QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
☑ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
PART I - FINANCIAL INFORMATION | |||||||||||
Page | |||||||||||
Item 1. | |||||||||||
Item 2. | |||||||||||
Item 3. | |||||||||||
Item 4. | |||||||||||
PART II - OTHER INFORMATION | |||||||||||
Item 1. | |||||||||||
Item 1A. | |||||||||||
Item 5. | |||||||||||
Item 6. | |||||||||||
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
Income tax receivable | |||||||||||
Prepaid and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Deferred taxes | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Other assets, net | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and stockholders' equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities and other | |||||||||||
Current operating lease liabilities | |||||||||||
Income taxes payable | |||||||||||
Current portion of deferred revenue | |||||||||||
Current debt obligation | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities: | |||||||||||
Deferred revenue, net of current portion | |||||||||||
Non-current deferred taxes | |||||||||||
Non-current operating lease liabilities | |||||||||||
Long-term debt, net of current portion | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 11) | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
Preferred stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss (income) | ( | ||||||||||
Retained earnings | |||||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Revenue: | |||||||||||
Subscription and other revenue | $ | $ | |||||||||
Cost of revenue: | |||||||||||
Cost of revenue | |||||||||||
Amortization of acquired technologies | |||||||||||
Total cost of revenue | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Sales and marketing | |||||||||||
Research and development | |||||||||||
General and administrative | |||||||||||
Amortization of acquired intangibles | |||||||||||
Total operating expenses | |||||||||||
Operating income | |||||||||||
Other expense: | |||||||||||
Interest expense, net | ( | ( | |||||||||
Other income, net | |||||||||||
Total other expense, net | ( | ( | |||||||||
Income before income taxes | |||||||||||
Income tax expense | |||||||||||
Net income | $ | $ | |||||||||
Net income per share: | |||||||||||
Basic earnings per share | $ | $ | |||||||||
Diluted earnings per share | $ | $ | |||||||||
Weighted-average shares used to compute net income per share: | |||||||||||
Shares used in computation of basic earnings per share: | |||||||||||
Shares used in computation of diluted earnings per share: | |||||||||||
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive (loss) income: | |||||||||||
Foreign currency translation adjustment | ( | ||||||||||
Other comprehensive (loss) income | ( | ||||||||||
Comprehensive (loss) income | $ | ( | $ |
Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||||
Balance as of December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Restricted stock units issued, net of shares withheld for taxes | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of stock under employee stock purchase plan | — | — | — | |||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance as of March 31, 2024 | $ | $ | $ | ( | $ | $ |
Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | ||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||||||||||||||||||
Restricted stock units issued, net of shares withheld for taxes | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of stock | — | — | — | — | ||||||||||||||||||||||||||||||||||
Issuance of stock under employee stock purchase plan | — | $ | — | — | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ | ( | $ | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Provision for (benefit from) doubtful accounts | ( | ||||||||||
Stock-based compensation expense | |||||||||||
Deferred taxes | ( | ||||||||||
Amortization of debt issuance costs | |||||||||||
Operating lease right-of-use assets, net | ( | ( | |||||||||
Loss on foreign currency exchange rates | |||||||||||
(Gain) loss on contingent consideration | ( | ||||||||||
Other non-cash expenses | |||||||||||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Income tax receivable | ( | ( | |||||||||
Prepaid expenses and other assets | ( | ( | |||||||||
Accounts payable | ( | ( | |||||||||
Accrued liabilities and other | ( | ( | |||||||||
Income taxes payable | |||||||||||
Deferred revenue | |||||||||||
Other long-term assets | ( | ( | |||||||||
Other long-term liabilities | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Purchases of intangible assets | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Payments of tax withholding obligations related to restricted stock units | ( | ( | |||||||||
Exercise of stock options | |||||||||||
Proceeds from issuance of common stock under employee stock purchase plan | |||||||||||
Repayments of borrowings from Credit Agreement | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents | |||||||||||
Beginning of period | |||||||||||
End of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | $ | $ | |||||||||
Supplemental disclosure of non-cash activities: | |||||||||||
Change in purchases of property, equipment and leasehold improvements included in accounts payable and accrued expenses | $ | $ | ( | ||||||||
Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Income (Loss) | ||||||||||
(in thousands) | |||||||||||
Balance as of December 31, 2023 | $ | $ | |||||||||
Other comprehensive loss before reclassification | ( | ( | |||||||||
Net current period other comprehensive loss | ( | ( | |||||||||
Balance as of March 31, 2024 | $ | ( | $ | ( |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Subscription revenue | $ | $ | |||||||||
Other revenue | |||||||||||
Total subscription and other revenue | $ | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Revenue recognized at a point in time | $ | $ | |||||||||
Revenue recognized over time | |||||||||||
Total revenue recognized | $ | $ |
Total Deferred Revenue | |||||
(in thousands) | |||||
Balance as of December 31, 2023 | $ | ||||
Deferred revenue recognized | ( | ||||
Additional amounts deferred | |||||
Balance as of March 31, 2024 | $ |
Revenue Recognition Expected by Period | |||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | More than 3 years | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Expected recognition of remaining performance obligations | $ | $ | $ | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Amortization of acquired technologies | $ | $ |
