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What changed in N-able, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of N-able, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+456 added−419 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-14)

Top changes in N-able, Inc.'s 2023 10-K

456 paragraphs added · 419 removed · 325 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

137 edited+75 added−30 removed254 unchanged
Biggest changeRisks Related to Cybersecurity and the Cyber Incident • Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ systems, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ environments, the theft or misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business. • The Cyber Incident has had and may continue to have an adverse effect on our business, reputation, MSP partner and employee relations, results of operations, financial condition or cash flows. 18 Table of Contents Risks Related to the Separation and Distribution • The Separation and Distribution may not achieve some or all of the anticipated benefits, which may disrupt or adversely affect our business, results of operations and financial condition. • We could incur significant liability if the Separation and Distribution is determined to be a taxable transaction, and, in certain circumstances, we could be required to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement. • We have limited operating history as a stand-alone public company, and our historical financial information is not necessarily representative of the results we would have achieved as a stand-alone public company and may not be a reliable indicator of our future results. • If we encounter difficulties in the transition after the Separation and Distribution and implementation of our business strategies by our senior management team, our business could be negatively impacted. • The assets and resources that we acquired from SolarWinds in the Separation and Distribution may not be sufficient for us to operate as a stand-alone company, and we may experience difficulty in separating our assets and resources from SolarWinds.
Biggest changeRisks Related to Cybersecurity and the Cyber Incident • Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ systems, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ environments, the theft or 18 Table of Contents misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business. • The Cyber Incident has had and may continue to have an adverse effect on our business, reputation, MSP partner and employee relations, results of operations, financial condition or cash flows.
We enable IT service providers of all types to act as MSPs by providing a platform that they can leverage to help SMEs access powerful and seamless technology to power their businesses. Our software platform is designed to be an integrated, enterprise-grade solution that serves as an operating system for our MSP partners and scales as their businesses grow.
We enable IT service providers of all types to act as MSPs by providing a platform they can leverage to help SMEs access powerful and seamless technology to power their businesses. Our software platform is designed to be an integrated, enterprise-grade solution that serves as an operating system for our MSP partners and scales as their businesses grow.
Alternative tools may also lack reporting and analytics that help MSPs proactively identify and remediate issues before they arise. Our Solution We provide cloud-based remote monitoring and management, security solutions, and data protection as-a-service that are integrated within our technology platform.
Alternative tools may also lack reporting and analytics that help MSPs proactively identify and remediate issues before they arise. Our Solution We provide cloud-based remote monitoring and management, security and data protection as-a-service solutions that are integrated within our technology platform.
Our past acquisitions and any mergers and acquisitions that we may undertake in the future involve numerous risks, including, but not limited to, the following: • difficulties in integrating and managing the operations, personnel, systems, technologies and solutions of the companies we acquire; • diversion of our management’s attention from normal daily operations of our business; • our inability to maintain the key business relationships and the reputations of the businesses we acquire; • uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; • our dependence on unfamiliar affiliates, resellers, distributors and partners of the companies we acquire; • our inability to increase revenue from an acquisition for a number of reasons, including our failure to drive demand in our existing partner base for acquired solutions and our failure to obtain sales from customers of the acquired businesses; • increased costs related to acquired operations and continuing support and development of acquired solutions; • liabilities or adverse operating issues, or both, including potential product errors or defects or security issues or vulnerabilities, of the businesses we acquire that we fail to discover or mitigate through due diligence or the extent of which we underestimate prior to the acquisition; • potential goodwill and intangible asset impairment charges and amortization associated with acquired businesses; • adverse tax consequences associated with acquisitions; • changes in how we are required to account for our acquisitions under U.S. generally accepted accounting principles, including arrangements that we assume from an acquisition; • potential negative perceptions of our acquisitions by MSP partners, financial markets or investors; • failure to obtain required approvals from governmental authorities under competition and antitrust laws on a timely basis, if at all, which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition; • potential increases in our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • our inability to apply and maintain our internal standards, controls, procedures and policies to acquired businesses; and • potential loss of key employees of the companies we acquire.
