March 31, 2026. We expect stock-based compensation expense to continue to decrease during the remainder of the year ending December 31, 2026.
•Sales and Marketing. Sales and marketing expenses primarily consist of related personnel costs, including our sales, marketing, partner success and product management teams, net of capitalized commissions related to long-term committed contracts, as well as an allocation of our facilities, depreciation, IT and benefits costs. 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, marketing development funds, as well as the cost of events for existing and prospective customers. We expect to continue to grow our sales and marketing organization over time to drive new customer adds, retain and expand with existing customers, and pursue initiatives designed to help our customers succeed and grow.
•Research and Development. Research and development expenses primarily consist of related personnel costs, including our engineering, development operations, user experience and internal security operations teams, as well as an allocation of our
facilities, depreciation, IT and benefits costs. We expect to continue to grow our research and development organization over time 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 transaction related costs, professional fees and other general corporate expenses, as well as an allocation of our facilities, depreciation, IT and benefits costs. We expect to continue to grow our general and administrative organization over time to support continued growth of our business.
•Amortization of Acquired Intangibles. We amortize to operating expenses capitalized costs of intangible assets primarily acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the late July 1, 2022 acquisition of Spinpanel and the November 20, 2024 acquisition of Adlumin. Amortization related to the take private transaction of SolarWinds concluded during the three months ended March 31, 2023.
Other Expense, Net
Other expense, net primarily consists of interest expense related to the Credit Agreement and losses resulting from changes in exchange rates on foreign currency denominated accounts, partially offset by gains resulting from changes in exchange rates on foreign currency denominated accounts and dividend income from our money market fund financial assets. 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 March 31, 2026 and 2025
Revenue
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Subscription revenue $ 132,459 99.1 % $ 116,849 98.9 % $ 15,610
Other revenue 1,216 0.9 1,348 1.1 (132)
Total subscription and other revenue $ 133,675 100.0 % $ 118,197 100.0 % $ 15,478
Total revenue increased $15.5 million, or 13.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. We base revenue by geography on the billing address of each customer. Based on customer location, revenue from the United States was approximately 48.5% and 51.2% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Revenue from the United Kingdom was approximately 10.4% and 10.0% of total revenue for the three months ended March 31, 2026 and 2025, 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 $15.6 million, or 13.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in subscription revenue was primarily driven by increased
traction across our cybersecurity platform. Subscription revenue as a percentage of our total revenue was 99.1% for the three months ended March 31, 2026, compared to 98.9% for the three months ended March 31, 2025.
Our annual dollar-based net revenue retention rate for our subscription products was approximately 106% and 101% for the trailing twelve-month periods ended March 31, 2026 and 2025, respectively. The 106% dollar-based net revenue retention rate reflects the impact from our pricing and packaging changes. Our calculation includes any expansion revenue and is net of any contraction or cancellation, but excludes credits and revenue attributable to any customer who was not a customer with a paid subscription in the prior period. To calculate our annual dollar-based net revenue retention rate, we first identify the customers with active paid subscriptions in the last month of the prior-year period, or the base customers. We then divide the subscription revenue in the last month of the current-year period attributable to the base customers by the revenue attributable to those base customers 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.
Other Revenue. Other revenue decreased $0.1 million, or 9.8%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to decreases in maintenance revenue and professional services revenue. Other revenue as a percentage of our total revenue was 0.9% for the three months ended March 31, 2026, compared to 1.1% for the three months ended March 31, 2025.
Cost of Revenue
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Cost of revenue $ 27,510 20.6 % $ 23,511 19.9 % $ 3,999
Amortization of acquired technologies 4,241 3.2 4,167 3.5 74
Total cost of revenue $ 31,751 23.8 % $ 27,678 23.4 % $ 4,073
Total cost of revenue increased $4.1 million, or 14.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increases in public cloud infrastructure and hosting fees and royalties related to our subscription products of $3.5 million and depreciation of servers and amortization of capitalized internal-use software costs of $0.8 million.
Operating Expenses
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Sales and marketing 42,586 31.9 % 40,404 34.2 % 2,182
Research and development 26,138 19.6 23,884 20.2 2,254
General and administrative 20,247 15.1 23,908 20.2 (3,661)
Amortization of acquired intangibles 496 0.4 499 0.4 (3)
Total operating expenses $ 89,467 66.9 % $ 88,695 75.0 % 772
Sales and Marketing. Sales and marketing expenses increased $2.2 million, or 5.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increases in personnel costs driven by headcount and salary increases of $1.2 million, advertising and other marketing spend of $1.1 million, and trade show and events spend of $0.5 million, partially offset by a decrease in acquisition-related costs of $1.0 million.
