N-able Inc Aktie

Hello, everyone. Thank you for joining us, and welcome to the N-able Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Griffin Gyr, Director of Investor Relations. Please go. ahead.

Thanks, operator, and welcome, everyone, to N-able's Second Quarter 2026 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.n-able.com.

There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law.

These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now I will turn the call over to John.

Thank you, Griffin, and thank you all for joining us today. At N-able, we believe every business deserves enterprise-grade cybersecurity, and we're working to democratize cyber defense at a moment when the stakes have never been higher. That mission has continued to translate into disciplined growth and profitability. Second quarter ARR was $544 million, growing 6% year-over-year in constant currency, and adjusted EBITDA was $40 million, representing a margin of 29%.

Our results this quarter and the promising road ahead are grounded in what we believe is a compelling cybersecurity and AI opportunity. Recent advances in frontier AI models are accelerating both the volume and velocity of cyber risk. Vulnerabilities are being discovered faster, exploit time lines are compressing and customers need to move from threat detection to remediation with far greater urgency.

The data underscores this shift. CVE.org shows the number of vulnerabilities more than tripled between the second quarter of 2022 and the second quarter of 2026. And Anthropic's recent research shows how a loan operator can turn a month's worth of patches into working exploits in a single afternoon for only a few thousand dollars and with no specialized expertise.

The recent Hugging Face security incident, where an agent broke out of its test environment and autonomously attack business infrastructure makes this AI risk even more concrete. At the same time, businesses are deploying agents and continue to digitize their operations, expanding the amount of data and IT assets that need to be protected. This creates a compounding challenge. As adversaries offensive capabilities grow more powerful, the attack surface they can target is growing right alongside them.

We believe this backdrop reinforces the strategic relevance of N-able's end-to-end portfolio from patch management and vulnerability remediation and unified endpoint management to threat detection and response and security operations to fast, efficient restore capabilities and data protection. With a base of 500,000 businesses and a platform that spans the full attack life cycle, we believe N-able is well positioned to capture the large and growing opportunity and deliver growth and profitability over the long term.

While we remain excited about the opportunity ahead, we are updating our 2026 top line guidance, and I want to address this directly. Our update reflects two primary factors: First, the impact from a transition in go-to-market leadership; and second, shifting dynamics in the evolving UEM and EDR markets. While we believe N-able is performing well and strategically positioned for long-term durable growth and profit, these items are creating near-term financial pressures.

Let's assess both. On the go-to-market side, we welcomed Russell Rosa as our new Chief Revenue Officer in July, and his priorities are clear. First, accelerating our full channel strategy to better target partner segments where our platform can deliver value. Second, deepening our upmarket motion, particularly as our portfolio increasingly addresses more complex customer needs across security, data protection, AI and compliance.

And third, driving operational excellence across the revenue organization with a focus on durable productivity and long-term efficiency. Russell brings more than 25 years building and scaling channel organizations. Most recently, he was CRO at Sumo Logic, where he helped deliver constant double-digit security growth. And before that, at Cisco and Actifio, where we built global channel and go-to-market programs from the ground up.

That combination of channel DNA and enterprise scale is exactly what this next phase of growth for N-able calls for. Given the significance of the leadership transition, we expect some near-term variability in our go-to-market execution, which is reflected in our adjusted 2026 guidance. We are making this change now to build a stronger, more enduring growth engine as we look to 2027 and beyond. Turning to UEM and EDR. Managing and securing endpoints remains foundational to IT management and security.

But as AI reshapes the landscape, customers now expect greater capabilities on top of these core outcomes. While we're moving fast to meet these needs, this shift is pressuring near-term growth in both categories, which is also reflected in our updated guidance. As it relates to UEM, we're executing a road map to govern and secure AI agents, deliver more comprehensive exposure management capabilities and drive value from our AI workflow assistant Enzo.

And in EDR, our portfolio expansion plans include AI security for emerging AI-driven threats, FedRAMP-certified EDR capabilities to enhance our appeal with regulated customers and cloud-native security as workloads move to the cloud. We are also adding managed EDR. This serves customers who do not want the full breadth of our security operations solution, but still want a higher level of protection than EDR alone provides.

This lower entry point helps us cover the full range of customer preferences and can serve as a platform wedge for broader estate expansion over time. As agents get deployed and AI-driven attacks elevate the importance of patching, vulnerability management, compliance and real-time detection and response, we believe the endpoint remains a primary battleground for keeping IT assets and businesses safe.

We intend to win this ground while building beyond it. As we execute our mission to protect businesses from cyber threats, we also remain focused on balancing growth and profitability. Aligning investments with our highest priority opportunities, operating a streamlined organization and driving high levels of productivity have always been a part of that focus, and we are acting with discipline on all three.

With that in mind, we plan to implement a series of organizational changes in the second half of the year that will reduce our total headcount by about 6%. Let me explain what's driving this. We see a widening opportunity and more pronounced customer demand in data protection, security operations and the full channel. Success requires relentless customer focus and as customers' needs shift, it's imperative that enables resource allocation shift too. Our changes aim to realign our resources with these opportunities while preserving the organizational focus and speed that cybersecurity leadership demands.

From a productivity perspective, we are driving real gains from incorporating the latest technologies, including AI into the way we work. From AI-enabled SDRs and accelerated content marketing and go-to-market to faster resolutions and customer support to shipping more code in engineering, new tools are helping drive step change progress across the business.

We are seeing particular effectiveness in engineering with AI-generated code accounting for 47% of all committed code in the second quarter and some features shipping 10x to 12x faster than prior road map estimates. These results give us confidence to move decisively rather than incrementally. While this is a difficult decision, it reflects our commitment to continuing to strengthen N-able for the long term.

We firmly believe our changes will make us better positioned to deliver for our customers, partners and all stakeholders. Let's now look at our progress throughout the company in the second quarter. These updates share a common thread. Customers are getting faster outcomes and stronger protection with less operational burden. Let's walk through each. In data protection, we launched Disaster Recovery as a Service, or DRaaS, earlier this year. With enabled DRaaS, customers can restore full operations in minutes rather than days, and there's no separate infrastructure or hardware needed.

This means faster restores, less complexity and execution against our mission to democratize cyber defense. The timing of our launch is notable. DRaaS lets customers avoid CapEx costs, supply delays and maintenance that comes with owning hardware, an increasingly relevant value proposition. DRaaS has already helped a number of businesses avoid costly downtime, a real proof of the value this capability delivers.

We also added automated backup ticketing to streamline backup-related workflows for customers. And looking ahead, our plan to extend coverage to Google Workspace later this year remains on track. The industry is taking notice. Omdia, one of the most respected channel-focused research firms, named N-able its backup and Disaster Recovery champion for the third year running. Customers are telling us the same story. Our data protection solution, which is above $200 million in ARR, continues to grow faster than the total company and once again led our net new ARR growth this quarter.

Stepping back, we see AI driving a paradigm shift in data protection. As AI agents operate inside businesses, traditional perimeter-oriented defenses such as the endpoint and network no longer suffice to keep organizations protected. When an agent makes a mistake or gets compromised, a strong data protection solution can be the difference between a business extension event or routine recovery. We needed our solution, Cove Data Protection to invoke the column protected waters a Cove provides.

As AI makes the seas choppier than ever, this commitment to safety has never been more relevant. We're excited to continue investing in this market and extend the capabilities of our fast-scaling solution. In UEM, we made progress on our priority road map items to govern and secure AI agents, deliver more comprehensive exposure management capabilities and drive value from our AI-assisted Enzo.

We are seeing indications that our vulnerability management capabilities are resonating as we uncovered billions of vulnerabilities across our customer base. On the commercial front, UEM cross-sell to data protection and security customers was up 27% in the quarter, and our targeted displacement campaign increased migrations against a top competitor by 60%. [ It is ] data points support our confidence in the strategic importance and competitiveness of our Gartner recognized UEM solution.

We also launched Shadow AI Visibility in both UEM and security operations, giving customers insight into where AI tools are being used across their environment. This addresses a blind spot that affects many organizations and addresses a need that we anticipate will only grow over time. This brings us to our AI-powered security operations solution, where we continue to see strong traction for enterprise-grade security delivered in an accessible way.

This is driven by several factors. Chief among them is the sheer intensity of the threat environment. Our own research found that the average SOC analyst faces an alert every 30 seconds, a volume no human analyst can realistically absorb. We empower customers to cut through all this noise. By utilizing a vendor-agnostic approach that ingest signals across the endpoint, network, cloud, identity layer and SaaS application, we give customers a view no single point solution can match.

And our AI capabilities enable customers to act on risk faster than a fragmented stack could. And for the threats that do escalate beyond automated containment, we are extending management incident response capabilities, giving customers hands-on investigation and response exactly when they need it. Identity, in particular, has emerged as a leading attack vector as attackers increasingly target credentials rather than endpoints directly.

In fact, we see half of attacks now bypassing endpoint controls entirely, a clear signal that attackers are finding new ways in and identity has become one of their new favorite paths. We protect over three million identities, helping stem this growing tide. That value is showing up in our results. This quarter featured one of our largest new deals ever, and we believe we are gaining market share in this category.

Each of these updates point to what we believe is a broader shift. DRaaS allows customers to walk away from hardware and manual disaster recovery. UEM is moving from simply surfacing vulnerabilities to helping remediate them. And our security operations platform is increasingly handled threat responses automatically. In each case, software is taking on work that has historically required dedicated labor. We see this as a meaningful expansion of our opportunity. And with that, I'll turn it over to Tim before circling back for closing remarks. Tim?

Thank you, John, and thank you all for joining us today. Before we go into the details of the quarter, let's start with the broader takeaways and how we view the business going forward. Our updated full year top line guidance is below our ambitions for the business. Still, we firmly believe N-able remains strong.

The drivers of our business remain intact. The organizational changes John discussed give us confidence in greater speed and better execution. We also remain highly profitable with a full year 2026 adjusted EBITDA margin guide of approximately 30% at the midpoint. And given our continued strong free cash flow generation, we intend to be active with our share repurchase program that has a remaining authorization of $45 million, a direct reflection of our conviction in the value of the business.

With that context, let's turn to the numbers. For our second quarter results, total ARR was $544 million, growing at 6% year-over-year on a reported and constant currency basis. Total revenue was $138 million, representing approximately 6% year-over-year growth on a reported basis and 5% on a constant currency basis. Subscription revenue was $137 million, representing approximately 6% year-over-year growth on a reported basis and 5% on a constant currency basis.

We ended the quarter with 2,706 customers that contributed $50,000 or more of ARR, which is up approximately 7% year-over-year. Customers with over $50,000 of ARR now represent approximately 63% of our total ARR, up from approximately 60% a year ago. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 106% on a reported basis and 103% on a constant currency basis.

Approximately 46% of our revenue was outside of North America in the quarter. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release.

Second quarter gross margin was 80% compared to 82% in the same period in 2025. Second quarter adjusted EBITDA was $40 million, representing approximately 29% adjusted EBITDA margin. Unlevered free cash flow was $23 million in the second quarter. CapEx, inclusive of $3 million of capitalized software development costs was $13 million or 9% of revenue in the second quarter. We ended the quarter with approximately $116 million of cash and an outstanding loan principal balance of approximately $398 million, representing net leverage of approximately 1.8x.

During the quarter, we also added a delayed draw term loan facility of up to $75 million on the same terms as our existing facility. This gives us additional flexibility and capacity as we evaluate capital allocation strategies. Non-GAAP earnings per share was $0.10 in the second quarter based on [ 189 ] million weighted average diluted shares. Before turning to guidance, I want to give some context on our results in the second quarter.

The second quarter has our largest cohort of contract renewals and renewal rates in this cohort, primarily in UEM and EDR came in below expectations. That's the main driver of this quarter's net new ARR performance and updated guidance. We're addressing this head on. In addition to the organizational changes, expanded UEM and EDR capabilities and CRO hire we discussed earlier, we're also taking specific steps to strengthen our renewal motion.

This includes more dedicated sales engineers on renewal accounts and improved outreach cadence ahead of renewal dates, facilitating more in-person customer interactions with our top accounts and an up-level support organization to strengthen the customer experience throughout the contract life cycle.

Let's now turn to our financial outlook. Our guidance incorporates the following elements. First is the impact of updated FX rates and revised first quarter results. Regarding FX, we are assuming rates of [ $1.13 ] for the euro and [ $1.33 ] for the pound. Relative to our guidance last quarter, the changes in FX rates drive approximately $2.5 million of negative impact to full year revenue and approximately $5 million to full year ARR.

We also revised first quarter 2026 revenue per our filings down $1.3 million. This is a revenue-only item. It does not affect ARR, though it does flow through to adjusted EBITDA. Second, we are accounting for recent business trajectory in UEM and EDR, including the lower-than-expected renewal rates we experienced in the second quarter. While we have clear plans in place to address both, we have updated our guidance to reflect these trends.

Third is the change in go-to-market leadership. As John mentioned, we're excited about our new CRO and the leadership he brings, but transitions like this typically carry near-term headwinds as new priorities and processes take hold, and we're factoring that into our guide. All that said, several factors give us confidence in our ability to continue driving solid growth.

The renewal cohort in the first half of the year is approximately 40% larger than the second half cohort, which limits second half churn exposure and supports our retain and expand motion. We also believe new product launches, in particular, DRaaS, Google Workspace Backup, incident response and FedRAMP EDR are tailwinds. The road map extends well past this year.

In 2027, we plan to launch Entra ID coverage and data protection, expand our security operations platform and begin monetizing agents. As it relates to profitability, I want to briefly take a step back and discuss the broader strategic context of our adjusted EBITDA and unlevered free cash flow guidance. The opportunity ahead for N-able is clear. Businesses are navigating a more complex security and IT landscape with cyber threats growing in speed, scale and sophistication.

Organizations are looking to N-able to help them respond with greater effectiveness and confidence. For N-able to continue leading in this environment, we have to evolve as well. Given this, as John mentioned, we plan to implement a series of organizational changes, reducing our annualized operating expenses by approximately $11 million to $13 million. In connection with these changes, which include an approximately 6% reduction in the total size of our workforce, we expect to incur approximately $4 million to $6 million of restructuring charges in the second half of the year.

These actions are designed to align investments with our highest priority opportunities, streamline our organization and improve productivity. We believe these changes make N-able stronger and better positioned to drive profitable growth over the long term. Moving to the third quarter of 2026. We expect total revenue in the range of $134.5 million to $135.5 million, representing approximately 3% year-over-year growth on a reported basis and 3% to 4% on a constant currency basis.

We expect third quarter adjusted EBITDA in the range of $41 million to $42 million, representing an adjusted EBITDA margin of approximately 30% to 31%. For the full year 2026, our total revenue outlook is approximately $539 million to $542 million, representing approximately 6% to 7% year-over-year growth on a reported basis and 5% on a constant currency basis.

Our full year ARR outlook is $562 million to $565 million, representing 4% to 5% year-over-year growth on a reported basis and 5% on a constant currency basis. We expect full year adjusted EBITDA of $158 million to $161 million, representing an adjusted EBITDA margin of approximately 29% to 30%. We expect our unlevered free cash flow to be approximately $116 million to $120 million. We expect CapEx, which includes capitalized software development costs to be approximately 6% of total revenue for 2026.