Our past acquisitions and any mergers and acquisitions that we may undertake in the future involve numerous risks, including, but not limited to, the following: • difficulties in integrating and managing the operations, personnel, systems, technologies and solutions of the companies we acquire; 23 Table of Contents • diversion of our management’s attention from normal daily operations of our business; • our inability to maintain the key business relationships and the reputations of the businesses we acquire; • uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; • our dependence on unfamiliar affiliates, resellers, distributors and partners of the companies we acquire; • our inability to increase revenue from an acquisition for a number of reasons, including our failure to drive demand in our existing partner base for acquired solutions and our failure to obtain sales from customers of the acquired businesses; • increased costs related to acquired operations and continuing support and development of acquired solutions; • liabilities or adverse operating issues, or both, including potential product errors or defects or security issues or vulnerabilities, of the businesses we acquire that we fail to discover or mitigate through due diligence or the extent of which we underestimate prior to the acquisition; • potential goodwill and intangible asset impairment charges and amortization associated with acquired businesses; • adverse tax consequences associated with acquisitions; • changes in how we are required to account for our acquisitions under U.S. generally accepted accounting principles, including arrangements that we assume from an acquisition; • potential negative perceptions of our acquisitions by MSP partners, financial markets or investors; • failure to obtain required approvals from governmental authorities under competition and antitrust laws on a timely basis, if at all, which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected financial or strategic goals of an acquisition; • potential increases in our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • our inability to apply and maintain our internal standards, controls, procedures and policies to acquired businesses; and • potential loss of key employees of the companies we acquire.
Through a combination of leading targeted marketing content, free trials and business development efforts, we cultivate a high volume of qualified opportunities that are passed on to dedicated insides sales teams to convert into partners. Additionally, our inside sales team leverages our marketing content to generate their own qualified opportunities to increase product penetration into our existing base.
Through a combination of leading targeted marketing content, events, free trials and business development efforts, we cultivate a high volume of qualified opportunities that are passed on to dedicated insides sales teams to convert into partners. Additionally, our inside sales team leverages our marketing content to generate their own qualified opportunities to increase product penetration into our existing base.
These adverse conditions could result in reductions in subscriptions, reduction of consumption of our services, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events could have an adverse effect on our business, operating results and financial position. Climate change may have a long-term negative impact on our business.
Any such conditions could result in reductions in subscriptions, reduction of consumption of our services, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events could have an adverse effect on our business, operating results and financial position. Climate change may have a long-term negative impact on our business.
A portion of our revenue is recognized based on consumption as MSP partners use certain aspects of our platform, whether such usage is beyond their paid subscriptions or on an individual basis. This usage is particularly applicable to our remote monitoring and management (“RMM”) solutions and our backup, recovery and disaster recovery solutions.
A portion of our revenue is recognized based on consumption as MSP partners use certain aspects of our platform, whether such usage is beyond their paid subscriptions or on an individual basis. This usage is particularly applicable to our remote monitoring and management (“RMM”) solutions and our Cove backup, recovery and disaster recovery solutions.
Our solutions development and innovation roadmap incorporates real-time feedback from our active user community, which helps shape improvements to existing offerings and the development of new offerings that address the needs of our MSP partners and their SME customers. 4) Best-in-class partner success.
Our development and innovation roadmap incorporates real-time feedback from our active user community, which helps shape improvements to existing offerings and the development of new offerings that address the needs of our MSP partners and their SME customers. 4) Best-in-class partner success.
Any loss of the right to use any of the software could result in decreased functionality of our solutions until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated, which could harm our business.
Any loss of the right to use any of the software could result in decreased sales or decreased functionality of our solutions until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated, which could harm our business.
Rise of the Managed IT Services Model As SMEs invest in technology and their needs for continuous availability, performance and security grow, they are increasingly relying on IT service providers to manage these aspects of their businesses.
Rise of the Managed IT Services Model As SMEs invest in technology and their needs for continuous availability, performance and security grow, SMEs are increasingly relying on IT service providers to manage these aspects of their businesses.
We believe that developing and maintaining awareness and integrity of our brand in a cost-effective manner are important to achieving widespread acceptance of our existing and future offerings and are important elements in attracting new MSP partners.
