N-able Inc

Previous wording

N-able, Inc., a Delaware corporation, and its subsidiaries (“Company”, “we,” “us” and “our”) is a leading global provider of cloud-based software solutions for managed service providers (“MSPs”), enabling them to support digital transformation and growth for small and medium-sized enterprises (“SMEs”), which we define as those enterprises having 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.

Current wording

N-able, Inc., a Delaware corporation, together with its subsidiaries (“Company”, “we,” “us” and “our”) is a leading global provider of cloud-based security, data protection, and unified endpoint management software solutions for IT services providers, including managed service providers (“MSPs”). Our powerful technology enables them to support digital transformation and growth for small and medium-sized businesses (“SMBs”) and mid-market businesses, which we define as those businesses having fewer than 2,500 employees. With a flexible technology platform and powerful integrations, N-able makes it easy for our customers to monitor, manage, and protect systems, data, and networks. Our growing portfolio of management, security, automation, and data protection solutions is built for IT services management professionals. In addition, we provide extensive, proactive support—through enriching partner programs, hands-on training, and growth resources—to help our customers deliver exceptional value and achieve success at scale. Through our multi-dimensional land and expand model and global presence, we have been able to drive strong recurring revenue growth and profitability.

Previous wording

During the nine months ended September 30, 2024, we began increasing the proportion of our subscriptions that are long-term committed contracts, as compared to month-to-month contracts (the “Long-Term Contract Initiative”). Under Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (“Topic 606”),” we recognize revenue for long-term subscriptions when the distinct license is made available to the customer, and support revenue is recognized ratably over the contract term. Point in time subscription revenue increased from $10.9 million during the three months ended September 30, 2023 to $15.2 million during the three months ended September 30, 2024, and from$41.7 million during the nine months ended September 30, 2023 to $51.5 million during the nine months ended September 30, 2024. The increase in point in time subscription revenue was primarily due to the impact of revenue recognition for long-term committed contracts under Topic 606, net of any volume and pricing rationalization when committing to long-term subscriptions and any fluctuations in month to month contracts. See Note 2. Summary of Significant Accounting Policies in the Notes to Cons olidated Financial Statementsfor further details regarding revenue recognized from subscription and other services at a point in time and over time.

Current wording

During theyear ended December 31, 2024, we began increasing the proportion of our subscriptions that are long-term committed contracts, as compared to month-to-month contracts (the “Long-Term Contract Initiative”). Under Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (“Topic 606”),” we recognize revenue for long-term subscriptions when the distinct license is made available to the customer, and support revenue is recognized ratably over the contract term. 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. The Long-Term Contract Initiative results in an increase in point in time subscription revenue, primarily due to the impact of revenue recognition for long-term committed contracts under Topic 606, net of any volume and pricing rationalization when committing to long-term subscriptions and any fluctuations in month-to-month contracts. See Note 2. Summary of Significant Accounting Policies in the Notes to Cons olidated Financial Statementsfor further details regarding revenue recognized from subscription and other services at a point in time and over time.

Previous wording

As of September 30, 2024, we had approximately 25,000 customers. Additionally, as of September 30, 2024, we had 2,275 MSP partners with annualized recurring revenue (“ARR”) over $50,000 on our platform, up from 2,134 as of September 30, 2023, representing an increase of 6.6%. The number of MSP partners may fluctuate over time as the result of a number of factors. Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 55% of our total ARR as of September 30, 2023 to approximately 57% of our total ARR as of September 30, 2024. We define ARR as the annualized recurring revenue as of the last month of a given period. We calculate ARR by multiplying the recurring revenue and related usage revenue, excluding the impacts of credits and reserves, recognized during the final month of the reporting period from both long-term and month-to-month subscriptions by twelve. We use ARR, and in particular, ARR attributable to MSP partners with over $50,000 of ARR, to enhance the understanding of our business performance and the growth of our relationships with our MSP partners.