We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. We expect total weighted average diluted shares outstanding of approximately 189 million to 192 million for the third quarter and 188 million to 192 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 25% to 26% for both the third quarter and the full year. Now I will turn it over to John for closing remarks.

So bringing it all together, AI is reshaping the security landscape, making our mission to democratize cyber defense more critical than ever. We are taking decisive action across the business to better capture this demand. We welcomed Russell Rosa as our new Chief Revenue Officer. We are making organizational changes to align resources with our highest priority opportunities, and we are sharpening our road maps to bring new products to market faster.

Our award-winning platform protects approximately 500,000 businesses across the globe, and our confidence in the road ahead remains strong. And with that, operator, we'll turn it over to questions.

[Operator Instructions]

Your first question comes from Mike Cikos with Needham.

I just wanted to zoom out for a second and just get a better view of the shape of Q2. And where I'm going with this is if I just take a step back and look like 90 days ago, N-able already had a month under its belt from Q2. They had outperformed the Q1 result and opted to maintain the full year guide. And then here we are, and we're talking about the renewal cohorts really for that UEM and EDR market flipping around on us and causing us to downtick here on the guide for the full year.

So can you help us think about how much of that renewal cohort is in the final month or final couple of weeks of the quarter? Like when did that renewal dynamic really show up in the quarter?

Mike, so the renewal cohort in Q2 is by far the biggest that we have in the year just due to the dynamics of how we converted customers into those long-term contracts. So the impact of the renewal rate, what we kind of saw was we were seeing renewal rates in the higher 80s. And as we progress through the quarter, we saw them kind of middling out more in the mid-80s. And the impact of that plus the size of the cohort is what drove kind of the Q2 performance. And as we look at the full year guide, we baked similar renewal rates going forward into the remainder of the year.

Okay. And for those renewal rates, like if a customer is not renewing with you, where are they going? What are they doing?

Yes. Mike, this is John. So -- and for you and for everyone, there's a couple of different factors that go into the renewal rate as well. It's also dollars, right? So if we -- we might renew the customer, but if they're coming in at a lower price point or a lower quantity, that's going to impact the renewal rate. And as mentioned, and if we just zoom out, data protection and security operations continue to be green from where we stand.

Data protection, the product offering continues to hum. Security operations is actually ahead of plan. What we mentioned in the prepared remarks, especially on the renewal rates was more focused on EDR and UEM. And with EDR, we're seeing some pricing pressure. Now that manifests itself in two ways. One, we might retain the customer but at a lower price point, which is going to affect GRR and the renewal rate.

And then in times, we see pricing pressure, and that might manifest itself for them going to get a SentinelOne type of service from a different type of provider. So that's where we're seeing it with EDR. And I'll tell you what we're doing to combat some of this in a second. And then on UEM, similar, right? We might see some pricing pressure from customers that might be coming off of renewal. They might have been a 2-year commitment with us and/or they might have some quantity degradation in their own base from -- at the MSP.

Because remember, our model is not just selling to an enterprise, we're selling to an MSP. So if their quantities drop a little bit and/or they're coming back for more competitive pricing, that's going to show up as a headwind in renewal rate. So you can't just take a straight line and say that the customers are leaving. To answer your question a little bit more succinctly, if they're leaving on EDR, they could actually be going to another provider who might be offering or partnering with the SentinelOne or they might be going to some of the other names that we know in the industry.

And on UEM, Mike, it's the usual kind of cast of characters that we've been going with. But we don't really see a change or a significant change in UEM from a market share ebb and flow, frankly. A lot of this is some of the pricing sensitivity on both of those areas. And and then so from an actions point of view on EDR, just to round the basis on this. On EDR, a couple of things. One, we've entered into or amended our agreement with SentinelOne, which will allow us to do two things.

It actually puts a nice good amount of pricing protection for N-able for the foreseeable future, but it also, more importantly, extends our offerings and SKUs. Sometimes we would lose a customer because they might need a certain offering or a SKU like -- and we listed them off in the prepared remarks, you might need like a FedRAMP type of certified endpoint security offering or SKU. Even if it's for an MSP with 10% or 5% of their customer base, if we didn't have that SKU available to us in Q2, we potentially could put that customer in harm's way or have a degradation in the renewal rate.

We've now amended that agreement with SentinelOne, opening up the SKUs, and we think that will also provide a strengthening of renewal rates, especially for the EDR part of our customer base.

Your next question comes from Erik Suppiger with B. Riley.

First off, can you remind us what your headcount is currently? And I assume that's before you've had any reductions. And then what was the DRaaS contribution in the quarter? And then lastly, on SentinelOne, just to be clear, is -- are they giving better pricing to some of the other channels?

Is that an issue? Or is it more access to products like you were talking you extended your offering?

Erik, I'll start with the DRaaS one, and then I'll -- we'll take them one at a time. So the impact for revenue in Q2 was actually none. So DRaaS went GA in July, and we're really excited about this offering. We've had it in customer hands for a good part of the quarter. It's resonating. It's resonating with the smaller shops. It's resonating with the larger shops. And frankly, the timing is perfect.

As we all know, hardware costs are going up. Labor costs continue to rise, and we're actually taking the hardware and labor parts out of the hands of the MSPs and putting an instance in our cloud so that if they need to fill over, they can fill over immediately. We believe this will be a winner, and we're really excited. We did begin starting to sell it in July.

And as I sit here in August, I continue to have the same level of excitement for DRaaS. So that's that. On -- on the SentinelOne question, I'm not going to speak -- I can't speak to, frankly, what the other pricing folks have in the market. Our differentiation has always been, one, the integration in our UEM and the strong partnership we have with SentinelOne. We do, I believe, a best-in-class job with the support.

And it historically has been and continues to be a really strong relationship. We believe it's not just the economics, but it's also the complete business resilience story where we're actually bringing in our UEM and our XDR offering in conjunction with some of the SentinelOne SKUs that makes it the winning combination. And so we're not out there really looking to just resell EDR as an example.

It's really in conjunction with the full attack life cycle with UEM on the before the attack, endpoint security during the attack and a little bit more on the protection side and then XDR. And we do sell the SentinelOne SKU as an add-on to both our UEM and XDR offering. So for us, it's a good winning formula as we go through. On the headcount, I'll defer to Tim, but we're around.

Yes, it's about -- it's approximately 2,000 employees as of Q2.

And just real quick on the DRaaS, what are you projecting as you look into the second half of the year?

Look, I think it will be one of our faster-growing SKUs to $10 million of ARR. I'm not going to put a time line on it, and we don't really forecast out specific SKUs, but we're pretty bullish on the offering. Data protection continues to be an area that, again, both mid-market enterprises and MSPs of all sizes continue to look to.

And then frankly, in this AI-forward world where we're beginning to see agents causing a need, I'll say, for fast restore and recovery. That's not really necessarily cyber related. It's now a new use case that we're seeing. I think the need for data protection and an offering like DRaaS is just -- is even stronger. So we're very bullish on it. The team has done a great job putting the offering together, and it's really been resonating so far.

So now it's up to us to continue to drive this pipeline and convert this pipeline as we get into the second half of the year.

Your next question comes from Jason Ader with William Blair.

Just I want to get at the sort of MSP versus VAR dynamics. What's -- I guess the question is what's happening in the MSP market from a macro or competitive standpoint? And wondering if the apparent pivot somewhat over the last few years to the VAR channel is indicative of more headwinds in the MSP market than in the VAR market.

Thanks, Jason. This is John. So in the prepared remarks, we talked about upmarket. And I just want to clarify or make sure folks understand what that means. That's both related to the MSP market that we serve and the mid-market, right? And so in the MSP land, we continue to see an uptick in M&A. And you can see that. I think it's widely known MSPs continue to consolidate, continue to drive a lot of M&A.

There's a lot more private equity driving consolidation. And as a reminder, that doesn't mean our TAM is shrinking. In fact, as MSPs grow, they're getting exposed more and more to larger enterprises because their level of sophistication and their scale grows. So it's usually -- it's definitely a net positive for the industry, but it also requires a little bit of a different selling motion for N-able, and this is why we brought in Russell.

Russell has that enterprise experience. Russell himself comes with the Rolodex in connections to a good number of VARs and MSPs across the landscape. And we're seeing more and more 6-figure opportunities than we ever have. It has a different rhythm. It has a different -- it requires a different type of seller and it requires, frankly, just a different cadence into our closing cycle. So that's what we're seeing on MSP.

I do -- I will say from an MSP point of view, from a demand point of view, we continue to see the sell-through part of the equation remains strong. So data protection, security operations, security. But on MSP, where it might be a sell to, people are taking a step back and saying, "Hey, how is AI going to affect the tools for my technicians vis-a-vis solutions that we're putting into our end customers. And for example, that's where UEM plays.

The good news story here is our -- I believe our AI vision and our AI story is resonating in the market. And we're beginning to deliver that with Enzo. We have AI agents that were slotted to begin to deliver to the back half of the year, and MSPs are taking notice. I believe our AI story is differentiated from the market. And as we continue to deliver more of these AI capabilities, I think it will unlock some of that UEM trepidation when people are trying to figure out how do -- how is my technicians going to be impacted by AI.

We're going to help them alleviate some of the burden that a lot of L1 technicians are looking to have this year. I believe more and more of that will really start to surface and be felt in 2027. But the AI story is also a strong one. And I think the more mature MSPs are looking for vendors like N-able to help guide them through that AI fog and giving them technology that they can put on top of their existing SaaS platform.

On the mid-market, again, this is where I think Russell's strength will really be shown. Russell understands the channel. He comes from the channel. We began seeing good uptick in the channel. And this is where UEM is not as much of a red ocean. So an MSP land that UEM is very much more of a red ocean. In the mid-market, where CIOs like this all-in-one tool where they can combine things like a take control tool, a monitoring capability, vulnerability management, patching management and reporting all in one tool, wow, they'll get to replace maybe four or five, potentially even six tools in their stack with one tool at a price point that saves them a good amount of money.

And so getting that offering into the channel, having the channel understand the power of this tool, we think, is an exciting proposition for mid-market CIOs. And I'm sure Russell and his channel experience will be able to put this value prop into better hands in the channel, and we'll be able to see that uptick as we go through.

But you're right, we're seeing the UEM market and the demand in mid-market pulling us in that direction for sure.

Pulling you in the VAR direction?

Pulling us, yes, more than the -- let's call it -- yes, it's the mid-market. The VAR is the way that we're going to channel that mid-market.

Got you. Okay. And then just sort of zoom out question. I know you guys have been searching for the right growth formula over the last few years. I guess what makes you confident that you found it?

Well, look, we believe where we are today is not where we want to be, right? And so I would -- the way I would frame it, Jason, is how do we go from where we are to where we want to be. And look, a lot of that is in NPIs, and new product introduction. The second half of this year, we're in a better position from an organic new product introduction, I think, than we've been for many quarters or many years, frankly, with DRaaS in July.

We have Google Workspace for our backup offering later this year. We have incident response and Security Operations that we're bringing to market. And then we're also bringing on a host of SKUs, some of which, again, for endpoint security that are ours and our IP and some that are SentinelOne. And so just like any other company, to drive that NRR to a spot that is much more interesting, you need to have that healthy, steady diet of new products that will resonate in the market.

You couple that with what we're doing with AI, and we believe that growth formula will really begin to accelerate as we get into 2027. We are a series of long transactions. We have 25,000 customers. And inevitably, that I always refer to it as that snowball. That snowball will take some time to compound. But given the second half lineup card of new product introductions and with our AI tooling, we believe those snowballs will begin in the second half and really start to accelerate and show up in 2027.

Your next question comes from Joe Vandrick with Scotiabank.

John, you mentioned customers are expecting more advanced capabilities in UEM and EDR. Can you maybe elaborate just a little bit more on that point? And then remind us, going forward, I mean, how are you viewing the importance of UEM and EDR to the business? And have you guys quantified how much of the total business these two segments make up?

On UEM, Joe, I think it's two dimensions. One, UEM is a real anchor from a security -- anchor meaning a good thing from a security point of view. So we're seeing MSPs, both large and small, looking for extended vulnerability management capabilities, exposure management and we're looking to provide that for them. That's on one part. And then one of the key parts in our business, and this has been true for the 20-year existence here, it's all about automation.

And today, the way that automation is being felt and the need is really through the artificial intelligence and helping MSPs drive that important metric. For an MSP, for every technician, they want to drive at least -- they want to be able to manage, monitor and secure about 300 endpoints or devices, right? With AI and automation, we hope to drive that number to a much higher ratio so that the MSPs themselves can become more efficient and drive more profitability for our end customers, the MSP.

And so what they're looking for is help in understanding how they can leverage AI. We have MCP server capability with both of our OEMs. We're bringing -- we have AI assistance in our offerings right now, and that's just the start. Later this year, we'll be bringing coworkers. And the difference there is the level of autonomy. With our AI assistant, they can use it as an assistant to help them take action.

But as we go forward in the future, the AI will not just be an assistant, it will actually take an autonomous type of action to drive a lot more of that efficiency for the MSP. That's what they're looking for. They're building AI capabilities themselves in-house, but they're really looking for vendors to help with that next step and making sure that they can do so at scale and safely.

And we're laser-focused there. And again, we believe that our AI vision and our AI strategy will be a differentiator as we begin to deliver that later on this year.

Very helpful. And then one for Tim. Can you help us understand -- what's giving you the confidence that net new ARR can pick up in the back half of the year? And how much of that guide is supported by what you're seeing in the pipeline today? How much of that is supported by pipeline? And I guess, what are you assuming around improved execution?

Yes. I would say the guide does not really bake in any improved execution. It's really some dynamics of the renewal cohort sizes that are going to drive some of the sequential growth first half versus second half. As an example, like the entire second half renewal that we have is generally the same size that we had in Q2. So there's a positive dynamic there in terms of growth.

We've assumed similar renewal rates in the second half that we experienced in Q2. We do have a little bit of impact from new product introduction, but that's like 0.5 point of revenue or so between all the new offerings that are coming out in terms of the outlook. So it's generally immaterial. So it's really that dynamic. And then we also had some FX impact in the quarter just as rates came down a bit for Q2 kind of looking forward.

Your next question comes from Matt Hedberg with RBC.

I wanted to dig into kind of the selling environment a little bit more. I mean we've all seen enterprises sort of think through their AI rollout and strategy, and it's complex enough there. I have to imagine in the SMB market, it's even more complex. I guess I'm wondering how much of the buying behavior is impacted by maybe just these businesses trying to themselves understand their own AI strategy, and it's just causing some pause or questions on their existing spend.

And as we work through some of that AI adoption and digestion, things could also improve. Just kind of curious if there's an element of that in there.

Matt, there's definitely an element to that. And let me bifurcate it. And I mentioned this in an earlier comment. In our business model, we have a sell-through element and a sell-through. And that sell-through element is when the MSP, our customer is consuming the offering to drive their business. And then the sell-through is when they're actually taking those offerings and deploying them at their customers and effectively selling through as the phrase kind of implies.