We believe that developing, maintaining and growing awareness and integrity of our brand in a cost-effective manner are important to achieving widespread acceptance of our existing and future offerings and are important elements in attracting new MSP partners.
Our quarterly results of operations may fluctuate as a result of a variety of factors, including, but not limited to, those listed below, many of which are outside of our control: • our ability to maintain and increase sales to existing MSP partners and to attract new MSP partners, including selling additional subscriptions to our existing MSP partners to deliver services to their SME customers or for their internal use; • changes in SME demand for services provided by our MSP partners, including those related to the number of SME customers serviced by our MSP partners and the reduced amount of services provided by our MSP partners to their SME customers; 19 Table of Contents • declines in subscription renewals and changes in net customer retention; • lack of visibility into our financial position and results of operations in connection with our consumption-based revenue; • our ability to capture a significant volume of qualified sales opportunities; • our ability to convert qualified sales opportunities into new business sales at acceptable conversion rates; • the amount and timing of operating expenses and capital expenditures related to the expansion of our operations and infrastructure and customer acquisition; • our failure to achieve the growth rate that was anticipated by us in setting our operating and capital expense budgets; • potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; • fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations; • the timing of revenue and expenses related to the development or acquisition of technologies, solutions or businesses, or strategic partnerships and their integration; • potential goodwill and intangible asset impairment charges and amortization associated with acquired businesses; • the timing and success of new offerings, enhancements or functionalities introduced by us or our competitors, including potential deferral of orders from our MSP partners in anticipation of new offerings or enhancements announced by us or our competitors; • any other change in the competitive landscape of our industry, including consolidation among our competitors, MSP partners or SMEs and strategic partnerships entered into by us and our competitors; • our ability to obtain, maintain, protect and enforce our intellectual property rights; • changes in our subscription pricing or those of our competitors; • the impact of new accounting pronouncements; • general economic, industry and market conditions that impact expenditures for IT management technology for SMEs in the United States and other countries where we sell our solutions; • significant security breaches, such as the Cyber Incident, technical difficulties or interruptions to our solutions or infrastructure; • changes in tax rates, laws or regulations in jurisdictions in which we operate; and • uncertainties arising from the impact of the COVID-19 pandemic, or other pandemics, on the market and our business operations.
Our quarterly results of operations may fluctuate as a result of a variety of factors, including, but not limited to, those listed below, many of which are outside of our control: • our ability to maintain and increase sales to existing MSP partners and to attract new MSP partners, including selling additional subscriptions to our existing MSP partners to deliver services to their SME customers or for their internal use; • changes in SME demand for services provided by our MSP partners, including those related to the number of SME customers serviced by our MSP partners and the reduced amount of services provided by our MSP partners to their SME customers; • declines in subscription renewals and changes in net customer retention; • lack of visibility into our financial position and results of operations in connection with our consumption-based revenue; • our ability to capture a significant volume of qualified sales opportunities; • our ability to convert qualified sales opportunities into new business sales at acceptable conversion rates; • the amount and timing of operating expenses and capital expenditures related to the expansion of our operations and infrastructure and customer acquisition; • our failure to achieve the growth rate that was anticipated by us in setting our operating and capital expense budgets; 19 Table of Contents • potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; • fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations; • the timing of revenue and expenses related to the development or acquisition of technologies, solutions or businesses, or strategic partnerships and their integration; • potential goodwill and intangible asset impairment charges and amortization associated with acquired businesses; • the timing and success of new offerings, enhancements or functionalities introduced by us or our competitors, including potential deferral of orders from our MSP partners in anticipation of new offerings or enhancements announced by us or our competitors; • any other change in the competitive landscape of our industry, including consolidation among our competitors, MSP partners or SMEs and strategic partnerships entered into by us and our competitors; • our ability to obtain, maintain, protect and enforce our intellectual property rights; • changes in our subscription pricing or those of our competitors; • the impact of new accounting pronouncements; • general economic, industry and market conditions that impact expenditures for IT management technology for SMEs in the United States and other countries where we sell our solutions; • significant security breaches, such as the Cyber Incident, technical difficulties or interruptions to our solutions or infrastructure; • changes in tax rates, laws or regulations in jurisdictions in which we operate; and • the impact of a recession, pandemic, or any other adverse global economic conditions on our business, including any future impacts of the COVID-19 pandemic.