Current wording

As of March 31, 2025, we had 2,398 customers with ARR over $50,000 on our platform, up from 2,187 as of March 31, 2024, representing an increase of 9.6%. Over the same period, customers with over $50,000 of ARR on our platform grew from approximately 56% of our total ARR as of March 31, 2024 to approximately 58% of our total ARR as of March 31, 2025.

Previous wording

We have grown while maintaining high levels of operating efficiency. Our operating income for the three months ended September 30, 2024 was $23.9 million compared to operating income of $18.4 million for the three months ended September 30, 2023. Our net income for the three months ended September 30, 2024 was $10.8 million compared to net income of $6.0 million for the three months ended September 30, 2023. The increase in net income for the three months ended September 30, 2024 was primarily due to an increase in revenue, an increase in other income, net, a decrease in sales and marketing expense, a decrease in general and administrative expense, and a decrease in interest expense, net, partially offset by an increase in research and development expense, an increase in income tax expense, and an increase in cost of revenue. Our Adjusted EBITDA, calculated as net income of $10.8 million and $6.0 million for the three months ended September 30, 2024 and 2023, respectively, excluding amortization of acquired intangible assets and developed technology of $2.1 million and $1.4 million, respectively, depreciation expense of $4.0 million and $3.9 million, respectively, income tax expense of $7.9 million and $4.1 million, respectively, interest expense, net of $7.5 million and $7.8 million, respectively, unrealized foreign currency (gains) losses of $(0.5) million and $1.6 million, respectively, transaction related costs of $(1.8) million and $(0.6) million, respectively, spin-off costs of $0.0 million and $0.2 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $11.8 million and $11.6 million, respectively, and restructuring costs and other of $3.1 million and $0.6 million, respectively, was $44.8 million and $36.6 million for the three months ended September 30, 2024 and 2023, respectively. For a description and reconciliation of the non-GAAP measures discussed in this section, see Non-GAAP Financial Measures below.

Current wording

Our operating income for the three months ended March 31, 2025 was $1.8 million, compared to operating income of $20.5 million for the three months ended March 31, 2024. Our net loss for the three months ended March 31, 2025 was $7.2 million compared to net income of $7.5 million for the three months ended March 31, 2024. The decrease in net income for the three months ended March 31, 2025 was primarily due to an increase in general and administrative expense, an increase in cost of revenue, an increase in sales and marketing expense, an increase in amortization of acquired technologies, an increase in research and development expense, and an increase in amortization of acquired intangibles, partially offset by an increase in revenue, a decrease in income tax expense, a decrease in interest expense, net, and an increase in other income, net. Our Adjusted EBITDA, calculated as net (loss) income of $(7.2) million and $7.5 million for the three months ended March 31, 2025 and 2024, respectively, excluding amortization of acquired intangible assets and developed technology of $6.2 million and $1.9 million, respectively, depreciation expense of $4.2 million and $4.0 million, respectively, income tax expense of $3.3 million and $5.7 million, respectively, interest expense, net of $7.1 million and $7.6 million, respectively, unrealized foreign currency (gains) losses of $(0.8) million and $0.8 million, respectively, transaction related costs of $6.3 million and $(1.4) million, respectively, spin-off costs of $0.0 million and $0.1 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $12.7 million and $13.0 million, respectively, and restructuring costs and other of $(0.1) million and $0.6 million, respectively, was $31.6 million and $39.6 million for the three months ended March 31, 2025 and 2024, respectively. For a description and reconciliation of the non-GAAP measures discussed in this section, see Non-GAAP Financial Measures below.

Previous wording

We have built our business to generate strong cash flow over the long term. For the three months ended September 30, 2024 and 2023, cash flows from operations were $22.0 million and $27.5 million, respectively. Our cash flows from operations were reduced by cash payments for interest of $7.2 million and $7.4 million for the three months ended September 30, 2024 and 2023, respectively, and cash payments for income taxes of $2.1 million and $1.2 million for the three months ended September 30, 2024 and 2023, respectively.