On the sell-through, especially as it relates to data protection and security and security operations, we're not seeing really much trepidation there or slowdown there. So that's, I would say, business as usual. But you're right, MSPs are stepping back. And I would say, I hate to use the word every, but nearly every conversation, folks want to understand whether it be N-able or there other vendors, what is our AI strategy?

How are we playing in that equation? And then MSPs are looking whether they want to build some AI capabilities, not to replace just to be clear, not to replace the UEM, but to drive some automation on top. And folks are definitely taking a harder look at vendors and understanding what their AI strategy is and looking at how that -- how they can make themselves more efficient. So we're definitely seeing a pause or a little bit more of a scrutiny as to how a vendor's AI strategy and what they're planning and doing and how that will impact the sell to and the life of the technician.

And again, so we have our Chief AI Officer, and she's been speaking to hundreds of MSPs both individually but also at conferences, and we're bringing MSPs here. And I'm confident the large shops, the smaller shops, they're fully supportive of our strategy. Again, we have a multipronged approach. For those that want to access to their data in a much more AI-friendly way. We have the MCP server capabilities that customers can leverage.

We have our AI assistant that people can plug in on top of our SaaS offerings. And then as we're rolling out these more autonomous agents, the MSPs will drive a lot more efficiency there. So we believe our multipronged strategy is resonating with all segments, and it's all about delivering that. But Matt, you're right. We're seeing MSPs wanting to understand, again, our AI strategy and how it's going to impact their labor and their workforce.

We're seeing MSPs reimagine even their workforce structurally. And they're leveraging the new technology that we're looking to bring on to help them reimagine that workforce, not just for the 2026, but for the foreseeable future.

Got it. And then maybe as a follow-up to an earlier question, on confidence in growth resuming in the second half. It sounds like, Tim, you're not embedding any sort of improvement in your guide. But just kind of thinking through all the changes with the new CRO, the RIF, still maybe some lingering renewal questions, new products that are still early.

Like how should we think about the potential for additional disruption from here sort of beyond what you've sort of scoped out? Because it does seem like there's a lot of change going on right now as well.

Yes. I would say like, Matt, just to double back on kind of comments earlier. In terms of the renewal rates that we experienced in the quarter, we've assumed similar renewal rates the remainder of the year. From demand assumptions, we've assumed kind of similar demand going forward as well. And then a lot of the a lot of the kind of difference in kind of sequential growth in the back half versus the first half is really due to kind of renewal cohort sizes between first half and second half.

So we're not assuming any real improvement from a guide standpoint. We're obviously operationalizing change to push better improvements across renewal rates, demand as we kind of move forward and execution on the new product introductions that we're bringing to market here in the second half of the year as well. So that's just kind of the, I would say, overall color in terms of kind of how we built the guidance up for the remainder of the year.

Your next question comes from Keith Bachman with BMO .

I wanted to go in a little bit different direction in that if we think about the macro, I think most of the security companies that have a broad spectrum of customers have said and will say that, in fact, with Mythos and other incremental security threats, their pipeline has actually increased, which is probably also driving a revenue cadence increase. And what you're suggesting is there's been a pause.

And to Matt's question, the intimation is maybe there's an evaluation period, but that's not what we have heard or will heard, I think, from other security vendors. So I'm trying to tie it together. So either, a, the MSP market or maybe even the lower end, so to speak, of the VAR tier is going through a longer cadence of evaluation?

Or is it b, is the incremental competitive threat actually causing vendors to evaluate other products? In other words, what I'm really trying to drill down, is there something -- you're suggesting go-to-market may be a contributing factor, but is there something on the product side which is causing N-able to potentially lose share as security threats increase and incremental threat vectors such as AI become more prominent?

And how do you think about -- even in your slide deck, you suggested the market TAM is growing 14%. Obviously, you're under that. With all these changes that you're making, when do you think -- if there are -- if you're making changes that would enable you to be more successful, when do you think you can get back to improved growth? So really two-pronged question. One is competitive nature and two is growth. When do you see growth improving?

Keith, this is John again. Good thoughtful question, as always. So just to double back on that, though, right? So what I mentioned to Matt, so the -- as it relates to our security offerings that are especially more sell-through in nature, our XDR offering, our data protection and Disaster Recovery offerings, those continue to show strong uptick. And so we're seeing a lot of strong demand, no trepidation there.

In UEM, remember, UEM is IT management in some elements, and there's a lot of monitoring and management capabilities there. And it's that sell to tool. The UEM is effectively the operational fabric of the MSP. This is where technicians spend their time and handle tickets. So it's -- that one is more operational in nature, not necessarily, I would say, security in nature. And that's where I think that little bit of that pause is as MSPs are again reimagining what's the workflow of the ticket, how are they addressing and dealing with IT monitoring and IT management.

So that's -- maybe that's a little bit of a nuance that I wanted to make sure that you heard. So security elements SecOps data protection, that continues to remain strong. But the tooling themselves for which MSPs are running their business, I think that's where they're doing a little bit more of a pause and making sure that the solution that they're picking today is, in fact, going to be the solution for tomorrow with the right AI strategy and AI road map.

As it relates to the competitive environment, really nothing new to report. We continue to see the same players in data protection. We believe we're winning security operations. Again, I think that's an area where we continue to win and do well from a market share point of view. UEM, there is one player that is gaining more market share, I'd say, than the other couple. But a lot of that is their focus on the mid-market vis-a-vis MSP.

That's at least from what we can -- what we believe from listening to folks in the industry. So which maps to a little bit of what our focus was earlier, making sure that we can actually address the channel with our new CRO, making sure that we're getting a lot more go-to-market traction in the mid-market in addition to MSP. The MSP market continues to be strong. We believe there's a little bit more white space and greenfield opportunity in some of the mid-market areas. And Keith, I forgot your second question.

When do you think you get back to something that would be reflective of market growth?

So look, our -- for us, a healthy growth algorithm, it starts with making sure that the retention rates are strong. And we're focused on some operational tasks as early as already in place on the renewal rates that we believe we can control and start upticking as early as the back half of this year. But the real part of our growth engine is that new product introduction to drive expand.

We saw this when we introduced data protection many moons ago. We saw this again when we introduced XDR into our base. That's when we see this nice expansion in the NRR because our customers trust N-able. Our customers trust us when we tell them there's a best-in-class offering, they'll consume that best-in-class offering. They'll plug it into their business and begin either selling it or leveraging it immediately to drive efficiency gains.

And so we have that trust of our customers and that brand recognition. So when we bring in NPIs, when we bring in those new products, that's when we really start to see the growth algorithm get back to where we want it to be. And as I mentioned, -- we have a strong lineup, in particular, in data protection and security in Q3 and Q4. And then toward the tail end of the year, that's when we start bringing on more of those offerings for UEM. So we do expect to see more of an accelerated growth in 2027.

There are no further questions at this time. I will now turn the call back to CEO, John Pagliuca, for closing remarks.

Thank you all for joining us today and your continued interest in N-able. We'll talk to you in a quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the N-able First Quarter 2026 Earnings Call. [Operator Instructions]. I will now hand the conference over to Griffin Gyr, Investor Relations. Please go ahead.

Thanks, operator, and welcome, everyone, to N-able's First Quarter 2026 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session.

This call is being simultaneously webcast on our Investor Relations website at investors.nable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business.

These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website.

Now I will turn the call over to John.

Thank you, Griffin, and welcome, everyone, to our call this morning. Today, we'll review our first quarter results, discuss key trends we're seeing through recent industry engagements and highlight how AI innovation is tangibly expanding our software opportunity. We will focus particularly on our AI innovation, where we are automating work historically delivered through labor-intensive services, helping organizations operate more efficiently and securely while also growing our TAM.

This progress matters now as advancements in frontier models are fundamentally rewriting the threat landscape, compressing response times for defenders and empowering attackers to exploit vulnerabilities at unprecedented speed and scale. We believe our end-to-end cyber resilience platform is purpose-built for this moment, positioning N-able to lead as cybersecurity reaches an inflection point.

Let's jump right in. Starting with the quarter, our results were strong. First quarter ARR was $548 million, growing 8% year-over-year in constant currency, and adjusted EBITDA margin was 27%. Quarterly gross and net revenue dollar retention both improved quarter-over-quarter and year-over-year, with trailing 12-month net retention now at 106%. Let's walk through the drivers of that performance.

First, we continue to see momentum upmarket. The number of customers with over $50,000 of ARR grew by 13% year-over-year, and this cohort now represents 62% of N-able's total ARR. In addition, customers with over $100,000 of ARR represent 41% of our annual recurring revenue. This upmarket progress is further exemplified by our selection as Manchester City Football Club's official cybersecurity partner. As the club operates at global scale on the field, N-able protects its critical data and systems, securing its digital environment off the field. The partnership underscores our ability to serve complex, high-profile organizations. More broadly, given the strong retention in our upmarket cohorts, we believe our success in this segment provides a solid foundation for future growth.

Second, our channel expansion strategy is working. 4 of our top 5 new customer wins in the quarter, including the Manchester City deal, were through value-added resellers, or VAR channel. With an established MSP motion that counts 25% of CRN's top 150 MSPs as customers and our scaling VAR presence, our broad channel footprint enables us to capture demand across the market.

Third, the depth and breadth of our platform is resonating. Strength in cross-sell and upsell underpinned improvement in both gross and net retention as customers realize value in expanding and consolidating with N-able. From a category perspective, security operations and data protection continue to outpace total company growth as customers prioritize advanced remediation and recovery capabilities in the face of rising cyber risk. Reflecting on the quarter, the business executed well and our strategy delivered strong results.

Let's now switch gears and discuss key observations from recent industry engagements. During the quarter, we engaged across the ecosystem through our annual customer conference in power, a major industry event such as RSA and ongoing dialogue with third-party research firms. One major takeaway is that we believe cybersecurity continues to experience strong secular tailwinds. We are consistently hearing from customers that the worsening threat environment and rising IT complexity are driving increased need for stronger cybersecurity solutions.

This sentiment is reinforced by our internal data and third-party research. Our 2026 state of the SOC report, which is informed by telemetry and frontline response data from N-able SOC, we observed an alert every 30 seconds. We also saw a dramatic rise in perimeter-based attacks with 50% of attacks bypassing endpoint controls entirely. Manual triage approaches are not able to keep pace with the scope and velocity, emphasizing the need for modern, machine-driven defense. Industry research firm, Futurum, reported a similarly challenging attack environment.

In their 2025 Cybersecurity Global Enterprise decision-making survey report, Futurum highlighted that 46% of organizations surveyed experienced more than 3 significant security incidents over the past year. We do not see these dynamics abating, particularly as advances in AI continue to lower the barrier to entry for increasingly sophisticated cyberattacks. Together, these factors give us confidence that our mission to protect businesses from evolving cyber threats is underpinned by strong market demand.

Another takeaway is that customers are struggling to balance the need for powerful layered defense with practical constraints such as managing vendor sprawl, staffing challenges and budget limitations. This pain point validates our platform strategy. Spanning unified endpoint management, security operations and data protection, our platform enables customers to efficiently manage complex IT environments, detect and stop threats in real time and safeguard and recover critical data. We deliver coverage across the entire life cycle before, during and after an incident, helping customers stay secure while operating efficiently.

We are also hearing strong conviction that AI is a meaningful growth driver for MSPs. Our conversations at our customer conference in power reflected a broadly bullish sentiment, improve efficiency and create new revenue streams for MSPs. While adoption is still early, customers are clear that they want a trusted partner to help them navigate the technological wave so they can focus on operating their businesses.

In summary, our industry engagements reinforce our view that industry demand is strong and increasingly favors AI-powered integrated platform-based approach. This brings us to our innovation and how our software is expanding our opportunity by automating work historically delivered through services. Our platform is rapidly evolving from a system of record to a system of action, increasingly completing tasks previously handled by technicians. This evolution unlocks significant economic opportunity.

Industry analysts such as Omdia estimate annual security services spend at about $200 billion, roughly twice the size of security software spend. We see a similar labor-heavy cost structure within our MSP customer base. Our field work indicates MSPs operate at approximately 10% EBITDA margins with a sizable portion of their cost structure composed of labor.

As our intelligent software completes workflows historically owned by labor, we help our customers operate more efficiently and improve margins while expanding our monetization surface from software budgets into a much larger labor-driven services opportunity. A concrete example helps illustrate the opportunity we are driving. Technicians are the revenue engine for MSPs. The more IT assets, including AI that each MSP technician can manage, the more revenue an MSP can generate.

The challenge is that technicians have practical limits. A common industry benchmark is roughly 1 technician for every 200 devices. This creates a growth ceiling in the structurally tight IT labor market and pressures MSPs profitability as they must continually hire additional technicians to support more customers. Our aim is for our software to improve that ratio, empowering a single technician to manage 500, 1,000 or even more IT assets. Delivering this creates a win-win for our customers and N-able. Our customers can scale their businesses without linear increase in labor costs, and we can gain market share as MSPs consolidate around platforms that can help them grow their businesses more efficiently.

Importantly, this is not a future state. We are delivering progress today. In UEM, we recently introduced N-zo, our AI workflow assistant and our custom model context protocol, or MCP server. These advancements mark an important step forward in AI-driven IT operations. For certain tasks, N-zo delivers up to 70% faster IT operations by enabling teams to interact with their environments using natural language and agentic workflows. Our MCP server goes a step further. Securely connecting external AI tools like Claud, ChatGPT and Microsoft Copilot directly to live operational data inside N-able UEM. This means AI no longer just tells customers what's wrong. It helps fix it real time with the control and governance our partners require.

Together, these capabilities are empowering IT teams to move faster, reduce manual effort and act directly within the environments where they already work. This progress directly improves the technician to managed device ratio we discussed earlier. UEM's value proposition is showing clearly in execution. 6 of our top 10 new customer lands flowed through our UEM solution.

A standout example is one of the fastest-growing quick service U.K. restaurant brands that was looking for a trusted partner to ensure the digital operations work seamlessly. They deployed our UEM in late 2025 across 100 locations, gaining real-time visibility into the devices, automating routine fixes and significantly reducing downtime. We recently built on that success, signing the U.S. group and expanding the relationship significantly.

We are also automating historically manual-intensive work in data protection, where we recently introduced Disaster Recovery as a Service, or DRaaS. We are eliminating the need for customers to manage backup infrastructure themselves, reducing cost, time, risk and operational headache. This shifts backup management from a labor-intensive activity to a software-led capability. Beyond efficiency, DRaaS meaningfully strengthens customer security posture. In the event of data loss, businesses can there instantly recover critical systems, minimizing their downtime and maintaining their operations.

We also expanded our anomaly detection capabilities, which help identify changes to backup environments. With threat actors increasingly using identity-based attacks to steal credentials and target backups from inside the organization, including altering retention policies or deleting servers, this advancement has real impact. Building on that momentum, we are excited about the planned addition of Google Workspace backup coverage later this year.

From a broader perspective, we continue to see durable demand drivers for data protection. With time to exploit turning negative and adversaries exploiting vulnerabilities before patches exist, the criticality of our ability to protect and restore data is heightened. As we look ahead to a world with agents owning more workloads for businesses, the possibility of agents making costly mistakes also rises. We see the need to effectively undo agent mistakes and restore operations through a clean prior state as a potential demand catalyst for our data protection solution.