Research and Development. Research and development expenses increased $2.3 million, or 9.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by increases in personnel costs driven by headcount and salary increases of $1.1 million, allocated facilities and IT costs of $0.6 million, and contract services costs of $0.5 million.
General and Administrative. General and administrative expenses decreased $3.7 million, or 15.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to decreases in acquisition-related
costs of $4.8 million and rent and allocated facilities and IT costs of $0.8 million, partially offset by increases in bad debt expense of $0.9 million and restructuring costs of $0.5 million.
Amortization of Acquired Intangibles. Amortization of acquired intangibles remains relatively unchanged for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, and relates to the November 20, 2024 acquisition of Adlumin.
Interest Expense, Net
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Interest expense, net $ (7,589) (5.7) % $ (7,071) (6.0) % $ (518)
Interest expense, net decreased by $0.5 million, or 7.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a decrease in tax-related interest income of $1.0 million related to prior year CRA refunds in Canada, partially offset by a decrease in expense of $0.6 million related to the Adlumin deferred consideration liability. Outstanding borrowings under the Credit Agreement bear interest at variable rates, and therefore changes in interest rates will have an impact on our financial results and cash flows. See Note 8. Debt in the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement and Note 3. Acquisitions, Note 6. Fair Value Measurements, and Note 11. Commitments and Contingencies for further details regarding the acquisition of Adlumin.
Other (Expense) Income, Net
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Other (expense) income, net $ (683) (0.5) % $ 1,385 1.2 % $ (2,068)
Other (expense) income, net decreased by $2.1 million, or 149.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increased losses due to the impact of exchange rates on foreign currency denominated accounts of $2.2 million
Income Tax Expense
Three Months Ended March 31,
2026 2025
Amount Percentage of Revenue Amount Percentage of Revenue Change
(in thousands, except percentages)
Income (loss) before income taxes $ 4,185 3.1 % $ (3,862) (3.3) % $ 8,047
Income tax expense 4,800 3.6 3,300 2.8 1,500
Effective tax rate 114.7 % (85.4) % 200.1 %
Our income tax expense for the three months ended March 31, 2026 increased by $1.5 million as compared to the three months ended March 31, 2025. The effective tax rate increased to 114.7% for the same period primarily due to an increase in income taxes on income outside of the United States, partially offset by a decrease in the amount of the unbenefited loss in the United States.
On July 4, 2025, the President signed into law H.R. 1, the "One Big Beautiful Bill Act" ("OBBBA"). Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of domestic research and development expenditures under Internal Revenue Code (IRC) Section 174, extension of bonus depreciation, the restoration of an EBITDA-based interest limitation deduction, and revisions to international tax regimes. The overall financial statement impact of the OBBBA is not material. For additional discussion about our income taxes, see Note 10. Income Taxes in the Notes to Consolidated Financial Statements.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and Board of Directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business. Investors are encouraged to review the reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure included below.
While we believe that these non-GAAP financial measures provide useful supplemental information, non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, their most comparable GAAP measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be comparable to similarly titled measures of other companies due to potential differences in their financing and accounting methods, the book value of their assets, their capital structures, the method by which their assets were acquired and the manner in which they define non-GAAP measures. Items such as the amortization of intangible assets, stock-based compensation expense and related employer-paid payroll taxes, transaction related costs, spin-off costs related to the Separation and Distribution, as well as the related tax impacts of these items can have a material impact on our GAAP financial results.
Non-GAAP Operating Income and Non-GAAP Operating Margin
We provide non-GAAP operating income and related non-GAAP operating margins excluding such items as stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangibles, transaction related costs, spin-off costs and restructuring costs and other. We define non-GAAP operating margin as non-GAAP operating income divided by total revenue. Management believes these measures are useful for the following reasons:
•Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes associated with our employees' participation in N-able's stock-based incentive compensation plans. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock-based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, and does not necessarily correlate to the core operation of our business. Because of these unique characteristics of stock-based compensation and related employer-paid payroll taxes, management excludes these expenses when analyzing the organization's business performance.
•Amortization of Acquired Technologies and Intangible Assets. We provide non-GAAP information that excludes expenses related to purchased technologies and intangible assets associated with our acquisitions. We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired technologies and intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.
•Transaction Related Costs. We exclude certain expense items resulting from proposed and completed acquisitions, dispositions and similar transactions, such as legal, accounting and advisory fees, changes in fair value of contingent consideration, costs related to integrating the acquired businesses, deferred compensation, severance and retention expense. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, such proposed and completed transactions result in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude transaction related costs allows investors to better review and understand the historical and current results of our continuing operations and also facilitates comparisons to our historical results and results of peer companies with different transaction related activities, both with and without such adjustments.