Current wording

We have built our business to generate strong cash flow over the long term. For the three months ended March 31, 2025 and 2024, cash flows from operations were $19.7 million and $4.2 million, respectively. Our cash flows from operations were reduced by cash payments for interest of $6.4 million and $7.3 million for the three months ended March 31, 2025 and 2024, respectively, and cash payments for income taxes of $2.2 million and $1.8 million for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

•Subscription Revenue. We primarily derive subscription revenue from the sale of subscriptions to the SaaS solutions that we host and manage on our platform. Our subscriptions provide access to the latest versions of our software platform, technical support and unspecified software upgrades and updates. Subscription revenue for our SaaS solutions is generally recognized ratably over the subscription term once the service is made available to the MSP partner or when we have the right to invoice for services performed. In addition, our subscription revenue includes sales of our self-managed solutions, which are hosted and managed by our MSP partners. Subscriptions of our self-managed solutions include term licenses, technical support and unspecified software upgrades. Revenue from the license performance obligation of our self-managed solutions is recognized at a point in time upon delivery of the access to the licenses and revenue from the performance obligation related to the technical support and unspecified software upgrades of our subscription-based license arrangements is recognized ratably over the agreement period. We generally invoice subscription agreements monthly based on usage or in advance over the subscription period on either a monthly or annual basis.

Current wording

•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.

Previous wording

•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. MSP partners with maintenance agreements are entitled to receive technical support and unspecified upgrades or enhancements to new versions of their solutions on a when-and-if-available basis for the specified agreement period.

Current wording

•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. MSP 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.

Previous wording

•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 technical support personnel costs. We allocate facilities, depreciation, IT and benefits costs based on headcount.

Current wording

•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.

Previous wording

•Amortization of Acquired Technologies. We amortize to cost of revenue capitalized costs of technologies acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the July 1, 2022 acquisition of Spinpanel B.V. (“Spinpanel”). Amortization related to the take private transaction of SolarWinds concluded during the three months ended March 31, 2023.

Current wording

•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”).

Previous wording

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 1,635, 1,584, and 1,580 as of September 30, 2024, December 31, 2023, and September 30, 2023, respectively. Our stock-based compensation expense increased during the three and nine months ended September 30, 2024 as compared to the corresponding period of the prior fiscal year primarily due to the impact of new equity awards that were granted to employees through September 30, 2024.

Current wording

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 1,800, 1,773, and 1,598 as of March 31, 2025, December 31, 2024, and March 31, 2024, respectively. Our stock-based compensation expense increased during the three months ended March 31, 2025 as compared to the corresponding period of the prior fiscal year primarily due to the impact of new equity awards that were granted to employees through March 31, 2025, and we expect stock-based compensation expense to continue to increase during the year ending December 31, 2025.

Previous wording

•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 MSP partner adds, retain and expand with existing MSP partners and pursue initiatives designed to help our MSP partners succeed and grow.

Current wording

•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.

Previous wording

•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 July 1, 2022 acquisition of Spinpanel. Amortization related to the take private transaction of SolarWinds concluded during the three months ended March 31, 2023.

Current wording

•Amortization of Acquired Intangibles. We amortize to operating expenses capitalized costs of intangible assets primarily acquired in connection with the July 1, 2022 acquisition of Spinpanel and the November 20, 2024 acquisition of Adlumin.

Previous wording

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.

Current wording

Other expense, net primarily consists of interest expense related to the Credit Agreement and the Adlumin deferred consideration liability 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, dividend income from our money market fund financial assets and interest income on recoverable taxes. See Item 3. Quantitative and Qualitative Disclosures About Market Risk for additional information on how interest rates impact our financial results.

