N-able, Inc. 2026 Q2 Earnings Call

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 on our earnings press release on our investor relations website. I will now 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 are 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 timelines 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. Anthropic's recent research shows how a lone 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 attacked 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 in unified endpoint management, to threat detection and response in security operations, to fast, efficient restore capabilities and data protection. With a base of 500,000 businesses and a platform that spans a 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. 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 he 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 pressing near-term growth in both categories, which is also reflected in our updated guidance. As it relates to UEM, we're executing a roadmap to govern and secure AI agents, deliver more comprehensive exposure management capabilities, and drive value from our AI workflow assistant, N-zo.

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 is 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 is imperative that N-Able's 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 in 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. In some features, shipping 10 to 12 times faster than prior roadmap 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 us 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 us walk through each. In data protection, we launched Disaster Recovery as a Service, or DRaaS, earlier this year. With N-Able DRaaS, customers can restore full operations in minutes rather than days, and there is 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. 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 extinction event or a routine recovery. We named our solution Cove Data Protection to invoke the calm, protected waters a cove provides.