(in thousands) | |||||
Current assets, including cash acquired of $ | $ | ||||
Property and equipment, net | |||||
Current liabilities | ( | ||||
Non-current deferred tax liabilities | ( | ||||
Identifiable intangible assets | |||||
Developed technology | |||||
Customer relationships | |||||
Goodwill | |||||
Total assets acquired, net | $ |
(in thousands) | |||||
Cash paid, net of cash acquired of $ | $ | ||||
Contingent consideration | |||||
Total consideration, net | $ |
Fair Value | Weighted-Average Useful Life | |||||||||||||
(in thousands) | (in years) | |||||||||||||
Developed technology | $ | |||||||||||||
Customer relationships | ||||||||||||||
Total identifiable intangible assets | $ |
(in thousands) | |||||
Balance as of December 31, 2023 | $ | ||||
Foreign currency translation | ( | ||||
Balance as of March 31, 2024 | $ |
Fair Value Measurements as of March 31, 2024 Using | |||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Contingent consideration | $ | $ | $ | $ |
Fair Value Measurements as of December 31, 2023 Using | |||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Contingent consideration | $ | $ | $ | $ |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Payroll-related accruals | $ | $ | |||||||||
Value-added and other tax | |||||||||||
Purchasing accruals | |||||||||||
Accrued royalties | |||||||||||
Accrued contingent consideration liability | |||||||||||
Accrued other liabilities | |||||||||||
Total accrued liabilities and other | $ | $ |
Amount Outstanding | Effective Rate | ||||||||||
(in thousands, except interest rates) | |||||||||||
Term loan facility | $ | % | |||||||||
Revolving credit facility | % | ||||||||||
Total principal amount | |||||||||||
Unamortized discount and debt issuance costs | ( | ||||||||||
Total debt, net | |||||||||||
Less: Current debt obligation | ( | ||||||||||
Long-term debt, net of current portion | $ |
(in thousands) | |||||
2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
Total minimum principal payments | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Basic earnings per share: | |||||||||||
Numerator: | |||||||||||
Net income | $ | $ | |||||||||
Denominator: | |||||||||||
Weighted-average common shares outstanding used in computing basic earnings per share | |||||||||||
Basic earnings per share | $ | $ | |||||||||
Diluted earnings per share: | |||||||||||
Numerator: | |||||||||||
Net income | $ | $ | |||||||||
Denominator: | |||||||||||
Weighted-average shares used in computing basic earnings per share | |||||||||||
Add dilutive impact of employee equity plans | |||||||||||
Weighted-average shares used in computing diluted earnings per share | |||||||||||
Diluted earnings per share | $ | $ |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Restricted stock units | |||||||||||
Total anti-dilutive shares |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Subscription revenue | $ | 111,517 | 98.0 | % | $ | 97,442 | 97.6 | % | $ | 14,075 | |||||||||||||||||||
Other revenue | 2,232 | 2.0 | 2,376 | 2.4 | (144) | ||||||||||||||||||||||||
Total subscription and other revenue | $ | 113,749 | 100.0 | % | $ | 99,818 | 100.0 | % | $ | 13,931 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Cost of revenue | $ | 17,836 | 15.7 | % | $ | 15,753 | 15.8 | % | $ | 2,083 | |||||||||||||||||||
Amortization of acquired technologies | 461 | 0.4 | 456 | 0.5 | 5 | ||||||||||||||||||||||||
Total cost of revenue | $ | 18,297 | 16.1 | % | $ | 16,209 | 16.2 | % | $ | 2,088 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Sales and marketing | $ | 35,816 | 31.5 | % | $ | 32,563 | 32.6 | % | $ | 3,253 | |||||||||||||||||||
Research and development | 22,082 | 19.4 | 18,810 | 18.8 | 3,272 | ||||||||||||||||||||||||
General and administrative | 17,049 | 15.0 | 17,348 | 17.4 | (299) | ||||||||||||||||||||||||
Amortization of acquired intangibles | 14 | — | 564 | 0.6 | (550) | ||||||||||||||||||||||||
Total operating expenses | $ | 74,961 | 65.9 | % | $ | 69,285 | 69.4 | % | $ | 5,676 |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Interest expense, net | $ | (7,621) | (6.7) | % | $ | (7,200) | (7.2) | % | $ | (421) |
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Other income, net | $ | 285 | 0.3 | % | $ | 988 | 1.0 | % | $ | (703) | |||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||
Amount | Percentage of Revenue | Amount | Percentage of Revenue | Change | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||||||
Income before income taxes | $ | 13,155 | 11.6 | % | $ | 8,112 | 8.1 | % | $ | 5,043 | |||||||||||||||||||
Income tax expense | 5,699 | 5.0 | 4,573 | 4.6 | 1,126 | ||||||||||||||||||||||||
Effective tax rate | 43.3 | % | 56.4 | % | (13.1) | % |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands, except margin data) | |||||||||||
GAAP operating income | $ | 20,491 | $ | 14,324 | |||||||
Stock-based compensation expense and related employer-paid payroll taxes | 12,967 | 10,616 | |||||||||
Amortization of acquired technologies | 461 | 456 | |||||||||
Amortization of acquired intangibles | 14 | 564 | |||||||||
Acquisition related costs | (1,396) | 269 | |||||||||
Spin-off costs | 51 | 230 | |||||||||
Restructuring costs and other | 626 | 627 | |||||||||
Non-GAAP operating income | $ | 33,214 | $ | 27,086 | |||||||
GAAP operating margin | 18.0 | % | 14.4 | % | |||||||
Non-GAAP operating margin | 29.2 | % | 27.1 | % |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands, except margin data) | |||||||||||
Net income | $ | 7,456 | $ | 3,539 | |||||||
Amortization | 1,862 | 1,997 | |||||||||
Depreciation | 3,957 | 3,670 | |||||||||
Income tax expense | 5,699 | 4,573 | |||||||||
Interest expense, net | 7,621 | 7,200 | |||||||||
Unrealized foreign currency losses | 796 | 25 | |||||||||
Acquisition related costs | (1,396) | 269 | |||||||||
Spin-off costs | 51 | 230 | |||||||||
Stock-based compensation expense and related employer-paid payroll taxes | 12,967 | 10,616 | |||||||||
Restructuring costs and other | 626 | 627 | |||||||||
Adjusted EBITDA | $ | 39,639 | $ | 32,746 | |||||||
Adjusted EBITDA margin | 34.8 | % | 32.8 | % |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Net cash provided by operating activities | $ | 4,184 | $ | 10,631 | |||||||