Our execution and value are showing up in the numbers. Data protection has now surpassed 3.5 million Microsoft 365 users and led our net new ARR growth in the quarter. Finally, in security operations, we are extending the same system of action approach into one of the most labor-intensive areas of cybersecurity. Businesses are facing more complex attacks and N-able is helping them operate, contain and scale security without standing up their own SOC. Our security operations solution is a system of action at its core as AI handles the bulk of our threats automatically. This is a critical differentiator.

With breakout time shortening to minutes, the ability to neutralize threats in real time could be the difference between a contained event and a successful breach. Customer count has nearly doubled since the second quarter of 2025, reflecting our traction here. A recent customer win demonstrates the solution in action. A compliance-focused MSP serving regulated industries was facing challenges managing a fragmented security stack spanning multiple EDR, MDR and semi tools. We standardized the security operation, replacing multiple legacy providers with a unified scalable model, driving ARR of nearly $500,000.

Importantly, AI reinforces the role our platform plays in the Agentic world. From an operating standpoint, AI is embedded into our platform, and we are deeply embedded in our customer environments and workflows. This positions us to serve as a control plane to govern and secure agents as they become more prevalent across their IT and security environments. Customers can access AI where they already operate. We pair that accessibility with a technical experience built on proven infrastructure, extensive data, deterministic workflows, domain context and rigorous compliance standards.

From a demand perspective, we see AI increasing both the volume and severity of threats while also expanding the amount and criticality of data that must be protected. These forces directly drive the need for our solutions. Our trusted brand and established go-to-market further positions us to translate innovation and demand into real-world adoption.

To close, we're executing with discipline as we pursue the large and compelling cybersecurity opportunity. We believe AI is expanding our software opportunity by enabling us to automate more workflows and reinforcing the critical role we play in helping customers navigate a more complex and hostile digital environment.

With that, I'll turn it over to Tim and then circle back for closing remarks. Tim?

Thank you, John, and thank you all for joining us today. Our first quarter performance reflected the execution drivers John discussed, including continued upmarket momentum, strong contribution from both our MSP and VAR channels and expanding platform adoption. Our innovation is also broadening the scope of what our software can deliver, unlocking significant opportunity as we automate work historically delivered through services.

From a strategic and capital allocation perspective, our focus remains investing behind durable demand for cybersecurity solutions while delivering a robust financial profile. Before diving into the results and outlook, I also want to share perspective on how we believe our business is positioned for growth in an increasingly agentic era. Our revenue model is diversified. We have meaningful monetization across data growth, servers and cloud assets alongside more traditional drivers such as users and devices. We believe this diversified exposure powers multiple paths to growth.

Looking ahead, we see a significant new monetization opportunity as customers increasingly adopt agents and other non-human identities across their environments. As these new IT assets introduce requirements around security, governance and resilience, we believe we are well positioned to help customers secure, govern and back up these new IT assets.

At the same time, we intend to continue innovating by delivering our own agents, building on our existing platform capabilities and system of action. Taken together, we believe these dynamics reinforce the durability of our model and create additional long-term growth opportunities as the market evolves.

I'll now walk through our first quarter results, provide additional detail on the drivers of our performance and discuss our outlook for 2026. First, let's discuss our results for the first quarter. For our first quarter results, total ARR was $548 million, growing at 11% year-over-year on a reported basis and 8% on a constant currency basis. Total revenue was $134 million, $2 million above the high end of our guidance, representing approximately 13% year-over-year growth on a reported basis and 8% on a constant currency basis.

Subscription revenue was $132 million, representing approximately 13% year-over-year growth on a reported basis and 9% on a constant currency basis. We ended the quarter with 2,710 customers that contributed $50,000 or more of ARR, which is up approximately 13% year-over-year. Customers with over $50,000 of ARR now represent approximately 62% of our total ARR, up from approximately 58% a year ago. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 106% on a reported basis and 103% on a constant currency basis. Approximately 46% of our revenue was outside of North America in the quarter.

Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. First quarter gross margin was 80% compared to 81% in the same period in 2025. First quarter adjusted EBITDA was $37 million, representing approximately 27% adjusted EBITDA margin.

Unlevered free cash flow was $22 million in the first quarter. CapEx, inclusive of $3 million of capitalized software development costs, was $4 million or 3% of revenue in the first quarter. We ended the quarter with approximately $118 million of cash and an outstanding loan principal balance of approximately $399 million, representing net leverage of approximately 1.8x. Non-GAAP earnings per share was $0.09 in the first quarter based on 189 million weighted average diluted shares.

Turning to our financial outlook, which assumes FX rates of $1.17 for the euro and $1.34 for the pound. For the second quarter of 2026, we expect total revenue in the range of $137.5 million to $138.5 million, representing approximately 5% to 6% year-over-year growth on a reported basis and 4% on a constant currency basis. We expect second quarter adjusted EBITDA in the range of $39.5 million to $40.5 million, representing an adjusted EBITDA margin of approximately 29%. As a reminder, revenue growth is impacted by the timing and magnitude of on-premise deals and related revenue recognition dynamics, and we continue to view ARR as the best velocity metric for our business.

For the full year 2026, our total revenue outlook is approximately $554 million to $559 million, representing approximately 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. Our full year ARR outlook is $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis. We expect full year adjusted EBITDA of $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%. We are raising our unlevered free cash flow outlook and expect our unlevered free cash flow to be approximately $116 million to $120 million.

We expect CapEx, which includes capitalized software development costs to be approximately 5% of total revenue for 2026. We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. We expect total weighted average diluted shares outstanding of approximately 189 million to 192 million for the second quarter and $188 million to $192 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 24% to 27% for both the second quarter and the full year.

Now I will turn it over to John for closing remarks.

Thanks, Jim. We delivered another quarter of consistent execution with solid ARR growth, strong margins and practical AI innovation. As cyber threats continue to evolve and agent adoption grows, we remain focused on helping our customers prevent incidents, recover quickly and operate with confidence while delivering durable value for our shareholders.

With that, operator, we'll open the line for questions.

[Operator Instructions]. Your first question comes from the line of Mike Cikos with Needham & Company.

This is Matt Cory on for Mike Cikos over at Needham. Great to see the uptick in growth and retention. I wanted to dig in on the revenue beat was a bit more modest than we've seen over the last couple of quarters, and it didn't flow through to EBITDA margin or the full year guide. Can you give us some color on what you're seeing in the market in terms of sales cycles and linearity as well as how that influenced guidance construction?

Sure. Thanks for the question. This is John. I'll talk a little bit about sales cycle, and I'll pass it over to Tim on some of the compare. Look, as we continue to go upmarket, we are seeing a little bit of a lengthening of the sales cycle and a little bit more of a scrutiny around the ROI. I think some of this is a natural expectation. We're now landing deals. We referenced 1 or 2 during the call, a $500,000 ACV deal. We're seeing more and more 6-figure deals. We're seeing multiyear 7-figure deals.

As you go upmarket, you'll start to get requiring CEO sign off and actually, in some cases, we're starting to see Board level sign off. As you're going upmarket, we're starting to see a little bit of a lengthening of the sales cycle. Overall, I'd say a little bit more of a scrutiny on the ROI. Frankly, we feel we're in a good position with that. We pride ourselves on delivering really strong TCO across the portfolio. In Cove and our data protection, it's the software, but it's the labor, and so as there's more scrutiny on ROI across the landscape, we believe we're well positioned to win in that category because it is one of our strengths.

How do we allow MSPs to do more with their dollar, both from the software point of view and from the labor point of view. I think that's the one trend that we're keeping an eye on. I think it's somewhat expected as we continue to go up market.

Then you mentioned agent mistakes as a demand driver, which is extremely topical finding following reports of the Rogue PocketOS agent that its production database and backup. Have you seen a noticeable uptick in demand or initial conversations following, like incidents like this sounds like it's becoming more prevalent sort of as you alluded to? Or is there any other color you can provide on the data protection growth during the quarter?

It's much more top of mind. I think there's a realization across the landscape that the need to recover and the need for business resilience and continuity in the world of this agentic era is going to become more and more top of mind. If you think about backup in general, the last couple of years, it's been dominated by this cybersecurity bit, right, ransomware or attacks from threat actors and the ability to back it up.

Right along for a long time, there's also friendly fire. In other words, if an employee unintentionally or intentionally deletes a bunch of data. Well, now we have all these agents in some state in an autonomous state that if not governed the right way, have the same ability to go delete data. I think there's a realization that this will happen. This could happen across small organizations or large organizations and the ability to get back up and running is top of mind.

Frankly, that's why we pitch business resilience, not cyber resilience. That's what -- we know when we're talking to our MSPs and we're talking to mid-market companies and small, medium enterprises, what they're really worried about is avoiding disruption. If there is disruption, how quick can we get back up and running. That's why we're really excited about DRaaS. DRaaS provides an immediate failover or near immediate failover. If something happens via a threat actor or friendly player or because an agent goes rogue on you, you have the ability to fill over and keep your business going. All of these things are creating a bunch more demand. There is, I'd say, a realization across the industry that this is more and more of a real thing as agents continue to proliferate across the IT environment.

Your next question comes from the line of Jason Ader with William Blair.

A couple of things. First on the macro environment, John, can you talk about any impact? Has it changed given the situation in the Middle East, the supply chain tightness going on out there? In Q1, did you see any variance from what you've seen throughout 2025 on the macro front?

Jason, thanks for the question. As it relates to some of the geopolitical issues, no, we're not seeing any slowdown from any geopolitical issues. We are very international. A good amount of our business is in the U.K., a good amount of our business is in Western Europe. No, we're not really seeing any impact from what's going on related to what's going on in Iran.

Then, Tim, for you, just can you talk about the -- I guess you've had a 2-point NDR improvement over the last several quarters. Can you just talk through what is driving that improvement?

Yes. On the NRR, Jason?

Yes.

Yes. On the operational front, a lot of it is on the heels of the execution we've had with cross-selling MDR into the customer base. That's continued to be very successful and demand remains very healthy from that perspective. We also have some benefit from FX on the NRR rate as well. The combination of those 2 things are the key drivers of the NRR improvement.

Then I guess, last thing for you, John. What's the #1 thing you want people to take away from the print?

Yes. Look, I think the #1 thing is that we're really well positioned in this agentic era, and that's not a future state. That's a now state. we've introduced N-zo, which is an AI assistant in our UEM offering, which is really going to take a lot of the high-volume operational work off the load of our technicians. This is our first really or our continuation of turning labor into software. We're excited about that. We plan to do it, and we are doing it across all 3 fronts. We pride ourselves on being the platform of choice for MSPs before the attack, during the attack and after the attack. We're layering in an agentic technology to take the labor off of our MSPs, making them more efficient, making them more profitable. In turn, we expect better GRR, better NRR and being more of a critical piece of the MSP and the internal IT departments go forward. The best way of doing that, frankly, is to make sure that AI is helping them run their business and driving the efficiency. And we believe we're well positioned there.

Your next question comes from the line of Joe Vandrick with Scotiabank.

John, can you talk about if you're seeing frontier -- Cyber developments like Mythos and GPT 5.5 cyber changing customer urgency around N-able's core products. I'm thinking especially around the automated patching and maybe endpoint, but backup and recovery as well. Are you seeing that show up in pipeline or maybe even just in customer conversations?

Joe, definitely in customer conversations. I wouldn't say it's necessarily showing up in pipeline. Look, patching and vulnerability management is a fundamental layer in cyber resilience and an overall business resilience. We've been preaching that for a while. I think it just makes it more top of mind and folks need to make sure that they have a level of autonomous patching and vulnerability management regardless of the environment.

As it relates to backup, I think I brought this up earlier with the previous call from Mike and his team, it just provides another tailwind as to the use case, why you need to be able to back things up and more importantly, recover and recover in a near-time way. I think it's really just driving a lot more conversation and awareness across the industry. By and large, my MSPs that are in the upper quartile, they've been practicing this layered security approach. We've been helping them with that layered security approach.

Again, this is why we think our best-of-breed platform approach is the right one for our customers and because it helps tie in together and drive a lot more efficiency before the attack, during the attack and after the attack, whether it's agentic or not. It's definitely making some of these conversations that might have been out of vogue, more in vogue, but -- and that's overall good for the community, good for the industry and good for N-able.

Maybe one tactical one for Tim. How should we think about net new ARR for the remainder of the year? Is there any commentary that you can provide that could help us understand the trajectory throughout 2026?

Yes. We talked on slightly last quarter that it was going to be more back half led than front half led, more so due to some of the new offerings that we're bringing to market throughout the course of 2026. That's specifically more so on the data protection side with DRaaS and Google Backup that John touched on.

Your next question comes from the line of Eric Suppiger with B. Riley Securities.

I apologize if this was asked on balancing a couple of calls. Just curious, has the developments with Anthropic and Mythos highlighting new or highlighting zero-day attacks, has that changed your customer behavior in terms of the way they're using N-able to do patch management and trying to move forward on more of an accelerated path to implementing patches in response to kind of a threat landscape that's getting more difficult?

Erik , yea, we talked about this a little bit before. What it's really done is just, I think, making patching and vulnerability management, which is a fundamental layer and cyber resilience more top of mind for the -- overall for the industry. Look, an internal IT department and/or an MSP who is established, that is growing their business that practices the right proper layered security that is driving more of a compliance forward type of business is executing on these areas already. It really just puts the -- our solution more to the center of what it needs.

That's why, again, we believe the way that we're positioned before the attack, and we talk about before the attack, that is patching, that is vulnerability management that is monitoring and managing and during the attack with our threat hunting and our XDR, which is AI infused and then, of course, recovery if you need to get things back up and going, we believe that's the right formula for internal IT departments and MSPs. Tying these all together and adding an agentic layer that takes away from some of the high-volume operational work from a technician, that's the right formula because at the end of the day, what AI will also do for the bad guys is accelerate their speed and their volume for the threats.

We need to be able to give our customers the ability to fight fire with fire and provide them AI-infused or AI-led technology so they can keep up with the speed. Often, a human is the bottleneck, and it's our job here at N-able to give them the software. It's not a labor burden, but it's on technology to, one, keep their customers safe and also drive their efficiency. We mentioned in the prepared remarks, an average MSP has an EBITDA of 10%.

A lot of that's because of the labor and on the high-volume mundane tasks. As we usher in the AI technology, our hope is to really break that linearity in the model, number one, to help them improve their EBITDA, but also be able to make sure that they're thing off any threats as a result of some of the AI in the wrong hand type of thing. All of this, frankly, is pointing, I think, to an area where cybersecurity will see a tailwind and it's making it more top of mind.

[Operator Instructions]. Our next question comes from the line of Keith Bachman with BMO.

This is Adam on for Keith. I wanted to circle back to the new products and ask that now that disaster recovery and N-zo are formally launched, what are adoption trends and uptake there relative to your prior expectations? Then inclusive of those as well as the Google Workspace launch expected later this year, are you guys embedding any expectations into the guide for revenue or ARR?

Adam, thanks for the question. It's good. I want to clarify. DRaaS is in limited preview right now. It's in customers' hands. We'll do the full launch a little bit later on in the back half of the year. To Tim's point, that's why we have the ARR building more to the back half of the year. It's early days. I'm happy to report that so far, so good. We're building the pipeline. We have customers in preview. The experience so far, again, it's early days, has been really positive, and so we're excited there.