Previous wording

Total revenue increased $8.9 million, or 8.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. We base revenue by geography on the billing address of each MSP partner. Based on MSP partner location, revenue from the United States was approximately 47.6% and 48.6% of total revenue for the three months ended September 30, 2024 and 2023, respectively. Revenue from the United Kingdom was approximately 10.6% and 10.2% of total revenue for the three months ended September 30, 2024 and 2023, 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.

Current wording

Total revenue increased $4.4 million, or 3.9%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. We base revenue by geography on the billing address of each customer. Based on customer location, revenue from the United States was approximately 51.2% and 47.9% of total revenue for the three months ended March 31, 2025 and 2024, respectively. Revenue from the United Kingdom was approximately 10.0% and 10.4% of total revenue for the three months ended March 31, 2025 and 2024, 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.

Previous wording

Subscription Revenue. Subscription revenue increased $9.8 million, or 9.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in subscription revenue was primarily driven by growth in sales of our data protection, security and remote monitoring and management solutions, inclusive of the net positive impact from long-term committed contracts. See Third Quarter Financial Highlightsfor further details regarding the impact of long-term committed contracts during thethree months ended September 30, 2024. Subscription revenue as a percentage of our total revenue was 98.8% for the three months ended September 30, 2024, compared to 97.8% for the three months ended September 30, 2023.

Current wording

Subscription Revenue. Subscription revenue increased $5.3 million, or 4.8%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The increase in subscription revenue was primarily driven by growth in sales of our data protection, security and unified endpoint management solutions, inclusive of the net positive impact from long-term committed contracts, and includes revenue attributable to the recently acquired Adlumin business. See First Quarter Financial Highlightsfor further details regarding the impact of long-term committed contracts during the three months ended March 31, 2025. Subscription revenue as a percentage of our total revenue was 98.9% for the three months ended March 31, 2025, compared to 98.0% for the three months ended March 31, 2024.

Previous wording

Our annual dollar-based net revenue retention rate for our subscription products was approximately 105% and 108% for the trailing twelve-month periods ended September 30, 2024 and 2023, respectively. The 105% dollar-based net revenue retention rate reflects the pressure from our pricing and packaging changes, coupled with rationalization related to our Long-Term Contract Initiative, which began materially impacting net revenue retention during the three months ended June 30, 2024. Our calculation includes any expansion revenue and is net of any contraction or cancellation, but excludes credits and revenue attributable to any MSP partner who was not a partner with a paid subscription in the prior period. To calculate our annual dollar-based net revenue retention rate, we first identify the MSP partners with active paid subscriptions in the last month of the prior-year period, or the base partners. We then divide the subscription revenue in the last month of the current-year period attributable to the base partners by the revenue attributable to those base partners in the last month of the prior-year period. Our dollar-based net revenue retention rate for a particular period is then obtained by averaging the rates from that particular period with the results from each of the prior eleven months.

Current wording

Our annual dollar-based net revenue retention rate for our subscription products was approximately 101% and 111% for the trailing twelve-month periods ended March 31, 2025 and 2024, respectively. The 101% dollar-based net revenue retention rate reflects the pressure from our pricing and packaging changes, coupled with rationalization related to our Long-Term Contract Initiative, which began materially impacting net revenue retention during the three months ended June 30, 2024. 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.

Previous wording

Other Revenue. Other revenue decreased $0.9 million, or 38.8%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to a decrease in maintenance and professional services revenue. Other revenue as a percentage of our total revenue was 1.2% for the three months ended September 30, 2024, compared to 2.2% for the three months ended September 30, 2023.

Current wording

Other Revenue. Other revenue decreased $0.9 million, or 39.6%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a decrease in maintenance and professional services revenue. Other revenue as a percentage of our total revenue was 1.1% for the three months ended March 31, 2025, compared to 2.0% for the three months ended March 31, 2024.