Our fully cloud-based data protection as-a-service capabilities include storage efficient backup, high-speed restoration and disaster recovery for servers, workstations, files, data and key cloud-based applications. In addition to our core solution categories, our business management solutions help improve the technical and service delivery efficiencies of our MSP partners and include professional services automation and password and documentation management.
Our fully cloud-based data protection as-a-service capabilities include storage efficient backup, high-speed restoration and disaster recovery for servers, virtual machines, workstations, files, data and key cloud-based applications. In addition to our core solution categories, our business management solutions help improve the technical and service delivery efficiencies of our MSP partners and include professional services automation and password and documentation management.
In light of the foregoing, investors are urged to consider these factors, not to rely exclusively upon information we may provide regarding our financial outlook in making an investment decision regarding our common stock, and to take such information into consideration only in connection with other information included in our filings filed with or furnished to the SEC, including the “Risk Factors” sections in such filings.
In light of the foregoing, investors are urged to consider these factors, not to rely exclusively upon information we may provide regarding our financial outlook in making an investment decision regarding our common stock, and to take such information into consideration only in conjunction with other information included in our filings filed with or furnished to the SEC, including the “Risk Factors” sections in such filings.
Survey results are reviewed by our senior leadership, reported to the whole company and used to inform action plans at all levels of the organization.
Survey results are reviewed by our senior leadership team, reported to the whole company and used to inform action plans at all levels of the organization.
In addition, we compete with small to large enterprise vendors that provide solutions focused on a particular service that may be sold by MSPs, such as network monitoring, systems management, email security, remote support and data protection. Examples of such vendors are Auvik, Mimecast and Veeam.
In addition, we compete with small to large enterprise vendors that provide solutions focused on a particular service that may be sold by MSPs, such as network monitoring, systems management, email security, remote support and data protection. Examples of such vendors are Auvik, Acronis and Veeam.
Our backup, recovery and disaster recovery solutions are designed to help our MSP partners: • provide their customers with efficient and granular data protection and recovery across multiple types of data and systems, including servers, virtual machines, workstations, critical databases and business documents; • protect and restore critical SaaS applications, such as M365; • understand the integrity of their protection copies based on mechanisms like automated recovery testing; • optimize data transfers to and from the cloud with the option to designate a preferred storage location in one of our available data centers in 17 countries and allow for protection of data across workstations, servers and networks from a single platform; and • deliver these services to their customers without the need for them to purchase, maintain, and patch hardware.
Our backup, recovery and disaster recovery solutions are designed to help our MSP partners: • provide their customers with efficient and granular data protection and recovery across multiple types of data and systems, including servers, virtual machines, workstations, critical databases and business documents; • protect and restore critical SaaS application, such as M365; • understand the integrity of their protection copies based on mechanisms like automated recovery testing; • optimize data transfers to and from the cloud with the option to designate a preferred storage location in one of our available data centers in 18 countries and allow for protection of data across workstations, servers and networks from a single platform; and • deliver these services to their customers without the need for them to purchase, maintain, and patch hardware.
Our long-term growth depends on our ability to continually enhance and improve our existing offerings and develop or acquire new solutions that address the common problems encountered by technology professionals on a day-to-day basis in an evolving IT management market, including adapting to rapidly changing technologies and user preferences, adapting our offerings to evolving industry standards, predicting user preferences and industry changes in order to continue to provide value to our MSP partners and to improve the performance and reliability of our offerings.
Our long-term growth depends on our ability to continually enhance and improve our existing offerings and develop or acquire new solutions that address the common problems encountered by technology professionals on a day-to- 22 Table of Contents day basis in an evolving IT management market, including adapting to rapidly changing technologies and user preferences, adapting our offerings to evolving industry standards, predicting user preferences and industry changes in order to continue to provide value to our MSP partners and to improve the performance and reliability of our offerings.
These laws, procedures and restrictions provide only limited protection. As of December 31, 2022, we owned five issued U.S. patents and one issued foreign patent, with expiration dates ranging from February 22, 2033 to July 12, 2034.