Net cash used in investing activities | (5,127) | (5,615) | |||||||||
Net cash used in financing activities | (11,916) | (5,921) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (962) | 138 | |||||||||
Net decrease in cash and cash equivalents | $ | (13,821) | $ | (767) |
Exhibit Number | Exhibit Title | |||||||
2.1 | ||||||||
3.1 | ||||||||
3.2 | ||||||||
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1** | ||||||||
101* | Interactive Data Files (formatted as Inline XBRL) | |||||||
101.INS | Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith | ||||
** | The certifications attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing |
N-able, Inc. | |||||||||||
Dated: | May 9, 2024 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Dated: | May 9, 2024 | By: | /s/ John Pagliuca | ||||||||
John Pagliuca | |||||||||||
President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Dated: | May 9, 2024 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Dated: | May 9, 2024 | By: | /s/ John Pagliuca | ||||||||
John Pagliuca | |||||||||||
President and Chief Executive Officer | |||||||||||
(Principal Executive Officer) |
Dated: | May 9, 2024 | By: | /s/ Tim O'Brien | ||||||||
Tim O'Brien | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Current assets: | ||
Allowance on accounts receivable | $ 1,224 | $ 1,171 |
Common stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 550,000,000 | 550,000,000 |
Common stock, shares issued (in shares) | 184,762,998 | 183,220,689 |
Common stock outstanding (in shares) | 184,762,998 | 183,220,689 |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 7,456 | $ 3,539 |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustment | (10,395) | 5,703 |
Other comprehensive (loss) income | (10,395) | 5,703 |
Comprehensive (loss) income | $ (2,939) | $ 9,242 |
Organization and Nature of Operations |
3 Months Ended |
---|---|
Mar. 31, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations 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 fewer 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.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 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, 2023, referred to as our “2023 Annual Report.” 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 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; and •income taxes. Recently Adopted Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers,” instead of at fair value on the acquisition date as previously required by ASC 805, “Business Combinations.” The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for acquired revenue contracts and revenue contracts not acquired in a business combination. The updated guidance is effective for public companies for fiscal years beginning after December 15, 2022, and early adoption is permitted. The updated guidance will be applied prospectively to business combinations occurring during or after the fiscal year of adoption. We adopted this standard as of January 1, 2023. The adoption of the standard did not have a material impact on our consolidated financial statements. In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to reference rate reform. The standard became effective upon issuance and may be applied to any new or amended contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” extending the sunset date of the relief provided under ASU No. 2020-04 to December 31, 2024. During the three months ended September 30, 2023, the effective interest rate on outstanding debt under our credit agreement with JPMorgan Chase, Bank, N.A. (the “Credit Agreement”) transitioned from a LIBOR-based rate to a Secured Overnight Financing Rate (“SOFR”)-based rate. The transition did not have a material impact on our consolidated financial statements, and no remaining contracts, hedging relationships, or other transactions reference LIBOR as of September 30, 2023. See Note 8. Debt for further details regarding the Credit Agreement Money Market Fund Financial Assets As of March 31, 2024 and December 31, 2023, we have money market fund financial assets of $99.4 million and $98.6 million, respectively, which are included in “cash and cash equivalents” in our Consolidated Balance Sheets. See “Fair Value Measurements” below and Note 6. Fair Value Measurements for further details regarding the fair value measurements of our money market fund financial assets. Fair Value Measurements We apply the authoritative guidance on fair value measurements for financial assets and liabilities, such as our money market fund financial assets and contingent consideration 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. See Note 6. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, 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 8. Debt for further details regarding our debt. Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) by component are summarized below:
Revenue Our revenue consists of the following:
During the three month periods ended March 31, 2024 and 2023, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:
Deferred Revenue Deferred revenue primarily consists of transaction prices allocated to remaining performance obligations from annually billed subscription agreements and maintenance services associated with our historical sales of perpetual license products which are delivered over time. Certain of our maintenance agreements are billed annually in advance for services to be performed over a 12-month period. We initially record the amounts allocated to maintenance performance obligations as deferred revenue and recognize these amounts ratably on a daily basis over the term of the maintenance agreement. The following table reflects the changes in our total deferred revenue balance for the three months ended March 31, 2024:
We expect to recognize revenue related to remaining performance obligations as of March 31, 2024, as follows:
Cost of Revenue Amortization of Acquired Technologies. During the three month periods ended March 31, 2024 and 2023, respectively, amortization of acquired technologies included in cost of revenue relate to our subscription products as follows:
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Acquisitions |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions 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. Goodwill and acquired identifiable intangible assets for this acquisition are not deductible for tax purposes. During the three months ended March 31, 2023, a measurement period adjustment of $1.6 million was recorded to non-current deferred tax liabilities and goodwill. The measurement period concluded as of June 30, 2023. The following table summarizes the amounts recognized for the assets acquired and liabilities assumed:
The following table summarizes the total consideration for the assets acquired and liabilities assumed:
The following table summarizes the fair value of the acquired identifiable intangible assets and weighted-average useful life by category:
The results of operations related to Spinpanel since the acquisition date are included in our Consolidated Financial Statements during the three months ended March 31, 2024 and 2023. As noted above, total consideration includes up to $10.0 million payable upon the achievement of certain revenue metrics through July 1, 2025. The contingent consideration liabilities will be re-evaluated at least quarterly, with the resulting gains and losses recognized within general and administrative expense in our Consolidated Statements of Operations. The fair value of this contingent consideration was $5.2 million at the date of acquisition and $5.1 million, $5.3 million, $3.7 million and $2.2 million as of December 31, 2022, March 31, 2023, December 31, 2023 and March 31, 2024, respectively, resulting in the recognition of a gain of $1.4 million and a loss of $0.2 million for the three months ended March 31, 2024 and 2023, respectively. The current portion of the contingent consideration of less than $0.1 million is included in “accrued liabilities and other” and the non-current portion of $2.2 million is included in “other long-term liabilities” in our Consolidated Balance Sheets as of March 31, 2024. See Note 6. Fair Value Measurements, Note 7. Accrued Liabilities and Other, and Note 11. Commitments and Contingencies for further details regarding our contingent consideration liabilities. Pro forma information for the acquisition has not been provided because the impact of the historical financials on our revenue, net income and net income per share is not material. We recognize revenue on the acquired products in accordance with our revenue recognition policy as described in Note 2. Summary of Significant Accounting Policies
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Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Goodwill | Goodwill The following table reflects the changes in goodwill for the three months ended March 31, 2024:
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Relationship with Parent and Related Entities |
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Related Party Transactions [Abstract] | |
Relationship with Parent and Related Entities | Relationship with Parent and Related Entities 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. 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. Equity-Based Incentive Plans Prior to the Separation and Distribution, certain of our employees participated in Parent’s equity-based incentive plans. Under the SolarWinds Corporation 2016 Equity Incentive Plan (the “2016 Plan”), our employees, consultants, directors, managers and advisors were awarded stock-based incentive awards in a number of forms, including non-qualified stock options. The ability to grant any future equity awards under the 2016 Plan terminated in October 2018. Under the SolarWinds Corporation 2018 Equity Incentive Plan, our employees were eligible to be awarded stock-based incentive awards, including non-statutory stock options or incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other cash-based or share-based awards. Awards granted to our employees under the Parent incentive plans generally vested over periods ranging from to five years. We measure stock-based compensation for all stock-based incentive awards at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. 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 (the “Conversion”). The modification of these equity awards resulted in incremental compensation expense to the extent the estimated fair value of the awards immediately following the modification exceeded the estimated fair value of the awards immediately prior to the modification. This expense is to be recognized upfront for all vested and outstanding awards and over the remaining vesting term for all unvested awards. For the three months ended March 31, 2024 and 2023, we recognized $0.1 million and $0.3 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 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. Tax Matters Agreement We entered into a Tax Matters Agreement with SolarWinds that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. Costs incurred under the Tax Matters Agreement were insignificant during the three months ended March 31, 2024 and 2023, respectively. 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 had a two year term, and each agreement was renewed for an additional two year term during the year ended December 31, 2023. We earned $0.4 million of revenue during the three months ended March 31, 2024 and 2023, respectively, and incurred less than $0.1 million of costs during the three months ended March 31, 2024 and 2023, respectively, under the Software OEM Agreements. Employee Matters Agreement We entered into an Employee Matters Agreement with SolarWinds that governs N-able's and SolarWinds’ compensation and employee benefit obligations with respect to the employees and other service providers of each company, and generally allocated liabilities and responsibilities relating to employment matters and employee compensation and benefit plans and programs. Costs incurred under the Employee Matters Agreement were insignificant during the three months ended March 31, 2024 and 2023, 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 months ended March 31, 2024 and 2023, 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 months ended March 31, 2024 and 2023, 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 $0.1 million of revenue during the three months ended March 31, 2024 and 2023, respectively, and incurred $0.1 million of costs during the three months ended March 31, 2024 and 2023, respectively, under the Software Cross License Agreement.