Previous wording

Total cost of revenue increased $2.5 million, or 14.7%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in public cloud infrastructure and hosting fees and royalties related to our subscription products of $1.7 million, an increase in depreciation of servers and amortization of capitalized internal-use software costs of $0.8 million, and an increase in stock-based compensation expense of $0.1 million, partially offset by a decrease in allocated facilities and IT costs of $0.1 million.

Current wording

Total cost of revenue increased $9.4 million, or 51.3%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in amortization of acquired technologies of $3.7 million related to the November 20, 2024 acquisition of Adlumin, an increase in public cloud infrastructure and hosting fees and royalties related to our subscription products of $3.5 million, an increase in personnel costs driven by headcount and salary increases of $0.8 million, which includes an increase in stock-based compensation expense of $0.1 million, an increase in depreciation of servers and amortization of capitalized internal-use software costs of $0.6 million and an increase in contract services costs of $0.6 million.

Previous wording

Sales and Marketing. Sales and marketing expenses decreased $0.2 million, or 0.2%, primarily due to an increase in commissions related to long-term committed contracts that were capitalized from sales and marketing expenses to the Consolidated Balance Sheets of $2.2 million and a decrease in advertising expense of $1.8 million, partially offset by an increase in personnel costs driven by headcount and salary increases of $2.0 million, which includes an increase in stock-based compensation expense of $0.3 million, an increase in travel and event-related costs of $1.4 million, and an increase in restructuring and other costs of $0.4 million.

Current wording

Sales and Marketing. Sales and marketing expenses increased $4.6 million, or 12.8%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in personnel costs of $3.8 million, which includes an increase in stock-based compensation expense of $0.3 million, an increase in transaction related costs of $1.0 million, an increase in contract services costs of $0.3 million and an increase in travel and event-related costs of $0.2 million, partially offset by a decrease in advertising expense of $0.5 million and an increase in commissions related to long-term committed contracts that were capitalized from sales and marketing expenses to the Consolidated Balance Sheets of $0.2 million.

Previous wording

Research and Development. Research and development expenses increased $3.2 million, or 16.4%, primarily due to an increase in personnel costs driven by headcount and salary increases of $1.3 million, which includes an increase in stock-based compensation expense of $0.3 million, an increase in allocated facilities and IT costs of $1.1 million, an increase in subscription costs of $0.5 million, and a decrease in capitalized internal-use software costs of $0.2 million.

Current wording

Research and Development. Research and development expenses increased $1.8 million, or 8.2%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in personnel costs driven by headcount and salary increases of $3.5 million, which includes an increase in stock-based compensation expense of $0.3 million, and an increase in subscription costs of $0.5 million, partially offset by an increase in capitalized internal-use software costs of $2.0 million and a decrease in allocated facilities and IT costs of $0.3 million.

Previous wording

General and Administrative. General and administrative expenses increased $3.6 million, or 6.6%, primarily due to an increase in transaction related costs of $5.9 million, an increase in restructuring and other costs of $2.0 million, an increase in rent expense of $2.0 million, and an increase in personnel costs driven by headcount and salary increases of $0.6 million, which includes an increase in stock-based compensation expense of $0.2 million, partially offset by gains on contingent consideration related to the July 1, 2022 acquisition of Spinpanel of $3.7 million, a decrease in allocated facilities and IT costs of $2.0 million, a decrease in director and officer liability insurance costs of $0.6 million and a decrease in costs associated with our separation from SolarWinds of $0.6 million. See Note 3. Acquisitions, Note 6. Fair Value Measurements, and Note 11. Commitments and Contingencies of the Notes to Consolidated Financial Statementsfor further details regarding the acquisition of Spinpanel.