On N-zo, it's also promising. Now in N-zo, we're not going to directly monetize this in this first phase, but what we're seeing is MSPs coming back saying, "Hey, that saves me hours. You're improving certain tasks that I'm doing by 70% and the feedback has been good. That being said, the use cases are limited right now. Our plan is to continue to expand those use cases as we continue to get some of those reviews and savings from the labor.

DRaaS, just to be clear, that one will be directly monetizable. N-zo in its initial phase is really going to be about helping the customer experience, driving our GRR and helping them improve their profits as well. Then we'll layer in coworkers and other monetization paths as we continue on the Agentic lane.

As it relates to Google, that's more to the back half of the year. We actually have customers in the queue and doing some limited preview there, but because of where that sits in the year, we're not necessarily baking that into our financial plan just yet. just because that's a little bit closer to the back half of the year. Good question. Look, this is also DRaaS and backup for Google are the top 2 areas that people were requesting for backup and data protection for the last couple of years.

Just as a reminder, as it relates to data protection, this will help us improve our win rate now that we have these offerings. It will help us with the expansion, of course, because we'll be able to cross-sell, and it should help us with the GRR as well because now we have that one complete offering that an MSP is looking for. We're cautiously optimistic. Cove continues to be a fantastic offering and our data protection area is our largest ARR area. We expect this to just accelerate the data protection story.

Just a follow-up, if I may. I just wanted to ask about packaging and pricing changes. I believe you previously mentioned there's going to be a 1- to 2-point net benefit for FY '26. Is that still the expectation?

Yes. I would say it's probably closer to the 1, but yes, we're still expecting to get a slight benefit from pricing and packaging overall on the year.

There are no further questions at this time. I will now turn the call back to CEO, John Pagliuca, for closing remarks.

Thank you, everyone, for joining N-able's quarterly results. We'll see you next time. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the N-able Fourth Quarter 2025 Earnings Call.

[Operator Instructions]

I will now hand the conference over to Griffin Gyr, Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to N-able's Fourth Quarter 2025 Earnings Call.

With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO.

Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.enable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law.

These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website.

And now, I will turn the call over to John.

Thanks, Griffin. We entered 2026 with momentum, following another year of profitable growth and with confidence that we can drive continued strong performance. Cybersecurity is a matter of survival, and our AI-powered cybersecurity platform delivers the business resilience customers need. Our fourth quarter and full year results reflect this strength with strong results across our key operating metrics.

Both fourth quarter and full year 2025 revenue grew 9% year-over-year in constant currency. We exited 2025 with ARR of $540 million, growing 8% at constant currency. Our adjusted EBITDA in the fourth quarter was $39 million, reflecting a 30% margin and $153 million for the full year, also reflecting a 30% margin. Beyond the financial results, we made exceptional progress across the business in 2025. We solidified our presence in the AI SOC market with the successful integration of our Adlumin acquisition, crossed $200 million of ARR in data protection and expanded into the VAR channel to broaden our sales reach.

We also opened up a new R&D center in India to deepen our engineering capacity, elevated our cybersecurity brand and accelerated innovation across the platform with AI-driven capabilities. Our teams executed exceptionally well, and the business is meaningfully stronger as a result. Building on this progress, let's now discuss our strategy and approach moving forward. In particular, there's a lot of debate about the impact of AI on software, and I want to share how N-able is approaching AI and the tailwinds we see.

First and foremost, we continue to think long term. N-able was founded over 25 years ago on the belief that small and midsized organizations would keep digitally evolving and would rely on technology experts to help guide that journey. This enduring belief anchors our business. AI accelerates digital evolution, which we believe is the fundamental driver of our business and fuels even greater opportunity. Durable truths guide this evolution. Businesses need to be secure, and they want to achieve this efficiently. N-able helps them accomplish both.

AI enhances our ability to deliver these outcomes by automating routine tasks, strengthening threat detection and helping customers scale. For N-able, we believe AI is a fundamental tailwind, and we are not only embracing, but actively capitalizing on it. Second, our foundation is rock solid. With telemetry from 11 million IT assets across more than 500,000 businesses and decades of trust and cybersecurity expertise, we have the structural attributes to succeed in the AI era. We want to be clear about our stance on the AI-related debates unfolding in the industry.

One narrative is that businesses will look to replace existing software tools with low-code and vibe coded solutions. We see our position in cybersecurity as fundamentally different. Building cybersecurity solutions isn't a part-time or easy job. The difficulty in stakes are too high. One mistake and your business can become extinct. Our cybersecurity software solutions are a foundational part of complex business infrastructure. Sitting at the cybersecurity table requires deep domain expertise, meeting stringent compliance standards, mastering a long tail of edge cases and an innovation engine capable of quickly responding to new and emerging threats.

Businesses aren't looking for component parts to assemble. They want complete products and dependable cybersecurity outcomes. Coding is a component, N-able delivers the full product and the outcomes that actually matter. In fact, the democratization of coding is contributing to an increase in the scale, speed and sophistication of attacks. This has created a more dangerous AI-empowered adversary and makes our innovation, domain expertise and ability to deliver trusted outcomes more critical than ever. Another discussion is that new AI solutions will replace existing software workflows. We believe this view overlooks a key insight.

Probabilistic AI doesn't replace deterministic workflows. It complements them. We are combining our SaaS system of record in context with an AI system of action. This unlocks step function value that we believe will take us to $1 billion of ARR and beyond. Let me be clear. The way we see it, AI doesn't erode our moat, it widens it. Third, and perhaps most importantly, we are delivering value with AI now. AI is embedded across our cybersecurity platform, reducing risk and improving customer efficiency.

Each solution has exciting progress and use cases. I'll detail some product specifics in a moment. Underpinning our opportunity is a threat landscape that is constantly growing more difficult for businesses to manage. Attack services are widening, data volumes are growing and IT complexity is increasing. These challenges are further compounded as bad actors are utilizing AI to execute more advanced and widespread attacks. Business' need for cybersecurity has never been more critical and will only continue to grow.

We believe N-able is well positioned to capture this growing demand. From a go-to-market perspective, our channel-led approach unlocks efficient global scale. And from a solution standpoint, our purpose-built platform, which spans security operations, data protection and unified endpoint management drives compelling value. We enable customers to identify and stop threats, protect and recover data and efficiently manage complex IT environments to realize true business resilience.

This balanced platform breadth is our strategic advantage. By maintaining focused product development, we can continue to deliver technical excellence in each category where we compete. And by offering a wide breadth of solutions, we can also deliver platform-level value, including economic and technical benefits. Our approach improves technician feasibility and enables solution consolidation for our customers, helping them reduce risk and improve profitability.

A near $300,000 ARR fourth quarter customer win demonstrates this value proposition in action. The customer consolidated the unified endpoint management, security operations and data protection on to N-able, displacing 5 separate competitors. We addressed 3 critical pain points that included automation gaps, alert fatigue and high data protection overhead costs. A deal of this magnitude from a customer with only approximately 50 employees speaks directly to the power of our strategy to deliver enterprise-grade security to every business. The combination of our best-of-breed capabilities and efficiency of our platform approach drove compelling value.

Bringing it all together, our positioning is sound and our opportunity is significant. AI is a positive demand driver and a technology we are integrating across our platform. More broadly, as we seek to be a business that compounds value over the long term, our fundamental objective remains the same, focus on solving ever-evolving customer problems, deliver security and efficiency and unrivaled business resilience.

With that said, let's now turn to key tenets of our 2026 plan. Our priorities span product innovation, strengthening our trusted brand and continued improvements in go-to-market operations. On the product side, we plan to continue to develop AI as a core differentiator. For our UEM solution, we are excited to debut N-zo, our powerful AI workflow assistant that users will be able to command to complete tasks and better run their IT and security operations. We believe this is a game changer. With a single query, customers will be able to derive insights and complete actions in seconds that previously took hours.

As it evolves, our AI workflow assistant is intended to diagnose issues, recommend next steps, write and execute scripts, summarize device health and turn raw data from millions of endpoints into safe, reliable and efficient actions. Adding this orchestration layer is a force multiplier on top of our already powerful autonomous management capabilities. The industry faces a well-documented IT and security skills gap. Our customers operate labor-intensive businesses in a market with tight employment. AI can change that equation.

We're empowering customers to automate more tickets, streamline workflows and amplify the capabilities of every technician. Closing the skills gap with technology rather than a headcount unlocks a new frontier of scalable, profitable growth. Additionally, we have received industry recognition positioned in the 2026 Gartner Magic Quadrant for endpoint management tools. Our roadmap also includes furthering our investment in AI within our security operations solution.

AI unlocks security scalability that manual approaches simply cannot match. Within our security operations solution, AI now handles 90% of identified threats automatically, up from 70% a year ago, freeing customers to focus on higher-value strategic tasks. In addition to our AI advantage, we bring multiple proven differentiators, including interoperability across a spectrum of EDR providers and shared visibility into our data system. On the back of our product strength, we were excited to recently introduce a new cyber warranty program. We believe this warranty will help derisk adoption and bolster customer confidence.

Our solution is scaling quickly, driving strong net new ARR dollar growth. A recent customer incident illustrates the real-world difference we make when it matters most. At 5:00 a.m. Christmas morning, attackers identified a transportation company as an easy target for a holiday heist. Fortunately, our security operations solution was standing guard and spotted the targeted server attack and moved quickly to lock down the compromised asset. Leveraging our AI-powered SOC, time to containment was mere minutes. No data was taken, no downtime occurred and what could have been a major business disruption was completely avoided.

Threat actors don't take the holidays off and neither do our AI agents. Each of our 3 solution pillars is AI infused. And in data protection, our AI-enabled recovery testing saves customers hours of time and eliminates the guesswork involved in ensuring their backups are safe and secure. We aim to extend our advantage in data protection this year by adding Disaster Recovery as a Service or DRaaS and Google Workspace workload coverage. These are 2 highly requested billable capabilities across our 14,000 data protection customers and both represent meaningful TAM expansion.

DRaaS solves multiple pain points. Customers are challenged to manage backup infrastructure themselves. They face large upfront hardware costs, expensive and time-consuming setup, ongoing maintenance and potential liability associated with storing data. At the same time, expectations are rising and businesses are seeking shorter return to operation timelines. These dynamics are particularly acute among upmarket customers.

Our Disaster Recovery as a Service will allow customers to quickly launch virtual servers in our secure cloud environment. This delivers real-time restore capabilities, seamless business continuity and eliminates the need for them to have to manage backup ecosystems themselves, significantly reducing costs, time, risk and headache. Google Workspace coverage addresses another important customer need. Google Workspace has a large and growing footprint, particularly in the education sector and among cloud-first organizations. And customers want to ensure this data is protected and recoverable. Adding coverage will expand our strike zone significantly and unlock opportunity for N-able with both existing and new customers.

Our high confidence and expectations from both DRaaS and Google Workspace are supported by a robust demand environment and our market trajectory. As customers manage rapidly growing data estates and ransomware attacks escalate, our data protection solution delivers the simplicity and robust performance customers value and continues to grow meaningfully faster than our total ARR. From a marketing perspective, 2026 is about capitalization on our brand strength. We protect over 500,000 businesses and bring 25 years of service excellence.

The N-able name carries weight, underscored by Omdia recently naming N-able as a cybersecurity titan. That recognition validates the 3-pillar strategy we've been executing across unified endpoint management, security operations and data protection. The positioning is resonating. Partners and end customers alike are responding to the N-able brand, and we're seeing that translate into both deeper retention and new logo growth.

From a sales and customer success perspective, our priority is accelerating portfolio adoption and deepening engagement across our full channel for both MSPs to VARs. Security operations is a standout growth lever and key to both objectives. Penetration of our AI-powered security operations solution remains in the early stages and more broadly, a large portion of MSPs still operate without a security operations solution. In fact, over 75% of our new lands are entering the category for the first time.

We believe we are tapping into a sizable greenfield market with considerable upside. Pertaining to full channel development, we continue to expand our VAR outbound motion. This includes investments in field reps and channel account managers, which establishes critical in-market boots on the ground. From a product perspective, we are also seeing particularly strong traction with UEM in the VAR channel. Our all-in-one highly autonomous IT management and security value prop is resonating with enterprises struggling with vendor sprawl and tool complexity.

With our UEM platform, we're replacing multiple point solutions with a single converged offering that spans patching, vulnerability management, remote access, endpoint management and endpoint security. This not only delivers cost savings and operational efficiency for our customers, but positions N-able to capture a larger share of endpoint spend as organizations consolidate their security and IT management stacks. We plan to double down on this momentum with increased field events, up level of account teams and continued investment in prospect pipeline generation. The success of our strategy and execution is reflected in our financials.

We are sustaining a strong top line trajectory. N-able is not slowing down. Constant currency ARR growth in fiscal year '25 was 8% and the midpoint of our fiscal year '26 guide calls for the same. We are excited but not content. Our go-to-market and product strategy are aligned with customer demand. The foundation in place is to reach greater heights over time. Key to achieving this acceleration is the success of our channel expansion, new product introductions and monetization opportunities created by AI. We're executing today, while building for tomorrow. We've never been more energized and appreciate you're being part of the N-able journey.

With that, I'll turn it over to Tim and then circle back for closing remarks. Tim?

Thank you, John, and thank you all for joining us today. N-able continues to execute with focus and purpose. We exited 2025 with $540 million in ARR, growing 12% year-over-year, while delivering 30% adjusted EBITDA margin. Operationally, we deepened our presence in data protection and security operations, expanded our channel reach and accelerated AI innovation, all while maintaining a healthy balance of growth and profit. The acquisition of Adlumin was successful with cross-sell to our existing MSP customers performing well and ahead of our acquisition plan.

I'll now walk through our fourth quarter and full year results, provide additional detail on the drivers of our performance and discuss our 2026 outlook. First, let's discuss our results for the fourth quarter and full year. For our fourth quarter results, total ARR was $540 million, growing at 12% year-over-year on a reported basis and 8% on a constant currency basis. Total revenue was $130 million, $3 million above the high end of our guidance, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis. Subscription revenue was $129 million, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis.

As a reminder, we purchased Adlumin on November 20, 2024. As such, we only recognized approximately half a quarter of revenue in that period, while the fourth quarter of 2025 reflects a full quarter of Adlumin revenue contribution. This dynamic bolsters our fourth quarter 2025 revenue growth rate relative to our guidance for Q1 2026 revenue growth. We ended the quarter with 2,671 customers that contributed $50,000 or more of ARR, which is up approximately 14% year-over-year.

Customers with over $50,000 of ARR now represent approximately 61% of our total ARR, up from approximately 57% a year ago. Our momentum upmarket has been consistent and pronounced. This customer cohort has grown from 46% of total ARR at the time of our 2021 spin-off and has historically retained at rates roughly 2% to 3% above the total company average, supporting our continued upmarket and cross-sell focus. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 103% on a reported basis and 102% on a constant currency basis. For the full year, we finished 2025 ahead of our outlook with total revenue of $511 million, representing year-over-year growth of 10% on a reported basis and 9% on a constant currency basis.