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Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements The following tables summarize the fair value of our money market fund financial assets and contingent consideration financial liabilities that were measured on a recurring basis as of March 31, 2024 and December 31, 2023. See Note 3. Acquisitions and Note 11. Commitments and Contingencies for further details regarding our contingent consideration liabilities. There have been no transfers between fair value measurement levels during the three months ended March 31, 2024.
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Accrued Liabilities and Other | Accrued Liabilities and Other Accrued and other current liabilities were as follows:
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt In connection with the Separation and Distribution, on July 19, 2021, certain subsidiaries of the Company, including N-able International Holdings I, Inc. (as guarantor) and N-able International Holdings II, Inc. (as borrower), entered into the Credit Agreement with JPMorgan Chase, Bank, N.A. as administrative agent and collateral agent and the lenders from time to time party thereto. N-able International Holdings I, Inc. is a holding company with no other operations, cash flows, material assets or liabilities other than the equity interests in N-able International Holdings II, Inc. The Credit Agreement provides for $410.0 million of first lien secured credit facilities (the “Credit Facilities”), consisting of a $60.0 million revolving credit facility (the “Revolving Facility”), and a $350.0 million term loan facility (the “Term Loan”). On July 19, 2021, prior to the completion of the Distribution, the Company distributed approximately $16.5 million, representing the proceeds from the Term Loan, net of the repayment of related party debt due to SolarWinds Holdings, Inc., payment of intercompany trade payables, and fees and other transaction-related expenses, to SolarWinds. The Revolving Facility will primarily be available for general corporate purposes. The following table summarizes information relating to our outstanding debt as of March 31, 2024:
Under the Credit Agreement, borrowings denominated in U.S. dollars under the Revolving Facility bore 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%, until the LIBOR-based rate was replaced, as described below. Under the Credit Agreement, borrowings denominated in Euros under the Revolving Facility bear interest at a floating rate of an Adjusted Euro Interbank Offered Rate (“EURIBOR”) rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%. Under the Credit Agreement, borrowings under the Term Loan bore 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%, until the LIBOR-based rate was replaced, as described below. Each margin is subject to reductions to 2.75% and 1.75%, respectively, based on our first lien net leverage ratio. On June 26, 2023, the parties entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement. Amendment No. 1 amended the Credit Agreement to, among other things, replace the LIBOR-based rate included in the Credit Agreement with a SOFR-based rate, as an interest rate benchmark. Other than the foregoing, the material terms of the Credit Agreement described herein remain unchanged. The effective interest rate on our outstanding debt remained as a LIBOR-based rate until August 31, 2023, at which point it transitioned to a SOFR-based rate. As of March 31, 2024, the effective interest rate on our outstanding debt is 8.35%. In addition to paying interest on loans outstanding under the Revolving Facility, we are required to pay a commitment fee of 0.375% per annum in respect of unused commitments thereunder, subject to a reduction to 0.25% per annum based on our first lien net leverage ratio. The Term Loan requires quarterly repayments equal to 0.25% of the original principal amount, commencing in December 2021 through June 2028. The final maturity dates of the Revolving Facility and Term Loan are July 18, 2026 and July 18, 2028, respectively. The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; create liens; engage in mergers or consolidations; sell or transfer assets; pay dividends and distributions or repurchase our capital stock; make investments, loans or advances; prepay certain junior indebtedness; engage in certain transactions with affiliates; and enter into negative pledge agreements. In addition, the Revolving Facility is subject to a financial covenant requiring compliance with a maximum first lien net leverage ratio of 7.50 to 1.00 at the end of each fiscal quarter, which will trigger when loans outstanding under the Revolving Facility exceed 35% of the aggregate commitments under the Revolving Facility. The Credit Agreement contains certain customary events of default, including, among others, failure to pay principal, interest or other amounts; inaccuracy of representations and warranties; violation of covenants; cross events of default; certain bankruptcy and insolvency events; certain ERISA events; certain undischarged judgments; and change of control. As of March 31, 2024, we were in compliance with all covenants of the Credit Agreement. The following table summarizes the remaining future minimum principal payments under the Credit Agreement as of March 31, 2024:
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share A reconciliation of the number of shares in the calculation of basic and diluted earnings per share follows:
The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the three months ended March 31, 2024 and 2023 because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period:
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Income Taxes |
3 Months Ended |
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Mar. 31, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the three months ended March 31, 2024 and 2023, we recorded income tax expense of $5.7 million and $4.6 million, respectively, resulting in an effective tax rate of 43.3% and 56.4%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a decrease in the amount of the unbenefited loss in the United States, partially offset by an increase in income before income taxes outside of the United States. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of March 31, 2024, we did not have any accrued interest and penalties related to unrecognized tax benefits. In 2021, the Organization for Economic Co-operation and Development ("OECD") released model rules for a global minimum tax known as Pillar Two. Under such rules, a minimum effective tax rate of 15% would apply to multinational companies with consolidated revenues above €750 million. Although we operate in one or more jurisdictions that have substantively enacted Pillar Two legislation, we have not exceeded the revenue threshold of €750 million, and as such, we do not expect to be subject to the Pillar Two rules in 2024. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2012 through 2023 tax years generally remain open and subject to examination by federal, state and foreign tax authorities. We are not currently under audit in any taxing jurisdictions.