These laws, procedures and restrictions provide only limited protection. As of December 31, 2023, we owned five issued U.S. patents and one issued foreign patent, with expiration dates ranging from February 22, 2033 to July 12, 2034.
Our MSP partners’ customers generally have fewer than 1,000 employees and span a wide range of industry verticals, including financial services, healthcare, professional services, education and manufacturing. As of December 31, 2022, we had approximately 25,000 customers.
Our MSP partners’ customers generally have fewer than 1,000 employees and span a wide range of industry verticals, including financial services, healthcare, professional services, education and manufacturing. As of December 31, 2023, we had approximately 25,000 customers.
We hire based on our values, recognize each other based on our values, and strive to uphold our values in all of our interactions - every day. • N-rich Lives: We use our talents to find meaning and purpose in all that we do. • N-spire Others: We unlock potential and help bring out the best in others. • N-joy the Journey: We are passionate about what we do and have fun along the way.
We hire based on our values, recognize each other based on our values, and strive to uphold our values in all of our interactions - every day. 15 Table of Contents • N-rich Lives: We use our talents to find meaning and purpose in all that we do. • N-spire Others: We unlock potential and help bring out the best in others. • N-joy the Journey: We are passionate about what we do and have fun along the way.
We believe our quarterly revenue and operating results may vary significantly in the future. As a result, you should not rely on the results of any one quarter as an indication of future performance and period-to-period comparisons of our revenue and operating results may not be meaningful.
Our quarterly revenue and operating results may vary significantly in the future. As a result, you should not rely on the results of any one quarter as an indication of future performance and period-to-period comparisons of our revenue and operating results may not be meaningful.
We also rely on our MSP partner base and their SME customers in a variety of ways, including to give us feedback on our offerings and to provide user-based support to our other customers through our Head Nerds program.
We also rely on our MSP partner base and their SME customers in a variety of ways, including giving us feedback on our offerings and to provide user-based support to our other customers through our Head Nerds program.
We rely on our management team in the areas of operations, security, marketing, sales, support and general and administrative functions. The loss of one or more of our members of the management team could have a material adverse effect on our business.
We rely on our management team in the areas of operations, security, marketing, sales, research and development, support and general and administrative functions. The loss of one or more of our members of the management team could have a material adverse effect on our business.
Our broad remote monitoring and management capabilities include real-time availability and performance of networks and devices and automation of policies and workflows. We provide a layered security approach spanning network and systems infrastructure, applications, and end user devices through our data protection, patch management, endpoint security, web protection, e-mail security and archiving and vulnerability assessment solutions.
Our broad remote monitoring and management capabilities include real-time availability and performance of networks and devices and automation of policies and workflows. We provide a layered security approach spanning network and systems infrastructure, applications, and end user devices through our data protection, patch management, endpoint security, managed detection and response, web protection, e-mail security and archiving and vulnerability assessment solutions.
In addition, our RMM technology serves as the foundation for the managed services model, allowing our MSP partners to remotely monitor and access their customers’ IT environments. Through our RMM solutions, we can address the remote monitoring and management needs of MSPs of all sizes across cloud, on-premises and hybrid cloud environments.
In addition, our RMM technology serves as the foundation for the managed services model, allowing our MSP partners to remotely monitor and access their customers’ IT environments. Through our 9 Table of Contents RMM solutions, we can address the remote monitoring and management needs of MSPs of all sizes across cloud, on-premises and hybrid cloud environments.
This solution helps our MSP partners: • access their customer environments with granular role-based permissions and a full audit trail leveraging our centralized and secure password repository; • standardize service delivery and expedite issues by making essential documentation easily accessible through a fully integrated tool; and • conduct mobile password resets, which enables end-users to reset their own passwords at any time, without MSP support.
This solution helps our MSP partners: • access their customer environments with granular role-based permissions and a full audit trail leveraging our centralized and secure password repository; 11 Table of Contents • standardize service delivery and expedite issues by making essential documentation easily accessible through a fully integrated tool; and • conduct mobile password resets, which enables end-users to reset their own passwords at any time, without MSP support.