Subscription revenue was $506 million, growing approximately 10% year-over-year on a reported basis and 9% on a constant currency basis. Approximately 45% of our revenue was outside of North America in the quarter and the full year. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release.

Fourth quarter gross margin was 80% compared to 82% in the same period in 2024. Full year 2025 gross margin was 81% compared to 84% in 2024. Fourth quarter adjusted EBITDA was $39 million, $4 million above the high end of our guidance, representing approximately 30% adjusted EBITDA margin. Full year 2025 adjusted EBITDA was $153 million, representing an adjusted EBITDA margin of 30%. Unlevered free cash flow was $28 million in the fourth quarter and $101 million for the full year. CapEx, inclusive of $2 million of capitalized software development costs was $7 million or 5% of revenue in the fourth quarter. CapEx was $29 million, inclusive of $11 million of capitalized software development costs or 6% of revenue for the full year. We ended the year with approximately $112 million of cash and an outstanding loan principal balance of approximately $400 million, representing net leverage of approximately 1.9x.

We refinanced our credit facility in the fourth quarter. increasing our commitment from approximately $336 million to $400 million. This new facility enhances our flexibility and supports our broader capital allocation strategy, including evaluating potential share buybacks and M&A. Non-GAAP earnings per share was $0.06 in the fourth quarter based on 188 million weighted average diluted shares and $0.39 for the full year based on 189 million weighted average diluted shares.

Note that both the fourth quarter and full year non-GAAP earnings per share experienced approximately a $0.02 negative impact from onetime fees related to the new debt facility. We executed $30 million of share repurchases in the year, reflecting our belief in the business and our commitment to disciplined share count management.

Turning to our financial outlook. Our guidance incorporates the following elements. First, our guidance assumes FX rates of $1.17 for the euro and $1.34 for the pound. More broadly, our outlook reflects our expectations for steady demand trends, stable retention and continued execution across our platform and sales channels. Key initiatives spanning our growth algorithm give us confidence in this view. In gross retention, we see our contract initiative and ongoing shift upmarket driving sustained strong performance.

In net retention, we see cross-sell traction in security operations and data protection powering continued success. And on the new business side, our channel expansion, enhanced marketing engine and broader portfolio position us well to deliver consistent new logo growth. From an investment standpoint, in 2026, we intend to continue to make disciplined investments in AI and product innovation as well as go-to-market expansion. We are excited to make these growth-oriented investments, while materially improving our unlevered free cash flow on a year-over-year basis as we realize synergies from our Adlumin integration and begin to see benefits from our India development site investment.

With that in mind, for the first quarter of 2026, we expect total revenue in the range of $131 million to $132 million, representing approximately 11% to 12% year-over-year growth on a reported basis and 6% to 7% on a constant currency basis. We expect first quarter adjusted EBITDA in the range of $35.5 million to $36.5 million, representing an adjusted EBITDA margin of 27% to 28%. For the full year 2026, our total revenue outlook is approximately $554 million to $559 million, representing approximately 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis.

Our full year ARR outlook is $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis. To be clear, the high end of our full year 2026 ARR guidance calls for approximately 20% more net new ARR dollars on a constant currency basis than in 2025. We expect full year adjusted EBITDA of $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%. We expect CapEx, which includes capitalized software development costs to be approximately 5% of total revenue for 2026.

We also expect our unlevered free cash flow to be approximately $114 million to $118 million. We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. This cash flow outlook equates to a 17% increase in unlevered free cash flow dollars at the high end. Our model is built for profitable growth, and our outlook reflects this strength. We expect total weighted average diluted shares outstanding of approximately 188 million to 189 million for the first quarter and 188 million to 191 million for the full year.

Finally, we expect our non-GAAP tax rate to be approximately 24% to 27% for both the first quarter and the full year. We are delivering strong financial results, while positioning the company for long-term success. Our 2026 guide calls for meaningful growth in constant currency, net new ARR dollars and unlevered free cash flow dollars. Our growth algorithm remains healthy across gross retention, net retention and new customer acquisition. We are executing well, and our AI-powered cybersecurity platform is resonating. Importantly, we are achieving these results, while continuing to invest for the long term with an exciting AI road map and clear path to further build our global go-to-market engine.

Now I will turn it over to John for closing remarks.

Thanks, Tim. We move forward with a strong financial profile, a durable position in cybersecurity and a focused strategy. AI is amplifying what we do, and we are delivering AI capabilities today. 2026 is a year of execution for N-able. And on behalf of nearly 2,000 N-ableites across the globe, I'm excited for what we will deliver.

And with that, operator, we'll open the line for questions.

[Operator Instructions]

Your first question comes from the line of Joe Vandrick with Scotiabank.

John and Tim, so ARR grew about 8% on a constant currency basis in 4Q. Can you talk a little bit more about what you're seeing today that gives you confidence to guide to that slightly higher constant currency ARR growth in 2026?

Sure. Yes. Joe, thanks. This is John. So I think the -- really, the guidance is underwritten, I would say, with a lot of confidence in that it's steady. There's a lot of steady assumptions in there. We're expecting steady to slightly improved gross retention. We're seeing that in the business. We have a list of new SKUs that some are in the market already that are gaining nice traction like our AI-powered XDR, but also in data protection, Disaster Recovery as a Service, Google Workspace that we mentioned in the prepared remarks.

So it comes with a couple of combinations from the growth algorithm: one, the GRR improving; two, better expand on some of these new SKUs; and three, continued acceleration in our reach with the VAR community as well. So we have a multipronged approach. And I would say the guidance is baking in a moderate level of those performance -- of those things performing.

Makes sense. And then if I could just sneak in one more on the product side. You talked a lot about AI innovations that you have in the pipeline and one that you called out, I think it was called N-zo, which seemed really interesting. Just wanted to clarify, is this a product that you expect to be released in the coming year? And can you just talk a little bit more about the -- what value this is going to create for customers?

Sure. So it's N-zo, and it's N-Z-O. Make sure we get the spelling right in the script. And so yes, it's in actually customers' hands right now and limited preview. We're learning from it and getting the behavior. So far, the reviews have been fantastic. It is an in-product AI agent. It's an in-product AI workflow assistant. So embedded today in our UEM, but the plan is to really embed these AI assistants or these AI agents in all of our -- all or most of our offerings.

So what it will allow MSPs to do today right out of the gate, it allows them to really get a better assessment as to what their environments might look like with simple natural language, if an MSP wants to know if they have any devices that might be vulnerable, if there's a process that needs to get done. And that's today. And then in the go forward, it will actually be a source of action. So they'll be able to put in a request to understand what's going on in their customer environments, but then actually take a proactive action and remedy what might be a vulnerability or some type of operation.

So it might have taken hours to do like a script or some type of level of automation. Now what we're seeing with the customers is they're able to go through their environments, assess their environments and take action in honestly, minutes using natural language. So that's the play. And if I think about AI in general, I would say there's a 3-pronged strategy to how we're approaching this. Number one, we have AI infused in our products today, right? And so both machine learning and Agentic AI, as an example, our AI SOC or XDR has AI in it today. What is that doing? That's making our customers and their customers more secure. That's providing a better experience. That's also giving us a competitive advantage over other solutions out there because I believe we are ahead as it relates to AI and our XDR.

So today, not just in XDR, but across our offerings, we have in our products today, that should make our GRR better, that should make our expansion better because the solutions are better, there's better experience. And then we talked about the second prong, and that prong is more the in-product AI agents. Again, that should have a better experience, improve our GRR, but also give us an opportunity to even charge for a premium type of experience. And then the third prong are AI-specific SKUs and AI-specific agents that we can go charge for that have their own line item.

So it's a 3-pronged strategy. I'd say we've already executed the first prong with the end product and we'll continue. And N-zo is the first example of that in-product AI agent helping the MSPs and their internal IT departments with their workflows.

Your next question comes from the line of Mike Cikos with Needham.

Congrats on the finish here -- and the strong finish to calendar '25. I wanted to cycle back first question to the prepared remarks, and I believe it was Tim's commentary regarding Adlumin. It sounds like the cross-sell to the existing customer base is coming in ahead of what you guys had originally mapped out at the time of the acquisition. Could you just help us think through what is driving that earlier-than-expected success? It's great to hear, but just any other guardrails you could put around that? And then I have a follow-up.

Sure. Look, we knew we had a winner with the AI solution with Adlumin. And just as a reminder, this was a top 1 or 2 need that we saw in the MSP community. They needed help with the threats, and not just assessing the threats, but taking action on threats. And if you recall, Mike, this started off as an OEM arrangement. So we did our own extensive research, looked at all the solutions that are out there, bigger shops, other types of shops. We chose Adlumin because of the technology stack, the level of AI that was in it, number one.

Number two, the fact that it was agnostic. And so what does that mean? That means regardless of an MSP or their end customers' environments, if they're using different firewalls or if they're using different EDR, different endpoint security, different manners to get their logs, we can ingest all of that. And I believe it's a combination of the AI-infused technology, the fact that we can actually assess but take action in minutes where competitive solutions might take hours or days, it's resonating, number one.

Number two, we separate the software and the service so that we can allow the technicians eyes on glass as well. So what does that mean? A lot of offerings, it's more like a black box service. MSPs can see the same things that our AI SOC analysts are looking at, and that's resonating. There's a big push out there right now. Compliance is driving a lot of this need. And I think our original estimates, we -- I don't think we fully grokked the breadth of the demand. We knew that for our bigger MSPs, this was top of mind.

The nice thing here is we're seeing our large MSPs picking this up, but even our very small shops. And compliance is driving a lot of that, the ongoing cyber threats, AI as a new adversary is driving that. MSPs are now baking this to the -- effectively their standard stack. And so I believe a solution like this will be a table stakes part of every MSP's service going forward. And I think the fact that it's a broader swath of the MSP base is what's driving some of that upside.

Mike, I would probably just add, and John hit on it in his prepared remarks, is the mix of greenfield opportunities versus incumbents as well. We're seeing about 70%, 75% of the opportunities coming in from a greenfield perspective. So I think that's also been a catalyst in the equation as we've executed through 2025.

That's great. That's very encouraging. And then a quick follow-up, again, just to drill into the guidance assumptions. If I look at what's -- the constant currency growth we're looking for in Q1 versus the full year, it implies some stronger growth maybe as we get into 2Q and then the second half of the year. And I'm just trying to get a better sense, is there anything we should be thinking about from a seasonality standpoint or maybe those data points you have on the slightly improvement or the stable GRR translates to an improved NRR in the back half of the year, the new products incubating? Again, can you just give us some more to underwrite this guide from where we stand today?

Yes. Mike, looking back at 2025, we saw some seasonality in Q1. We actually kind of built ARR up from a growth standpoint, more so in the second half than the first half from a 2025 perspective. I think as we look at 2026, I'd expect some similar seasonality, probably more akin to what you touched on was the impact of some of the newer product initiatives will have heavier weight in the second half of calendar 2026 versus the first half.

We've got a few things in customer preview that we plan to flip GA in the first half, which I'd expect to have more impact on the net new ARR in the second half of the year. So I would expect a similar kind of flow on a constant currency basis. 2025 blended a bunch of choppiness from an FX perspective. But kind of from a sequential standpoint, I would expect a little bit more seasonality in Q1 versus the rest of the year with better performance in the second half.

[Operator Instructions]

Your next question comes from the line of Matt Hedberg with RBC.

John, I appreciate your comments at the start of the call around all of the market confusion around AI and certainly feel like, especially within your core customer base, you guys could serve as a bit of a catalyst for even customer AI adoption. When you look at your 3 pillars of N-able today, do you think there's -- do you think that they all could benefit from customers' increased focus on Agentic AI? Or do you think -- I'm just sort of curious how you think -- especially when we think of like Disaster Recovery as a Service. But just any sort of thoughts on like what elements of your business might actually see maybe even stronger uplift with customer AI adoption?

Sure. Look, the key tenets of our business, and this is part of the durable truth, Matt, it's really about security and efficiency. And that plays into all 3, right? So we have our data protection suite, which we mentioned is over $200 million, is growing nicely. You mentioned Disaster Recovery as a Service that's coming in the middle of the year. The way that we're going to make sure that we're driving that experience for our MSPs and their clients and even some of the mid-market folks is by leveraging a good amount of AI.

There's definitely an ability to make sure that the backups themselves are active, ready to go and continuing to collapse that RTO and RPO kind of metrics of XDR, of course, right? So XDR minutes matter in this world, right? You want to be able to contain a compromised asset. The example that we put in the script is a good example of that. So being able to drive more efficient, but also just taking action, leveraging AI is a big thing.

And with our UEM, look, that's where we're driving a lot more of the efficiency, but also adding SKUs and AI SKUs in the future to help MSPs with compliance matters, right, to help MSPs with posture management. The best way to do that efficiently is by leveraging AI, right? So helping MSPs with their posture management across the cloud, across their complex environments. Going forward, Matt, one of the things I always say is that the verbs in our business have been the same for 25 years, and they'll continue to be the same for the next 25 years.

We monitor, we manage, we secure, we protect, we recover, right? And the nouns continue to stack. In our future, the new nouns that will be coming is LLMs and agents and how does an MSP help make sure that, that data is protected. That data is secure, that data can be recovered. So these new nouns will stack on the old nouns and it will provide a tailwind for the MSPs and it will provide a tailwind for cybersecurity vendors and those that are servicing the MSPs.

And then the last point I'll make, Matt, is it's also a big unlock, right? When I speak to MSPs and I speak to hundreds, if not thousands of MSPs annually, a top 3 issue for them is labor. And the fact that we can unlock the labor, it will allow these MSPs to go out and grow and service more SMEs in a scalable, more profitable way. And so our tools allow them to do that securely. Our tools allow them to do that efficiently. And really, our tools with AI will really provide an unlock for the labor bottleneck for the MSP community. And that's why we -- I agree with you. I believe we -- our job is to be a catalyst for this MSP market so that they can scale and service more and more, not just of the SMB, but also of the Fortune 1000.

More and more MSPs, some of our studies suggest more than 3/4 of our MSPs are also going into a co-managed approach, where they're walking into a CIO or a CISO's office and saying, let me help with part of your security, let me help with your disaster recovery. And we're there to help make sure those MSPs can get into those bigger accounts, driving a bigger TAM and a bigger SAM for the MSP market itself.

That's super helpful. And then I think one of the things you guys do really well is you balance stable topline growth with obviously EBITDA margin expansion. When we think to 2026, and obviously, we're anniversarying Adlumin and you're rolling out new organic products that you talked about in your script. How do we think about capital allocation when we look to 2026? I mean, should we expect a little bit of M&A, should -- obviously more organic investments? You mentioned VARs. But yes, just a little bit more on capital allocation, sort of balancing that growth and profitability.

Sure. Look, Tim and the team did a great job with the structure of the new debt that we have. That gives us some flexibility. We take a look and we look at all different aspects. And I think you said it best, Matt, it's a balanced approach, right? We have the ability to buy back some shares as we did last year. So that's one option. But yes, I do expect us to continue to look at solutions that both MSPs and VARs and the mid-market look at to complement these 3 best-in-class offerings.