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings From time to time, we have been and may be involved in various legal proceedings arising in our ordinary course of business. We are party to a stockholders’ agreement dated as of July 19, 2021, by and among N-able, Inc. and the stockholders named therein, as amended December 13, 2021 (the “Stockholders’ Agreement”). On March 16, 2023, a stockholder who is not party to the agreement filed a Complaint for Declaratory Relief in the Court of Chancery of the State of Delaware against us seeking, among other relief, class action certification and a declaratory judgement that certain provisions in the Stockholders’ Agreement are unenforceable, including, among others, provisions relating to the election and removal of directors, the composition of committees and the hiring, or termination of the employment, of our chief executive officer. Oral arguments were held on February 6, 2024. Following oral arguments, the court requested supplemental briefing and under a stipulated briefing schedule submissions were completed by May 6, 2024. 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. Commitments as a Result of Acquisitions On July 1, 2022, we completed the acquisition of all the outstanding equity of 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. The contingent consideration liabilities will be re-evaluated at least quarterly, with the resulting gains and losses recognized within general and administrative expense in our Consolidated Statements of Operations. The fair value of this contingent consideration was $5.2 million at the date of acquisition and $5.1 million, $5.3 million and $3.7 million as of December 31, 2022, March 31, 2023 and December 31, 2023, respectively. As of March 31, 2024, the fair value of this contingent consideration is $2.2 million, resulting in the recognition of a gain of $1.4 million and a loss of $0.2 million for the three months ended March 31, 2024 and 2023, respectively. The current portion of the contingent consideration of less than $0.1 million is included in “accrued liabilities and other” and the non-current portion of $2.2 million is included in “other long-term liabilities” in our Consolidated Balance Sheets as of March 31, 2024. See Note 3. Acquisitions, Note 6. Fair Value Measurements, and Note 7. Accrued Liabilities and Other for further details regarding our contingent consideration liabilities. On December 14, 2022, we completed the acquisition of certain assets, primarily in the form of intellectual property, from a third party for a total consideration of up to $6.5 million, including $3.1 million of cash paid on the acquisition date, $1.0 million of product delivery fees and up to $2.5 million payable upon the achievement of certain software engineering and knowledge transfer milestones. The total consideration of $6.5 million has been capitalized as costs to obtain internal-use computer software from third parties and will be amortized over an estimated useful life of three years, beginning when the related technology is deemed ready for its intended use, in accordance with our policy for the capitalization of internal-use software costs. The $2.5 million of contingent consideration was deemed to be the total value of technology not ready for its intended use as of the acquisition date. During the year ended December 31, 2023, $1.5 million of cash was paid due to the achievement of two of the software engineering and knowledge transfer milestones, with the related technology deemed ready for its intended use. The remaining contingent consideration liabilities of $1.0 million are included in “accrued liabilities and other” in our Consolidated Balance Sheets as of March 31, 2024, and will be re-evaluated at least quarterly, with the resulting gains and losses recognized as an adjustment to the amount capitalized as costs to obtain internal-use computer software from third parties. No gains or losses on the contingent consideration were recognized during the three months ended March 31, 2024 and 2023. See Note 7. Accrued Liabilities and Other for further details regarding our contingent consideration liabilities.
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Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2024 |
Mar. 31, 2023 |
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Pay vs Performance Disclosure | ||
Net income | $ 7,456 | $ 3,539 |
Insider Trading Arrangements |
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Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Our interim Consolidated Financial Statements do not include all of the information and footnotes required by United States of America generally accepted accounting principles (“GAAP”) for complete financial statements. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023, referred to as our “2023 Annual Report.”
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Use of Estimates | The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The 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; and •income taxes.
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Recently Issued Accounting Pronouncements and Recently Adopted Accounting Pronouncements | In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers,” instead of at fair value on the acquisition date as previously required by ASC 805, “Business Combinations.” The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for acquired revenue contracts and revenue contracts not acquired in a business combination. The updated guidance is effective for public companies for fiscal years beginning after December 15, 2022, and early adoption is permitted. The updated guidance will be applied prospectively to business combinations occurring during or after the fiscal year of adoption. We adopted this standard as of January 1, 2023. The adoption of the standard did not have a material impact on our consolidated financial statements. In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides temporary optional expedients and exceptions to the existing guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to reference rate reform. The standard became effective upon issuance and may be applied to any new or amended contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” extending the sunset date of the relief provided under ASU No. 2020-04 to December 31, 2024. During the three months ended September 30, 2023, the effective interest rate on outstanding debt under our credit agreement with JPMorgan Chase, Bank, N.A. (the “Credit Agreement”) transitioned from a LIBOR-based rate to a Secured Overnight Financing Rate (“SOFR”)-based rate. The transition did not have a material impact on our consolidated financial statements, and no remaining contracts, hedging relationships, or other transactions reference LIBOR as of September 30, 2023. See Note 8. Debt for further details regarding the Credit Agreement
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Fair Value Measurements | We apply the authoritative guidance on fair value measurements for financial assets and liabilities, such as our money market fund financial assets and contingent consideration 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. See Note 6. Fair Value Measurements for a summary of our financial instruments accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, 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 8. Debt for further details regarding our debt.