In some instances, we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our website performance, especially during peak usage times and as our user traffic increases.
In some instances, we may not be able to identify the cause or causes of these 27 Table of Contents website performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our website performance, especially during peak usage times and as our user traffic increases.
Our digital marketing program is designed to efficiently and cost-effectively drive a high volume of website traffic and deliver high quality opportunities, which are generally trials of our solutions, to our sales teams.
Our digital marketing program is designed to efficiently and cost-effectively drive a high volume of website traffic and deliver high quality opportunities, which are often trials of our solutions, to our sales teams.
Desktop Management. Our desktop management solution enables MSPs to remotely: • work on issues and communicate with their customers while a customer’s device is in use; and 11 Table of Contents • troubleshoot and proactively address customer endpoint and network issues without disruption to the customer’s operations. Technology Key features of our platform include: Extensibility.
Desktop Management. Our desktop management solution enables MSPs to remotely: • work on issues and communicate with their customers while a customer’s device is in use; and • troubleshoot and proactively address customer endpoint and network issues without disruption to the customer’s operations. Technology Key features of our platform include: Extensibility.
Certain of our solutions or data centers meet one or more of the following security compliance standards, which vary by product or location: HIPAA, ISO 27001, ISO 9001, NIST 800-53, PCI DSS, SOC 1 Type II and SOC 2 Type II. Common user interface and user experience model .
Certain of our solutions or data centers meet one or more of the following security compliance standards, which vary by product or location: HIPAA, ISO/IEC 27001:2013 or ISO/IEC 27001:2022, ISO 9001, NIST 800-53, PCI DSS, SOC 1 Type II and SOC 2 Type II. Common user interface and user experience model .
For potential MSP partners that have less complex IT needs, we typically deploy a low-cost, low-touch strategy. For potential MSP partners that have more complex IT needs, we leverage a cost-efficient, account-based marketing model to target and educate them. Internationally, we partner with our global network of distributors to drive a localized marketing strategy.
For potential MSP partners that have less complex IT needs, we typically deploy a low-cost, low-touch strategy. For potential MSP partners that have more complex IT needs, we leverage a cost-efficient, account-based marketing model to target and educate them. Internationally, we partner in specific regions with our global network of distributors to drive a localized marketing strategy.
We regularly have a subset of our partners participate in processes to validate that our solutions and features are what they are looking for to improve their operations and address their most pressing demands. 14 Table of Contents We have built a development organization that allows us to add new features and enhance our platform quickly and efficiently.
We regularly have a subset of our partners participate in processes to validate that our solutions and features are what they are looking for to improve their operations and address their most pressing demands. We have built a development organization that allows us to add new features and enhance our platform quickly and efficiently.
In addition, our platform serves the needs of MSPs and customers of all sizes, making it easy for MSPs to standardize and operate on our platform. 2) Comprehensive and extensible platform designed for integrations. Our platform features out-of-the-box integrations with third-party technologies and solutions from leading enterprise technology vendors.
In addition, our platform serves the needs of MSPs and customers of all sizes, making it easy for MSPs to standardize and operate on our platform. 7 Table of Contents 2) Comprehensive and extensible platform designed for integrations. Our platform features out-of-the-box integrations with third-party technologies and solutions from leading enterprise technology vendors.
Our ability to expand within our partner base is demonstrated by our dollar-based net revenue retention rate, which was 103%, 110% and 109% for each of the trailing twelve-month periods ended December 31, 2022, 2021 and 2020, respectively. 3) Widen our surface area.
Our ability to expand within our partner base is demonstrated by our dollar-based net revenue retention rate, which was 110%, 103% and 110% for each of the trailing twelve-month periods ended December 31, 2023, 2022 and 2021, respectively. 3) Widen our surface area.
Support Our experienced and localized support teams provide our MSP partners with 24x7x365 technical support for our platform and solutions. Research and development Our research and development organization is primarily responsible for the architecture, design, development, testing and deployment of new solutions and improvements to existing solutions, with a focus on ensuring that our platform is fully integrated and extensible.