Current wording

General and Administrative. General and administrative expenses increased $6.9 million, or 40.2%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in expense of $2.3 million related to the Adlumin deferred consideration liability, an increase in expense related to contingent consideration of $2.1 million, due to the recognition of $0.7 million of expense on contingent consideration for the three months ended March 31, 2025 related to the acquisition of Adlumin, compared to the recognition of a gain on contingent consideration related to the July 1, 2022 acquisition of Spinpanel of $1.4 million for three months ended March 31, 2024, an increase in transaction related costs of $2.1 million, an increase in professional fees of $1.0 million, an increase in contract services costs of $0.5 million and an increase in allocated facilities and IT costs of $0.3 million, partially offset by a decrease in restructuring and other costs of $0.9 million, which includes a net gain on lease modification of $0.4 million, and a decrease in rent expense of $0.6 million. See Note 3. Acquisitions, Note 6. Fair Value Measurements, and Note 11. Commitments and Contingencies of the Notes to Consolidated Financial Statementsfor further details regarding the acquisitions of Adlumin and Spinpanel.

Previous wording

Amortization of Acquired Intangibles. Amortization of acquired intangibles was consistent for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Current wording

Amortization of Acquired Intangibles. Amortization of acquired intangibles increased $0.5 million, or 3,464.3%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, related to the November 20, 2024 acquisition of Adlumin.

Previous wording

Interest expense, net decreased by $0.3 million, or 3.4%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to the impact of decreased interest rates and lower outstanding borrowings under the Credit Agreement. 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 Statementsfor further details regarding the Credit Agreement.

Current wording

Interest expense, net decreased by $0.6 million, or 7.2%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in interest income on recoverable taxes of $1.0 million and a decrease in interest expense of $0.9 million due to the impact of decreased interest rates and lower outstanding borrowings under the Credit Agreement, partially offset by an increase in expense of $1.4 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 Statementsfor 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.

Previous wording

Other income (expense), net increased by $2.7 million, or 636.4%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to an increase in the impact of changes in foreign currency exchange rates of $2.2 million related to various accounts for the period and an increase in dividend income from our money market fund financial assets of $0.6 million.

Current wording

Other income, net increased by $1.1 million, or 386.0%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in the impact of changes in foreign currency exchange rates of $2.0 million related to various accounts for the period, partially offset by a decrease in dividend income from our money market fund financial assets of $0.8 million.

Previous wording

Our income tax expense for the three months ended September 30, 2024 increased by $3.8 million as compared to the three months ended September 30, 2023. The effective tax rate increased to 42.3% for the same period primarily due to an increase in the amount of the unbenefited loss in the United States, partially offset by a decrease in income taxes on income outside of the United States. For additional discussion about our income taxes, see Note 10. Income Taxesin the Notes to Consolidated Financial Statements.

Current wording

Our income tax expense for the three months ended March 31, 2025 decreased by $2.4 million as compared to the three months ended March 31, 2024. The effective tax rate increased to (85.4)% for the same period primarily due to an increase in the amount of the unbenefited loss in the United States, partially offset by a decrease in income taxes on income outside of the United States. For additional discussion about our income taxes, see Note 10. Income Taxesin the Notes to Consolidated Financial Statements.

Previous wording

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including operating income and net income 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.

Current wording

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including operating income and net (loss) income 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.

Previous wording

Cash and cash equivalents were $174.4 million as of September 30, 2024. As our sales and operating cash flows are primarily generated by international entities in the United Kingdom and Canada, our international subsidiaries held approximately $167.1 million of cash and cash equivalents, of which 82.8%, 9.5% and 3.5% were held in United States Dollars, Euros 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.

Current wording

Cash and cash equivalents were $94.1 million as of March 31, 2025. As our sales and operating cash flows are primarily generated by international entities in the United Kingdom and Canada, our international subsidiaries held approximately $86.7 million of cash and cash equivalents, of which 73.8%, 18.0% and 2.6% were held in United States Dollars, Euros 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.

Previous wording

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 expenses, to SolarWinds. The Revolving Facility is primarily available for general corporate purposes. We had total borrowings of $333.6 million and $335.0 million as of September 30, 2024 and December 31, 2023, respectively, net of debt issuance costs of $5.9 million and $7.1 million, respectively. See Note 8. Debtin the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement.