•Spin-off Costs. We exclude certain expense items resulting from the spin-off into a newly created and separately traded public company. These costs include legal, accounting and advisory fees, system implementation costs and other incremental costs incurred by us related to the Separation and Distribution. The spin-off transaction results in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing non-GAAP measures that exclude these costs facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
•Restructuring Costs and Other. We provide non-GAAP information that excludes restructuring costs such as severance, certain employee relocation costs and the estimated costs of exiting and terminating facility lease commitments, as they relate to our corporate restructuring and exit activities. These costs are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these costs for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.
Three Months Ended March 31,
2026 2025
(in thousands, except margin data)
GAAP operating income $ 12,457 $ 1,824
Stock-based compensation expense and related employer-paid payroll taxes 11,763 12,684
Amortization of acquired technologies 4,241 4,167
Amortization of acquired intangibles 496 499
Transaction related costs 179 6,254
Restructuring costs and other 514 (138)
Non-GAAP operating income $ 29,650 $ 25,290
GAAP operating margin 9.3 % 1.5 %
Non-GAAP operating margin 22.2 % 21.4 %
Adjusted EBITDA and Adjusted EBITDA Margin
We regularly monitor adjusted EBITDA and adjusted EBITDA margin, as they are measures we use to assess our operating performance. We define adjusted EBITDA as net income or loss, excluding amortization of acquired intangibles and developed technology, depreciation expense, income tax expense, interest expense, net, unrealized foreign currency losses (gains), transaction related costs, spin-off costs, stock-based compensation expense and related employer-paid payroll taxes and restructuring and other costs. We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and
•other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including operating income and net loss and our other GAAP results. In evaluating adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in this presentation. Our presentation of adjusted EBITDA should not be construed as an implication that our future results will be unaffected by the types of items excluded from the calculation of adjusted EBITDA. Adjusted EBITDA is not a presentation made in accordance with GAAP and the use of the term varies from others in our industry.
Three Months Ended March 31,
2026 2025
(in thousands, except margin data)
Net loss $ (615) $ (7,162)
Amortization 6,564 6,178
Depreciation 4,792 4,239
Income tax expense 4,800 3,300
Interest expense, net 7,589 7,071
Unrealized foreign currency losses (gains) 1,146 (783)
Transaction related costs 179 6,254
Stock-based compensation expense and related employer-paid payroll taxes 11,763 12,684
Restructuring costs and other 514 (138)
Adjusted EBITDA $ 36,732 $ 31,643
Adjusted EBITDA margin 27.5 % 26.8 %
Liquidity and Capital Resources
Cash and cash equivalents were $117.8 million as of March 31, 2026. As our sales and operating cash flows are primarily generated in the United Kingdom and Canada, our international subsidiaries held approximately $105.4 million of cash and cash equivalents, of which 68.3%, 19.0%, 3.8% and 3.6% were held in United States Dollars, Euros, Canadian Dollars and British Pound Sterling, respectively. We intend either to invest our foreign earnings permanently into foreign operations or to remit these earnings to our United States entities in a tax-efficient manner. The U.S. Tax Cuts and Jobs Act of 2017 imposed a mandatory transition tax on accumulated foreign earnings and eliminates United States federal income taxes on foreign subsidiary distributions. As a result, our earnings in foreign jurisdictions are generally available for distribution to the United States without significant U.S. tax consequences.
Our primary source of cash for funding operations and growth has been through cash provided by operating activities. Given the uncertainty of rapidly changing market and economic conditions, we continue to evaluate the nature and extent of the impact to our business and financial position. However, despite this uncertainty, we believe that our existing cash and cash equivalents and our cash flows from operating activities will be sufficient to fund our operations and meet our commitments for capital expenditures for at least the next twelve months.
In connection with the Separation and Distribution, on July 19, 2021, certain subsidiaries of the Company 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. 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 costs, to SolarWinds. The Revolving Facility is primarily available for general corporate purposes. We had total borrowings of $393.1 million and $393.9 million as of March 31, 2026 and December 31, 2025, respectively, net of debt issuance costs of $(5.9) million and $6.1 million, respectively. See Note 8. Debt in the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement.