And we'll continue to see if we want to build, which would potentially involve some R&D or OEM like what we did successfully with Adlumin and we've done successfully in other places or acquire. And it's really driven off of that North Star. And that North Star is what do the small, medium enterprise need to make sure that they are secure, that they are compliant, that they're staying one step ahead of the adversary. And so we have the flexibility to meet that need using a couple of different tactics, and we'll continue to look at and evaluate all the different avenues. And I think our strong balance sheet and our strong financial health gives us a leg up on a bunch of other folks, and therefore, that probability or optionality should allow us to meet the need of our customers.

[Operator Instructions]

Your next question comes from the line of Keith Bachman with BMO.

This is Adam on for Keith. But I wanted to follow up on the last AI question. So it's good to see the different prongs in growth levers there, but I was wondering if you can quantify the monetization opportunity there. And I know it's early, but in the past, you guys talked about the $3 per device per month opportunity. And I was wondering if AI adds meaningfully to that opportunity.

And then second, on the other side, I know device headwinds have come up in the past, primarily from the macro. I was just wondering, is it possible in the future that AI use among MSPs and SMBs can create a headwind there? And if so, how do you defend against that?

Thanks, Adam. So look, a couple of things. What we monitor, what we manage, what we protect, what we recover is more than just the endpoint, right? It's servers, it's virtual machines, it's SaaS applications, it's data and data growth. So that's number one. A good chunk of our revenue is really -- is on those kind of metrics or those kind of volume metrics. Number two, look, the SME, you guys have our power numbers, and you can do the math, right? We talk about 25,000 customers and over 500,000 or so small and medium organizations.

I always say averages are for dummies, but the average there is 200. And I believe the SME is a little bit better insulated on potentially some of this like headline that people think about in the Fortune 1000. In other words, if you think about the end markets that the MSPs are servicing, it's health care, right? It's your doctor's office, your dentist's office, it's the financial adviser, it's education. And so I feel that, that's really well insulated.

And then on the third part, we do continue to look to increase the ASP per MSP and per user by offering more SKUs. And a lot of those SKUs will be AI infused or AI-powered. So I believe it's going to increase our economic stack. It will expand our TAM. It will expand the TAM and the reach of our MSPs. And as we look to bring on AI-specific SKUs in the future, that will just add to that $30 economic stack as we go forward.

So we're optimistic and it's all about making sure that we're delivering that need for the customer. But overall, our multipronged approach leaves us optimistic that we can expand and get more revenue per the MSP because they should be able to get more from their customer and they should have a better reach as they go forward.

There are no further questions at this time. I will now turn the call back to CEO, John Pagliuca, for closing remarks.

Thank you, operator, and thank you, everyone, for joining us today and your ongoing interest in N-able. See you next time.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone, and thank you for joining the N-able Third Quarter 2025 Earnings Call. My name is [ Lucy ], and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to your host, Griffin Gyr of Investor Relations to begin. Please go ahead.

Thanks, operator, and welcome, everyone, to N-able's Third Quarter 2025 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.enable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now I will turn the call over to John.

Thank you, Griffin, and thank you all for joining us today. We delivered strong third quarter results, reflecting robust demand for cybersecurity and the rising strategic relevance of N-able. Third quarter ARR was $528 million, up 14% year-over-year, and adjusted EBITDA margin was 31% Quarterly gross and net retention both increased year-over-year and quarter-over-quarter, underscoring the momentum and traction we are seeing in the business. We also expanded our security capabilities and further scaled our channel-first go-to-market motion, key pillars of our long-term growth strategy. Another quarter of growth, profitability and superb execution. Our performance stands out in a fast-changing technology landscape. AI is intensifying the speed, sophistication and scale of threats, and the adversary has never been more dangerous. Businesses need help adapting and N-able is rising to the challenge. Leveraging proprietary data from our 11 million IT assets, we are embedding innovative AI capabilities across our platform, arming organizations with the cutting-edge solutions they need to defend themselves in today's cyber battleground. Today, we will take a closer look at our recent progress and discuss how N-able is positioning itself to lead in an evolving cybersecurity environment. The digital state of operations for small and mid-market businesses is rapidly changing. The accessibility of AI tools to both the knowledge worker and the threat actor alike has created a new digital normal for organizations of all sizes. Today's workforce operates across hybrid systems, multi-cloud environments, SaaS applications and increasingly AI-driven processes. At the same time, as our digital infrastructure grows increasingly vital to business operations, AI-powered threats are putting those systems under greater pressure. This is driving a paradigm shift in how businesses must think about cybersecurity. In this new environment, security isn't just a line item, it's table stakes and the foundation of business resilience. N-able's end-to-end cyber resilience platform is purpose-built for this new world. Delivering protection and performance, our platform spans 3 vectors: Unified endpoint management or UEM, security operations and data protection. It enables visibility across every endpoint, intelligence to help stop threats before they strike and data recovery at rapid speed. We deliver coverage across the entire attack life cycle. We believe this breadth sets us apart from most cybersecurity competitors who take a siloed incomplete approach. For small and mid-market businesses who often face enterprise-level threats without enterprise-level resources, our end-to-end value is paramount. Our platform is designed to keep their entire business resilient. Our recently published N-able 2025 Annual Threat Report comprehensively assesses the ever-changing threat landscape. One key takeaway, AI is helping fuel scalable, low effort attacks that exploit common gaps in visibility and response. We identified a surge in detected threats against SMBs over the past year as they increasingly invest in the proper security tools to monitor their environments and mitigate risk. Broader industry data supports that AI is helping increase the scale of cyber attacks, with McKinsey reporting a 1,200% increase in phishing attacks since 2022 and the rise of generative AI. AI is also increasing the potency of attacks. Cyber criminals are leveraging generative AI to better mimic real-world people and messages, making phishing and ransomware harder to detect and more believable. Further exacerbating the challenge, SMB economics make them a prime target. Ransom demands are often calibrated to just under the cyber insurance deductible and the breach of a smaller firm is less likely to trigger a wider scale investigation than an incident at a Fortune 500 company. Insurance regulations are adapting to these changing paradigms and implementing tighter security standards for businesses. This is driving deal activity for N-able. One of our largest sales this quarter was to a prospective customer looking to supplement their on-premise backups with cloud-based data copies to stay in line with NIST 2 data redundancy standards. With quick deployment, compelling TCO and easy scalability, our cloud-first data protection solution perfectly met their need. While AI is still in the early innings, the impact on cybersecurity is evident. Threats are turbocharged, IT is more complex, regulations are tightening, and data is increasingly important. For N-able, the implications are clear. We believe AI is making our mission more critical and our opportunity larger. As AI drives demand for cybersecurity, we are also embedding AI both in-house and across our platform. Data is gold in the AI era. And with the telemetry from over 11 million IT assets and a solution that spans the IT security stack, we have the critical data needed to create and deliver AI solutions. We believe this scale, breadth, and data ownership are a powerful moat. Let's look at how we are using AI today and build to use it even more effectively for Mara. This quarter, we established an industry standard by sponsoring CANI, a framework for shared AI language across organizations and vendors. This is a market-first initiative that establishes consistent v capability for use across MSP and IT ecosystems to help drive seamless AI automation and my server behavior, enabling customers to harness AI effectively for enhanced cyber resilience. We are empowering AI agents to interpret and act on commands with precision across multiple different systems. This addresses one of the biggest challenges in IT management, fragmented and inconsistent terminology across businesses. By introducing these standards, N-able isn't just participating in the AI evolution. We are taking a role in building the field and writing the playbook for how AI operates for our customers. In UEM, we are making meaningful strides to use the power of AI to automate key workflows. Our developer portal acts as a customer's AI assistant, helping users leverage AI to operate more effectively and efficiently. We are seeing particular success in driving automated script generation and API integrations, cutting hours of manual work to minutes. Building on our momentum, we are pushing to extend our capabilities further. We are developing AI agents that IT and security teams will be able to use across their operations. This supports our larger vision of delivering near-autonomous IT. The opportunity is significant. IT and security teams everywhere are washing complexity and are often burdened by tedious repetitive work, managing endpoints, resolving tickets, implementing policies, maintaining compliance, securing data, and more. We are aiming to transform this paradigm. Our vision is resonating, underscored by the fact that our largest deal this quarter was driven by our UEM solution, representing an ARR win of nearly $0.5 million. And our UEM leadership continues to be recognized in industry media and press. We are delighted to win the MSP RMM platform Award for CRN's 2025 annual report card, a recognition based directly on feedback from our customers. Our security operations solution is also at the forefront of AI and innovation. It starts with our vendor-agnostic technology that ingests data from the endpoint, network, cloud, identity layer, and SaaS applications. This delivers the necessary bird's-eye view of customers' IT environments. Our AI-powered technology stack then serves as the orchestration layer, transforming raw data into actionable insights for security teams and automating threat response. These orchestration capabilities position N-able as an active threat neutralizer and real-time decision-maker, and our approach is working. Our AI-powered SOC is analyzing billions of security events a month, adding hundreds of businesses a month, and driving meaningful ARR growth for N-able. We're solving a major market pain point. Operating even a small SOC team can cost millions annually. N-able is democratizing security by delivering advanced AI SOC capabilities at a fraction of the cost, and we're not stopping here. The next frontier is near autonomous cyber defense, and N-able is building toward that reality today. We are also utilizing AI in our data protection solution. Our recovery testing capability uses AI to provide proof of recoverability without requiring customers to fully initiate a backup test, saving them significant time and reducing operational burden. This supports our broader value proposition to ensure data is always protected and recoverable. Looking ahead, we plan to introduce AI-based scanning of backup data that will continuously monitor data flows and flag unusual patterns, further enhancing our ability to detect threats before they cause harm. While data is gold, it is not sufficient for AI leadership. Trust and distribution are also key, and both are areas where N-able has strong advantages. As it relates to trust, cybersecurity is not an area where we believe businesses will experiment with self-created or nonspecialized options. The cost of a single mistake is simply too painful to trust a homegrown model or a company that only does security part-time. We are a trusted security provider. Distribution is also important. Our base of over 0.5 million businesses allows us to efficiently test and ultimately deliver AI solutions. And with healthy cash flow margins, we have a sustainable business model that allows us to invest in our business to compete in the dynamically changing AI world. These are all big advantages over competitors, still searching for product market fit and sustainable, profitable business models. Embedding AI into our platform unlocks meaningful value from automating technician workflows to detecting and preventing more threats to enabling new services. AI raises the ceiling for the value we can deliver to customers. We are leaning into the opportunity as we see a clear path to how developing AI-powered solutions allows us to competitively differentiate and take share in the vast and growing cybersecurity market.

Our channel-led approach is also key to our strategy to capitalize on the AI world. Businesses face challenges in managing cybersecurity and IT themselves. According to the September COPTiA report, tech unemployment is at just 3%, and with the skill sets needed to stay ahead rapidly evolving, keeping pace is a challenge. That's why businesses turn to the channel for help with cybersecurity and IT. Whether fully outsourcing to a managed service provider or working with a value-added reseller to guide vendor selection, the channel provides expertise and scale to SMB and mid-market businesses. We see the arrival of AI as an accelerator for businesses using the channel. With deep roots in the MSP community and growing investment in VARs, we believe our go-to-market strategy is aligned with the market opportunity created by AI and cybersecurity trends. We've talked a lot about AI today. I'll leave you with this. AI expands the scope of software and what N-able can do for our customers. It elevates the need for cybersecurity and expands our opportunity. There has never been a more exciting time for N-able, and we are creating that future now. Let's now talk more about our progress this quarter. Our growth strategy rests on 3 key elements: first, driving security success; second, scaling our go-to-market; and third, boosting customer expansion. We saw progress across all 3. We will first look at our efforts to drive security success. The market need is clear. Our efforts align with the significant opportunity and our broader ambition to set a new standard in cyber resilience for small and mid-market businesses. In data protection, we advanced our powerful solution with the launch of Anomaly Detection as a Service. These new capabilities are designed to detect unauthorized access with backup environments and proactively flag indicators of compromise. Unlike traditional backup solutions that focus solely on restoration, our approach helps prevent data loss before it occurs. This marks a strategic shift from reactive defense to proactive resilience.

We believe we are ahead of the competition in this regard, and we are excited about the impact for our customers. More broadly, we deliver the simplicity, power and affordability our customers crave, and our data protection vision is resonating. In fact, a customer recently shared that they went from spending 60 hours a week managing backups to just 1 hour a week after adopting our solution. The numbers reflect what our customers are telling us. Our data protection solution once again led our net new ARR growth in the quarter. In security operations and UEM, we continued our strong pace of innovation with new threat detection capabilities and powerful integrations. Our latest enhancements strengthen endpoint visibility and accelerate incident response, helping customers reduce dwell time and improve overall security posture. Let's now turn to our go-to-market progress. N-able is scaling with purpose. Anchored in a channel-first model that continues to prove its strength, nearly all of our businesses flow through the channel, and we're investing to deepen those relationships and expand our reach with a strong focus on further engaging the reseller channel. This reseller motion is building momentum. We initiated it with a geo-specific approach, starting in the U.K. and plan to expand in other regions. We're already well established in North America via the Adlumin acquisition, and this deliberate expansion strategy is designed to maximize impact and efficiency. One powerful proof point, we now have active relationships with a sizable number of the top 25 U.K. partners for CRN 2025 listing, up from virtually no presence at the beginning of the year. We believe this traction underscores the strength of our model and the effectiveness of our targeted approach. We continue to see strength upmarket. A standout example this quarter was a 70,000 device win, firmly validating our investments in mid-market expansion and ability to win large deals. We saw another proof point with the reseller-driven UEM mid-market win, where we displaced and consolidated 3 separate competitors across multiple categories, including remote access, endpoint management and privileged access. Our ability to meet complex requirements, including on-premise deployment and a road map to CMMC readiness and FedRAMP compliance was key to winning this business. We're elevating our message to match this momentum and showcase the full strength of our platform. We just hosted our first annual Cyber Resilience Summit, where we brought together hundreds of industry leaders and practitioners and discussed the hard problems facing our customers. One clear takeaway, cyber resilience is business resilience. Cybersecurity is no longer just an IT concern, it's a business imperative. Speaking clearly about business resilience isn't just marketing and messaging. We're helping partners translate cyber resilience into tangible business outcomes. A great example is our new executive summary report feature. This highly requested capability enables customers to clearly communicate protection outcomes to internal and external stakeholders, delivering transparency, accountability and peace of mind. The final pillar of our growth strategy is customer expansion, deepening relationships by delivering more value across our platform. A powerful example this quarter came from a long-standing customer, a respected regional MSP in the Southwest of the United States that utilizes our UEM, EDR and data protection solutions.