Current wording

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 expenses, to SolarWinds. The Revolving Facility is primarily available for general corporate purposes. We had total borrowings of $332.6 million and $333.1 million as of March 31, 2025 and December 31, 2024, respectively, net of debt issuance costs of $5.1 million and $5.5 million, respectively. See Note 8. Debtin the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement.

Previous wording

During the three and nine months ended September 30, 2024 and 2023, 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.

Current wording

During the three months ended March 31, 2025 and 2024, 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.

Previous wording

Our primary source of cash from operating activities is cash collections from our MSP partners and our distributors. We expect cash inflows from operating activities to be affected by the timing of our sales and the consumption of our solutions by our MSP partners. 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.

Current wording

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.

Previous wording

Cash provided by operating activities decreased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a net cash outflow resulting from changes in our operating assets and liabilities, partially offset by an increase in net income and an increase in non-cash items within net income. The net cash outflow resulting from changes in our operating assets and liabilities was primarily due to an increase in current contract assets, a decrease in accrued liabilities and other, an increase in prepaid expenses and other assets, an increase in recoverable taxes, an increase in other long-term assets, an increase in deferred revenue, and a decrease in other long-term liabilities, partially offset by an increase in income taxes payable, a decrease in accounts receivable, a decrease in income taxes receivable, and an increase in accounts payable. The net cash outflow of $26.1 million and $6.0 million resulting from changes in our operating assets and liabilities for the nine months ended September 30, 2024 and 2023, respectively, excluding the changes noted above, was primarily due to the timing of sales, cash payments and receipts.

Current wording

Cash provided by operating activities increased for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a net cash inflow resulting from changes in our operating assets and liabilities and an increase in non-cash items within net income, partially offset by a decrease in net income. The net cash inflow resulting from changes in our operating assets and liabilities was primarily due to a decrease in recoverable taxes, an increase in accrued liabilities and other, a decrease in current contract assets, a decrease in income taxes receivable, a decrease in other long-term assets, a decrease in accounts receivable and an increase in other long-term liabilities, partially offset by an increase in income taxes payable, an increase in prepaid expenses and other assets, a decrease in accounts payable, a decrease in deferred revenue and an increase in operating lease right-of-use assets, net. The net cash inflow of $1.0 million and outflow of $20.6 million resulting from changes in our operating assets and liabilities for the three months ended March 31, 2025 and 2024, respectively, excluding the changes noted above, was primarily due to the timing of sales, cash payments and receipts.

Previous wording

Net cash used in investing activities decreased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a decrease in capitalized research and development costs related to internal-use software and a decrease in capital expenditures to support our domestic and international office locations.

Current wording

Net cash used in investing activities increased for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to an increase in capitalized research and development costs related to internal-use software, partially offset by a decrease in capital expenditures to support our domestic and international office locations.

Previous wording

Financing cash flows consist of payments of tax withholding obligations related to restricted stock, the exercise of stock options, proceeds from the issuance of common stock under the Employee Stock Purchase Plan, deferred acquisition payments and repayments of borrowings from the Credit Agreement.

Current wording

Financing cash flows consist of payments of tax withholding obligations related to restricted stock, 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.

Previous wording

Net cash used in financing activities increased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to an increase in payments of tax withholding obligations related to restricted stock, an increase in deferred acquisition payments and a decrease in proceeds from exercises of stock options, partially offset by an increase in proceeds from the issuance of common stock under the Employee Stock Purchase Plan.

Current wording

Net cash used in financing activities decreased for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a decrease in payments of tax withholding obligations related to restricted stock, an increase in proceeds from the issuance of common stock under the Employee Stock Purchase Plan and an increase in proceeds from exercises of stock options.

Previous wording

•the valuation of goodwill, intangibles, long-lived assets and contingent consideration;

Current wording

•the valuation of goodwill, intangibles, and long-lived assets;