On March 11, 2025, our board of directors approved a share repurchase program (the "Repurchase Program") authorizing the repurchase of up to $75.0 million of our common stock, par value $0.001 per share (the "Common Stock"). The timing and total amount of stock repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The Repurchase Program has no expiration date, may be suspended or discontinued at any time without notice, and does not obligate the Company to acquire any specific dollar amount or numbers of shares of Common Stock. Under the Repurchase Program, we repurchased 3,776,155 shares for $30.0 million during the year ended December 31, 2025. As of March 31, 2026, we are authorized to repurchase a remaining $45.0 million of our common stock under the Repurchase Program. See Part II - Item 2. Unregistered Sales of Equity and Use of Proceeds for additional information on the Repurchase Program.
Although we are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary businesses, applications or technologies, we may enter into these types of arrangements, which could reduce our cash and cash equivalents, require us to seek additional equity or debt financing or repatriate cash generated by our international operations. Additional funds from financing arrangements may not be available on terms favorable to us or at all.
During the three months ended March 31, 2026 and 2025, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Summary of Cash Flows
Summarized cash flow information is as follows:
Three Months Ended March 31,
2026 2025
(in thousands)
Net cash provided by operating activities $ 17,471 $ 19,677
Net cash used in investing activities (4,239) (6,076)
Net cash used in financing activities (4,424) (7,289)
Effect of exchange rate changes on cash and cash equivalents (2,833) 2,582
Net increase in cash and cash equivalents $ 5,975 $ 8,894
Operating Activities
Our primary source of cash from operating activities is cash collections from our customers. We expect cash inflows from operating activities to be affected by the timing of our sales and the consumption of our solutions by our customers. Our primary uses of cash from operating activities are for personnel-related expenditures, and other general operating expenses, as well as payments related to taxes, interest and facilities.
Cash provided by operating activities decreased for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to an increase in net cash outflows resulting from changes in our operating assets and liabilities of $7.9 million and a decrease in non-cash items within net loss of $0.9 million, offset in part by a decrease in net loss of $6.5 million. The increase in net cash outflows resulting from changes in our operating assets and liabilities of $7.9 million was primarily due to a decrease in accrued liabilities and other, an increase in recoverable taxes, and decreases in deferred revenue and income taxes payable, offset in part by a decrease in prepaid expenses and other current assets, an increase in accounts payable, and decreases in accounts receivable, current contract assets, and other long-term assets.
Investing Activities
Investing cash flows consist of cash used for capital expenditures and intangible assets and cash provided by the return of deposits in escrow. Our capital expenditures principally relate to purchases of servers for cloud infrastructure primarily to support our data protection solutions, as well as leasehold improvements, computers and equipment to support our domestic and international office locations. Purchases of intangible assets consist of capitalized research and development costs.
Net cash used in investing activities decreased for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to decreases in capital expenditures to support our domestic and international office locations and capitalized research and development costs related to internal-use software.
Financing Activities
Financing cash flows consist of repurchases of our common stock, payments of tax withholding obligations related to restricted stock, deferred acquisition payments, the exercise of stock options, proceeds from the issuance of common stock under the Employee Stock Purchase Plan and repayments of borrowings from the Credit Agreement.
Net cash used in financing activities decreased for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to a decrease in payments of tax withholding obligations related to restricted stock, offset in part by an increase in repayments of borrowing related to the Credit Agreement and a decrease in proceeds from the issuance of common stock under the Employee Stock Purchase Plan.
Contractual Obligations and Commitments
As of March 31, 2026, there have been no material changes in our contractual obligations and commitments as of December 31, 2025, which were disclosed in our 2025 Annual Report.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with GAAP and require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and such estimates may change if the underlying conditions or assumptions change. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected, perhaps materially.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application, while in other cases, management's judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions. We believe that these accounting policies requiring significant management judgment and estimates are critical to understanding our historical and future performance, as these policies relate to the more significant areas of our financial results. These critical accounting policies are:
•the valuation of goodwill, intangibles, and long-lived assets;
•the valuation of contingent consideration;
•revenue recognition; and
•income taxes.
A full description of our critical accounting policies that involve significant management judgment appears in our 2025 Annual Report. There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our 2025 Annual Report, except as described below.
Goodwill
During the three months ended March 31, 2026, we experienced a significant decline in our stock price. A continued and sustained decline in our stock price, when considered in conjunction with other relevant qualitative factors, could indicate a reduction in fair value below the carrying value of our reporting unit and require an interim goodwill impairment analysis. Any resulting goodwill impairment charge could have a material adverse impact on our results of operations. Throughout the remainder of fiscal 2026, the Company will monitor changes to its stock price, in addition to other qualitative factors, to determine if an interim impairment test is required.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for a full description of recently adopted accounting pronouncements, which is incorporated herein by reference.
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