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Deferred Revenue | Deferred revenue primarily consists of transaction prices allocated to remaining performance obligations from annually billed subscription agreements and maintenance services associated with our historical sales of perpetual license products which are delivered over time. Certain of our maintenance agreements are billed annually in advance for services to be performed over a 12-month period. We initially record the amounts allocated to maintenance performance obligations as deferred revenue and recognize these amounts ratably on a daily basis over the term of the maintenance agreement. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in accumulated other comprehensive income by component | Changes in accumulated other comprehensive income (loss) by component are summarized below:
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Disaggregation of revenue | Our revenue consists of the following:
During the three month periods ended March 31, 2024 and 2023, respectively, we recognized the following revenue from subscription and other services at a point in time and over time:
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Details of total deferred revenue balance | The following table reflects the changes in our total deferred revenue balance for the three months ended March 31, 2024:
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Remaining performance obligations for revenue recognition | We expect to recognize revenue related to remaining performance obligations as of March 31, 2024, as follows:
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Amortization of acquired technologies | Amortization of Acquired Technologies. During the three month periods ended March 31, 2024 and 2023, respectively, amortization of acquired technologies included in cost of revenue relate to our subscription products as follows:
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Acquisitions (Tables) |
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Summary of consideration paid and amounts recognized for assets acquired and liabilities assumed | The following table summarizes the amounts recognized for the assets acquired and liabilities assumed:
The following table summarizes the total consideration for the assets acquired and liabilities assumed:
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Summary of fair value of acquired identifiable intangible assets and weighted-average useful life | The following table summarizes the fair value of the acquired identifiable intangible assets and weighted-average useful life by category:
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Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Schedule of goodwill | The following table reflects the changes in goodwill for the three months ended March 31, 2024:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of financial assets measured on a recurring basis | The following tables summarize the fair value of our money market fund financial assets and contingent consideration financial liabilities that were measured on a recurring basis as of March 31, 2024 and December 31, 2023. See Note 3. Acquisitions and Note 11. Commitments and Contingencies for further details regarding our contingent consideration liabilities. There have been no transfers between fair value measurement levels during the three months ended March 31, 2024.
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Accrued Liabilities and Other (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued and other current liabilities were as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of debt | The following table summarizes information relating to our outstanding debt as of March 31, 2024:
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Schedule of maturities of long-term debt | The following table summarizes the remaining future minimum principal payments under the Credit Agreement as of March 31, 2024:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of shares in basic and diluted earnings per share calculation | A reconciliation of the number of shares in the calculation of basic and diluted earnings per share follows:
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Weighted average shares excluded from earnings per share computation | The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income per share attributable to common stockholders for the three months ended March 31, 2024 and 2023 because their effect would have been anti-dilutive or for which the performance condition had not been met at the end of the period:
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Organization and Nature of Operations (Details) |
3 Months Ended |
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Mar. 31, 2024
employee
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Maximum threshold of number of employees for consideration of a small and medium-sized enterprise | 1,000 |
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents, fair value disclosure | $ 99.4 | $ 98.6 |
Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | $ 711,360 | $ 642,071 |
Other comprehensive loss before reclassification | (10,395) | |
Other comprehensive (loss) income | (10,395) | 5,703 |
Balance at end of period | 709,062 | 656,195 |
Foreign Currency Translation Adjustments | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | 4,409 | |
Other comprehensive loss before reclassification | (10,395) | |
Other comprehensive (loss) income | (10,395) | |
Balance at end of period | (5,986) | |
Accumulated Other Comprehensive Income (Loss) | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | 4,409 | (7,815) |
Balance at end of period | $ (5,986) | $ (2,112) |
Summary of Significant Accounting Policies - Revenue Disaggregation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 113,749 | $ 99,818 |
