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. 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 three 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 cyberattacks, 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. Cybercriminals 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. 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 capability for use across the MSP and IT ecosystems to help drive seamless AI automation and 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 overwhelmed 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 three key elements: first, driving security success; second, scaling our go-to-market; and third, boosting customer expansion. We saw progress across all three. 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 within 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 three 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 roadmap 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 layer 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 non-negotiable 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 are 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.

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 through our expanded channel-led 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 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 it 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, enabling us to deliver 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.

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 Adlumin 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 Adlumin 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 distributors 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 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 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 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 as 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 increase on a constant currency basis that is implied here, how much of that is based off of lapping the Adlumin contribution compared to 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 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 roadmap 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 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. 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 costs. So I'm really 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 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. 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 really helpful. Tim, I have a question for you. I understand that 2025 will be focused on investments, and it seems like a new priority is to increase investments in AI. Should we consider the 30% EBITDA margins you mentioned for 2026 as a baseline? Also, how are you approaching the investment in AI?

We are investing in AI, which is not new for N-able. We've been focused on machine learning for some time, including generative AI and now Agentic AI. This will continue to become a larger part of our strategy. Earlier this year, we established a lower-cost site in India, giving us the capability to increase bandwidth and high-level skills without incurring significant costs. We believe that AI presents a significant opportunity for us in the short to midterm. It's crucial to seize this opportunity. We hold a competitive advantage because we possess valuable data that MSPs will rely on as we serve as their control center. The ability to integrate data from our UEM, data protection, and XDR in an automated environment allows us to enhance efficiency and effectiveness through Agentic agents. We will soon introduce these agents in our products, which will improve efficiency and create new monetization avenues for both N-able and our customers. We consider 30% as a prudent target and will reassess that as we progress. We are also committed to investing in our go-to-market strategy, positioning us to scale the business effectively. Tim and I review this on a quarterly basis, and we expect to achieve a more favorable profile as we grow. Our immediate focus is on capitalizing on the opportunities we see right 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.