Just days before a major attack deadline, a large CPA client of theirs experienced a targeted cyberattack at 2:00 a.m., exploiting a vulnerability in their environment. While the attack caused damage, it was quickly contained. Thanks to the lay of defense provided by N-able, including our data protection solution, they were back up and running by lunchtime. What could have been a multi-week outage and potential extension event for their business was resolved in hours, demonstrating the real-world impact of our cyber resilience platform. These are the moments of truth in what N-able is all about. In the aftermath, our customer reinforced its defenses by making our MDR a standard nonnegotiable service for its clients, closing the loop on true end-to-end cyber business resilience. This type of outcome is driving stronger customer loyalty and deeper adoption. In fact, 43% of new UEM wins this quarter included an additional solution, demonstrating that our end-to-end cyber resilience platform is resonating. Further, the largest deal this quarter, which I mentioned earlier, was a cross-sell to a security operations mid-market customer, validating our cross-sell success. And we're seeing the results in our metrics. Both gross and net retention improved year-over-year and quarter-over-quarter, underscoring the value customers seeing in expanding with N-able. As we continue to deliver outcomes like these, we're confident in our ability to grow with our customers, helping them stay protected, resilient and ready for whatever comes next. With that, I'll turn it over to Tim and then circle back for closing remarks. Tim?

Thank you, John, and thank you all for joining us today. Our strategy remains disciplined, delivering scalable cyber resilience for small and mid-market businesses throughout our expanded channel ledge approach. This quarter's performance reflects that focus, strong top line growth, quality margins, healthy free cash flow and considerable operational progress. We believe infusing AI into our cyber resilience platform further positions us for long-term success. We also executed on our share repurchase program, underscoring our confidence in the long-term value of the N-able business. Reviewing the quarter, ARR performance was a standout highlight. Constant currency year-over-year ARR growth accelerated for the second consecutive quarter. When adjusting for currency impact, net new ARR dollar growth in Q3 was our best performance year-to-date. These results demonstrate the strength of our business and validate our strategy and operational execution. We are executing with precision and investing with purpose to lead in a fast-changing cybersecurity environment. Let's now discuss our results for the third quarter and our outlook for the fourth quarter and full year. For our third quarter results, total ARR was $528.1 million, growing at 14% year-over-year on a reported basis and 13% on a constant currency basis. Total revenue was $131.7 million, $3.7 million above the high end of our guidance, representing approximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis. Subscription revenue was $130.5 million, representing approximately 13% year-over-year growth on a reported basis and 12% on a constant currency basis. We ended the quarter with 2,611 customers that contributed $50,000 or more of ARR, which is up approximately 15% year-over-year. Customers over $50,000 of ARR now represent approximately 61% of our total ARR, up from approximately 57% a year ago. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 102% on a reported basis. On a constant currency basis, dollar-based net revenue retention was 102%, up from the previous quarter. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. Third quarter gross margin was 81.1% compared to 83.7% in the same period in 2024. Third quarter adjusted EBITDA was $41.4 million, 4 million above the high end of our guidance, representing approximately 31.4% adjusted EBITDA margin. Unlevered free cash flow was $22.6 million in the third quarter. CapEx, inclusive of $2.8 million of capitalized software development costs, was $9.4 million or 7.2% of revenue. Non-GAAP earnings per share was $0.13 in the quarter based on 188.4 million weighted average diluted shares. We ended the quarter with approximately $101 million of cash and an outstanding loan principal balance of approximately $336 million, representing net leverage of approximately 1.5x. Approximately 45% of our revenue was outside of North America in the quarter. Turning to our financial outlook. Our guidance accounts for the following elements. In regards to FX rates, we are assuming rates of 1.13 for the euro and 1.29 for the pound for the remainder of 2025, along with updates to other currencies. Also, as a reminder, we acquired Adlumin in the fourth quarter of last year. As such, Adlumin is on a like-for-like basis in our year-over-year ARR growth and our expected fourth quarter ARR growth rate reflects the natural impact of lapping that acquisition. Additionally, as part of our deferred payment deal structure, we anticipate executing a planned cash installment payment of approximately $50 million in the fourth quarter. We also experienced slight seasonality in results due to 606 revenue recognition dynamics. Given this dynamic as it relates to profit margin, we believe our full year EBITDA margin guide better represents our overall operating profile than our fourth quarter guidance. We continue to expect strong ARR performance and adjusting for currency, our guided net new ARR dollar growth in the fourth quarter is slightly higher than our average quarterly year-to-date results. Also, while we are not giving guidance for 2026, we do want to provide some brief commentary on expectations. We remain committed to returning adjusted EBITDA margin to 30% in FY '26. That said, we remain focused on balancing profitability with growth. The AI wave is now and with structural advantages that position us favorably, we believe it's critical to invest appropriately to realize the opportunity at hand. With that in mind, for the fourth quarter of 2025, we expect total revenue in the range of $126.5 million to $127.5 million, representing approximately 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. We expect fourth quarter adjusted EBITDA in the range of $33.6 million to $34.6 million, representing an adjusted EBITDA margin of approximately 27%. For the full year 2025, we are raising our total revenue outlook to approximately $507.7 million to $508.7 million, representing approximately 9% year-over-year growth on a reported basis and 8% on a constant currency basis. We are raising our full year ARR outlook to $530 million to $531 million, representing 10% year-over-year growth or 8% on a constant currency basis. As a reminder, our full year ARR outlook is on a like-for-like basis as Adlumin was included in our year-end 2024 ARR. We are raising our adjusted EBITDA outlook and expect full year adjusted EBITDA of $148.2 million to $149.2 million, representing 29% adjusted EBITDA margin. We reiterate that we expect CapEx, which includes capitalized software development costs, will be approximately 6% of total revenue for 2025. We also expect our unlevered free cash flow to be in line with previous guidance of approximately $96 million to $98 million. We expect total weighted average diluted shares outstanding of approximately 188 million to 189 million for the fourth quarter and the full year. Finally, we expect our non-GAAP tax rate to be approximately 23% for the fourth quarter and 21% for the full year. Now I will turn it to John for closing remarks.

Thank you, Tim. Cybersecurity is entering a transformative period, one that demands and become a core part of the company's overall business strategy. With our scale, platform breadth, and data ownership, we are positioned to excel in this new era. AI-driven threats demand AI-driven defense and enable us delivering the cyber resilience solutions that we believe will redefine the standard for small and mid-market businesses. And with that, operator, we will open the line for questions.

[Operator Instructions]. The first question comes from Matt Hedberg of RBC Capital Markets.

It's [ Dan Bergstrom ] for Matt Hedberg. ARR revenue both accelerated quarter-over-quarter on a constant currency basis for several quarters now. Could you talk to some of the keys behind that building momentum? What's really been maybe the incremental the last several quarters? And then maybe with guidance for the fourth quarter here, the FX impact and Lumen anniversarying, I think it's the case, but should we still be thinking of more growth in the second half than the first half?

Thanks for the question. Yes, as it relates to the acceleration that we've seen through the year, it really boils back to executing on, I would say, probably a couple of key components of the strategy. One, on executing around the thesis of the Albumin acquisition, one on cross-selling that into the base of customers that we have, as well as continuing to push that product through the mid-market via the channel partners that came along with that acquisition. And then two, broadening our channel presence as well via bringing on new disties and resellers to kind of access the mid-market with the broader portfolio as well. So we've been bearing fruit from both of those kind of strategic initiatives internally that have driven some of that acceleration that we've seen through the year. And then unpacking the Q4, so FX is weighing a bit into the equation. We still are expecting more growth in the second half of the year than the first half of the year. Q3 was our best quarter of the year from a sequential ARR growth, excluding any currency impact. We expect Q4 to be above average for the year as well. So we are expecting more ARR growth overall in the second half of the year than we are in the first half of the year for sure. That still holds, and that's what the guide reflects.

That's great and helpful. And then on NRR, trends up year-over-year, quarter-over-quarter, same as last quarter. So that was nice to see. Maybe talk to some of the trends around the metric there. How confident are you that maybe it bottomed in the first quarter there and could be building at this point?

Yes. I would say confidence is high that it bottomed in the first quarter and has continued to build as we've gone through the year. I think that runs back to the execution that we've seen around the Adlumin acquisition and successfully being able to cross-sell that into our MSP customer base, and driving NRR up as well. Part of the NRR drive also is that GRR has been improving as we've gone through the year as well just from a gross retention standpoint, we've been making steady progress there as we've been going through calendar '25 here. We've been able to renew our longer-term contract at a rate around 90%. That's continued to progress and perform and start to contribute to the GRR story, which fuels NRR at the end of the day. So those are some of the key drivers. Trends have been positive on both fronts, as John spoke to.

Yes. And XDR is still in early innings, right? So, our penetration rates have been climbing. But as we're really just beginning to get into our base and selling into that base, that's a nice ASP per device offering that is essential for more and more of these MSPs and mid-market businesses. So, as we continue to go into that base, that gives us some confidence that we should continue to see that expand part of the NRR continue to climb. And then looking forward, we have some nice add-ons as we go through both on our data protection part and other parts of the business that should lend itself to additional SKUs, and we've done a good job continuing to increase our revenue per device type of thing. So that's all, giving us confidence in a strong NRR as we look forward.

The next question comes from Mike Cikos of Needham & Company.

This is Matt Calitri on for Mike Cikos over at Needham. Sticking on the ARR guidance, the sequential [indiscernible] on a constant currency basis that is implied here, how much of that is based off of lapping the [indiscernible] contribution compared to conservative or conservatism? And what other factors are you considering there?

Yes. We quantified the impact of the Adlumin acquisition in the 4% to 5% range. So it's primarily all related to lapping the Adlumin acquisition. And just unpacking the sequential part of ARR growth for Q4 on the surface due to some FX dynamics, it's looking lower than in what it is ex currency. So, just additional color, there is that Q4 sequential growth from a guide perspective, ex currency, it would be about $10 million higher if you assume the same rates as Q3, just as an example. So Q3, if you look at some of the euro and pound rates, they were some of the highest they were in the month of September year-to-date. So that's most of the impact as it relates to Q4.

Very helpful. And great to see the launches of Cat-MIP and Anomaly Detection as a Service. Are these offerings that MSPs were specifically asking for? And do you view anomaly detection more as an upsell lever for existing Cove deployments or as a key piece to get customers over the finish line on the initial adoption?

So both. And so the really cool part about the anomaly detection is it really helps us transition our Cove data protection to not just the recovery, but actually part of the detection spots, where we are reaching out to both MSPs and mid-market companies and actually detecting threats and breaches earlier than some of their MDR, XDR alerts have been, right? So often the threat after the bad guy will go after the backups. And if we see anything there, we put honeypots in. So if they're going after there or if there's any type of other anomaly, we're alerting the MSP or the internal IT department. So it's a great way for us to demonstrate higher value. It will help us with our win rate. It will help us get into even larger accounts, and we'll be able to monetize that directly. On Cat-MIP, not to be confused with Cat-MIP, this is really a standard, right? So the big thing here is that more and more of our customers are asking about our AI road map and our AI strategy. And so we're able to do a couple of things. We're able to demonstrate proof because a lot of our offerings, as we mentioned in the script, are AI-infused today, and that's why we're able to do these things at scale and democratize the technology that we have. But with Cat-MIP, we're really giving that confidence to the MSP that we're leading this wave, right? That creates a standard. So if you think about APIs or just to use the analogy of more of like a connector, it standardizes the connections, both for other vendors and for MSPs. So that now an MSP with an approved MCP agent, now it can connect to these servers in a way that's more secure, but it gains a lot more efficiency. So it's just another way that we're helping these MSPs drive the efficiency. And this just will begin to start the wave of both innovation, but also monetization for N-able and for the MSPs.

The next question comes from [ Joe Vandrick ] of Scotiabank.

Maybe one for John and then one for Tim. John, it's been almost a year since the Adlumin acquisition. Can you talk a little bit about how that business is performing relative to your initial expectations? And then what are any key learnings about the market or the business that you've had after operating it for a year?

Sure. So look, I'd say the acquisition thesis overall is very much holding true. It's -- the story is resonating with our MSPs with the small shops, with the large shops. And one, the fact that it's endpoint agnostic or just agnostic in general that it can ingest all of this different data from different firewalls, from different cloud offerings from different endpoints in EDRs, it really is a perfect fit in my estimation for the MSP community because we know they have a hybrid world. And so we're scaling this really nicely. As we mentioned, we're adding hundreds of end customers at the SMB level. And because of the AI technology, we're able to scale it and not necessarily have the same linear type of cost. So we're really -- I'm impressed with the level of scale that the offering has and the demand is here and now, right? This was very much a greenfield space for the broader MSP market, and that's turning over. MSPs know that they need to have this kind of technology. The very, very, very large shops might have the ability to go and build their own SOC, but that's for the far -- that's for the very few and very large. And so the story is resonating. It also gives us another way to cross-sell other bits, right? The fact that we can push and pull data from our UEM and Cove, we're now able to really convey a complete end-to-end cyber resiliency story. And that end-to-end complete cyber resiliency story, it's resonating with the MSPs. But frankly, it's resonating with our VARs as well, and we're building this VAR network. And a VAR might have an MDR shop or an XDR shop, a VAR might have a backup company, but we're right now the only shop that can actually go to a value-added reseller and walk them through the UEM, which is really a security endpoint management console, the Cove data protection on the backup and the recovery and XDR. And it's really resonating with the VARs because now they have a story to tell their mid-market, their CISOs and their CIOs. And so we're quite pleased with the acquisition. We're continuing to invest both in the R&D and the sales and marketing, and we're really excited for how this thing will continue to develop and be a bigger part of N-able.

That's super helpful. And Tim, one for you. I know 2025 has been somewhat of an investment year. It sounds like maybe a new priority is to invest a little bit more heavily in AI. So is that -- I guess, should we think about -- and you mentioned the commitment to 30% EBITDA margins in 2026. So should we think about those 30% EBITDA margins as a floor? And I guess, how are you thinking about the investment in AI?

Yes. So this is John. I mean, look, so the -- we are investing in AI. And by the way, this is not new to N-able, right? We've been investing in machine learning for quite some time with generative AI and now with Agentic AI. So it's part of the mix, right? It's going to continue to shift to be a bigger part of the mix. But the interesting thing there, we mentioned a couple of quarters ago, we've been investing in lower-cost sites. We stood up a site in India earlier this year. This gives us the ability to add bandwidth and high-level skill with not the same level of cost. And so that was all part of the thinking. And so we mentioned the 30%. We always like to run the business rule of . We look at AI as a tremendous opportunity for us, not in the distant future, but more in the short term and midterm. And so we want to make sure that we're realizing that opportunity. we have this interesting competitive advantage in the fact that we have the data. And we have the data and these MSPs will look to us again to continue to be their control center. And the fact that we can now pull the data from our UEM, our data protection and XDR in an AI world, in an automated world where they can -- the MSPs themselves can build agents so that they can do their jobs more efficiently and more effectively, that's the opportunity we want to capture, and we're going to begin capturing it. And we have some waves. We'll be introducing Agentic agents inside of our products in the short term here, which will also help with the efficiency and then that will open up another avenue for monetization, both again for N-able and our customers. So I think 30% is a good number, and we'll continue to evaluate that as we go through. And we're also continuing to invest in go-to-market. And so the business will scale. Tim and I look at this on a quarterly basis. And I think 30% is a good number that as we scale, we should be able to drive more of an accretive profile as the business continues to scale. But our focus right now is to realize some of that opportunity that we believe is here and now.

We currently have no further questions. So I'd like to hand back to John for any closing remarks.

Thank you all for joining us today, and thank you for your ongoing interest in N-able. We'll see you in a quarter.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.