Support Our experienced and localized support teams provide our MSP partners with 24x7x365 technical support for our platform and solutions. 14 Table of Contents Research and development Our research and development organization is primarily responsible for the architecture, design, development, testing and deployment of new solutions and improvements to existing solutions, with a focus on ensuring that our platform is fully integrated and extensible.
Successful promotion of our brands will depend on the effectiveness of our marketing efforts and on our ability to provide reliable and useful solutions at competitive prices. We intend to increase our expenditures on brand promotion.
Successful promotion of our brands will depend on the effectiveness of our marketing efforts and on our ability providing reliable and useful solutions at competitive prices. We intend to increase our expenditures on brand promotion.
Our RMM solutions include a fulsome set of remote monitoring capabilities across devices, endpoints and infrastructures designed to allow our MSP partners to: • support thousands of device types across major device categories, including Windows, macOS and Linux endpoints as well as network infrastructure components such as switches, routers, firewalls and wireless access points; • utilize a robust set of out-of-the-box features including network topology mapping and network path analysis; • enable remote access and support for IT systems and devices to quickly identify and resolve issues; • automate policies and tasks, power active device discovery and utilize automated alerts and customizable performance checks; • enable technical support personnel to perform maintenance and troubleshoot a wide array of issues, whether attended or unattended by end users; and • manage their business through dashboards and reports that track the activities of their technical support personnel, demonstrate value to their customers and identify opportunities for operational improvement.
Our RMM solutions include a fulsome set of remote monitoring capabilities across devices, endpoints and infrastructures designed to allow our MSP partners to: • support thousands of device types across major device categories, including Windows, macOS and Linux endpoints as well as network infrastructure components such as switches, routers, firewalls and wireless access points; • utilize a robust set of out-of-the-box features including network topology mapping and network path analysis; • enable remote access and support for IT systems and devices to quickly identify and resolve issues; • automate policies and tasks, power active device discovery and utilize automated alerts and customizable performance checks; • enable technical support personnel to perform maintenance and troubleshoot a wide array of issues, whether attended or unattended by end users; • manage their business through dashboards and reports that track the activities of their technical support personnel, demonstrate value to their customers and identify opportunities for operational improvement; and • monitor, manage, secure, standardize and automate Microsoft 365 users, Azure resources, and Intune devices.
In order to expand our business and functionality of our platform, we have previously made several acquisitions and expect to continue making similar acquisitions and possibly larger acquisitions as part of our growth strategy.
In order to expand our business and functionality of our platform, we have previously made several acquisitions and may continue making similar acquisitions and possibly larger acquisitions as part of our growth strategy.
We provide various partner success strategies aimed to help our MSP partners expand their customer bases and service offerings through our platform and to grow and operate their businesses more effectively. Our dedicated partner success teams assist with onboarding, post-sales engineering and partner management.
We provide various partner success strategies aimed at helping our MSP partners expand their customer bases and service offerings through our platform and to grow and operate their businesses more effectively. Our dedicated partner success teams assist with onboarding, post-sales engineering and partner management.
We deploy a highly flexible and analytics-driven direct marketing approach through broad use of digital marketing techniques including search engine optimization, paid search, social media marketing, virtual events, targeted email campaigns, localized websites, free resources and content marketing, display advertising, affinity groups and webinars. We target our marketing efforts through a segment specific approach.
We deploy a highly flexible and analytics-driven direct marketing approach through broad use of digital 13 Table of Contents marketing techniques including search engine optimization, paid search, social media marketing, events, targeted email campaigns, localized websites, free resources and content marketing, display advertising, affinity groups and webinars. We target our marketing efforts through a segment specific approach.
In particular, the software and technology industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of 30 Table of Contents intellectual property rights.
In particular, the software and technology industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights.
We typically state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed, but are not intended to represent that actual results could not fall outside of the suggested ranges.
We typically state possible outcomes as high and low ranges, which are intended to provide a sensitivity analysis as variables are changed, but are not intended to represent that actual results could not fall outside of the 32 Table of Contents suggested ranges.