Revenue recognized at a point in time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 16,688 | 15,279 |
Revenue recognized over time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 97,061 | 84,539 |
Subscription revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 111,517 | 97,442 |
Other Revenue | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 2,232 | $ 2,376 |
Summary of Significant Accounting Policies - Changes in Deferred Revenue (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2024
USD ($)
| |
Movement in Deferred Revenue [Roll Forward] | |
Balance as of December 31, 2023 | $ 12,813 |
Deferred revenue recognized | (5,496) |
Additional amounts deferred | 5,784 |
Balance as of March 31, 2024 | $ 13,101 |
Summary of Significant Accounting Policies - Cost of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Product Information [Line Items] | ||
Amortization of acquired technologies | $ 461 | $ 456 |
Subscription and other revenue | ||
Product Information [Line Items] | ||
Amortization of acquired technologies | $ 461 | $ 456 |
Acquisitions - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Jul. 01, 2022 |
Mar. 31, 2024 |
Dec. 31, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Business Acquisition [Line Items] | |||||
Goodwill, purchase accounting adjustments | $ (1,600) | ||||
(Gain) loss on contingent consideration | $ (1,407) | $ 240 | |||
Accrued contingent consideration liability (less than) | 1,013 | 1,800 | |||
Spinpanel BV | |||||
Business Acquisition [Line Items] | |||||
Payments to acquire businesses, gross | $ 20,000 | ||||
Contingent consideration maximum | 10,000 | ||||
Contingent consideration | $ 5,160 | 2,200 | $ 3,700 | 5,300 | $ 5,100 |
(Gain) loss on contingent consideration | (1,400) | $ 200 | |||
Accrued contingent consideration liability (less than) | 100 | ||||
Contingent consideration non-current | $ 2,200 |
Acquisitions (Details) - USD ($) $ in Thousands |
Jul. 01, 2022 |
Mar. 31, 2024 |
Dec. 31, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|---|---|---|
Business Acquisition [Line Items] | |||||
Goodwill | $ 829,790 | $ 838,497 | |||
Spinpanel BV | |||||
Business Acquisition [Line Items] | |||||
Current assets, including cash acquired of $6 | $ 128 | ||||
Cash acquired | 6 | ||||
Property and equipment, net | 48 | ||||
Current liabilities | (1,199) | ||||
Non-current deferred tax liabilities | (764) | ||||
Identifiable intangible assets | 8,970 | ||||
Goodwill | 7,176 | ||||
Total assets acquired, net | 14,359 | ||||
Acquisitions, net of cash acquired | 9,199 | ||||
Contingent consideration | 5,160 | $ 2,200 | $ 3,700 | $ 5,300 | $ 5,100 |
Consideration transferred | 14,359 | ||||
Spinpanel BV | Developed product technologies | |||||
Business Acquisition [Line Items] | |||||
Identifiable intangible assets | $ 8,890 | ||||
Weighted-Average Useful Life | 5 years | ||||
Spinpanel BV | Customer relationships | |||||
Business Acquisition [Line Items] | |||||
Identifiable intangible assets | $ 80 | ||||
Weighted-Average Useful Life | 3 years |
Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 838,497 | |
Acquisitions | $ (1,600) | |
Foreign currency translation | (8,707) | |
Balance at end of period | $ 829,790 | $ 838,497 |
Accrued Liabilities and Other (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Payables and Accruals [Abstract] | ||
Payroll-related accruals | $ 14,354 | $ 26,788 |
Value-added and other tax | 8,128 | 8,976 |
Purchasing accruals | 3,685 | 3,330 |
Accrued royalties | 2,222 | 2,550 |
Accrued contingent consideration liability | 1,013 | 1,800 |
Accrued other liabilities | 7,019 | 5,922 |
Accrued liabilities and other | $ 36,421 | $ 49,366 |
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
---|---|---|
Debt Instrument [Line Items] | ||
Total principal amount | $ 341,250 | |
Unamortized discount and debt issuance costs | (6,718) | |
Total debt, net | 334,532 | |
Less: Current debt obligation | (3,500) | $ (3,500) |
Long-term debt, net of current portion | 331,032 | $ 331,509 |
Secured debt | Credit agreement | ||
Debt Instrument [Line Items] | ||
Total principal amount | 341,250 | |
Total debt, net | $ 341,250 | |
Secured debt | Credit agreement | SOFR | ||
Debt Instrument [Line Items] | ||
Effective Rate | 8.35% | |
Line of credit | Revolving credit facility | Credit agreement | ||
Debt Instrument [Line Items] | ||
Total principal amount | $ 0 | |
Effective Rate | 0.00% |
Debt - Summary of Future Minimum Principal Payments of Debt (Details) $ in Thousands |
Mar. 31, 2024
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Total debt, net | $ 334,532 |
Credit agreement | Secured debt | |
Debt Instrument [Line Items] | |
2024 | 2,625 |
2025 | 3,500 |
2026 | 3,500 |
2027 | 3,500 |
2028 | 328,125 |
Total debt, net | $ 341,250 |
Earnings Per Share - Reconciliation of Shares in the Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Numerator: | ||
Net income | $ 7,456 | $ 3,539 |
Shares used in computation of basic earnings per share (in shares) | 184,015 | 181,435 |
Basic earnings per share (in dollars per share) | $ 0.04 | $ 0.02 |
Denominator: | ||
Net income | $ 7,456 | $ 3,539 |
Weighted-average shares used in computing basic earnings per share (in shares) | 184,015 | 181,435 |
Add dilutive impact of employee equity plans (in shares) | 3,159 | 1,756 |
Weighted-average shares used in computing diluted earnings per share (in shares) | 187,174 | 183,191 |
Diluted earnings per share (in dollars per share) | $ 0.04 | $ 0.02 |
Earnings Per Share - Weighted Average Outstanding Shares of Common Stock Equivalents Excluded (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total anti-dilutive shares (in shares) | 1,653 | 1,219 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total anti-dilutive shares (in shares) | 1,653 | 1,219 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 5,699 | $ 4,573 |
Effective income tax rate | 43.30% | 56.40% |
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