Our business has rapidly grown, which has resulted in large increases in our number of employees, expansion of our infrastructure, new internal systems and other significant changes and additional complexities. We generated revenue of $371.8 million, $346.5 million and $302.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Our business has rapidly grown, which has resulted in large increases in our number of employees, expansion of our infrastructure, new internal systems and other significant changes and additional complexities. We generated revenue of $421.9 million, $371.8 million and $346.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Some of our competitors have made acquisitions or 22 Table of Contents entered into strategic relationships with one another to offer more competitive, bundled or integrated solution offerings and to adapt more quickly to new technologies and MSP or SME needs.
Some of our competitors have made acquisitions or entered into strategic relationships with one another to offer more competitive, bundled or integrated solution offerings and to adapt more quickly to new technologies and MSP or SME needs.
Any failure by us to achieve or sustain cash flows on a consistent basis could cause us to halt our expansion, not pursue strategic business combinations, default on payments due on existing contracts, fail to continue developing our platform, solutions and services or experience other negative changes in our business.
Any failure by us to achieve or sustain cash flows on a consistent basis could cause us to 24 Table of Contents halt our expansion, not pursue strategic business combinations, default on payments due on existing contracts, fail to continue developing our platform, solutions and services or experience other negative changes in our business.
These key areas include N-able’s values; our employees’ impression of the executive team; employees’ experience in their individual roles, of their direct teams and with 15 Table of Contents their direct managers; and employees’ sense of belonging at work.
These key areas include N-able’s values; our employees’ impression of the executive team; employees’ experience in their individual roles, of their direct teams and with their direct managers; and employees’ sense of belonging at work.
Uncertainty about future economic conditions may, among other things, negatively impact the current and prospective SME customers of our MSP partners and result in delays or reductions in technology purchases.
Uncertainty about future economic conditions may, among other things, negatively impact the current and prospective SME customers of our MSP partners and result in delays or 20 Table of Contents reductions in technology purchases.
This can make it more difficult for MSPs to use and deploy tools to their full potential and effectively serve their customers. 6 Table of Contents 5) Pricing and deployment limitations. Many tools lack flexible pricing models and deployment options that are aligned with the way MSPs sell and deliver their services.
This can make it more difficult for MSPs to use and deploy tools to their full potential and effectively serve their customers. 5) Pricing and deployment limitations. Many tools lack flexible pricing models and deployment options that are aligned with the way MSPs sell and deliver their services.
We have experienced substantial growth in recent years, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer satisfaction or adequately address competitive challenges, and our financial performance may be adversely affected.
We have experienced substantial growth in recent years, which may not be indicative of future growth, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer satisfaction or adequately address competitive challenges, and our financial performance may be adversely affected.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 47% of our total ARR as of December 31, 2021 to approximately 51% of our total ARR as of December 31, 2022. We determine ARR as the annualized recurring revenue as of the last month of a given period.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 51% of our total ARR as of December 31, 2022 to approximately 56% of our total ARR as of December 31, 2023. We determine ARR as the annualized recurring revenue as of the last month of a given period.
We face competition from IT vendors focused on the MSP market which provide broad, integrated solutions that include monitoring and management, data protection, business management tools and security offerings. Examples of such vendors are Kaseya, Datto (a Kaseya company) and ConnectWise.
We face competition from IT vendors focused on the MSP market which provide broad, integrated solutions that include monitoring and management, data protection, business management tools and security offerings. Examples of such vendors are Kaseya, ConnectWise and NinjaOne.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 47% of our total ARR as of December 31, 2021 to approximately 51% of our total ARR as of December 31, 2022. 4 Table of Contents Our business is global, with 51.3%, 53.6% and 52.2% of our revenue generated outside of the United States for each of the years ended December 31, 2022, 2021 and 2020, respectively.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 51% of our total ARR as of December 31, 2022 to approximately 56% of our total ARR as of December 31, 2023. 4 Table of Contents Our business is global, with 51.2%, 51.3% and 53.6% of our revenue generated outside of the United States for the years ended December 31, 2023, 2022 and 2021, respectively.
To support our growth, we must effectively 23 Table of Contents transition and continue to improve our management resources and our operational and financial controls and systems, and these improvements may increase our expenses more than anticipated and result in a more complex business.
To support our growth, we must effectively transition and continue to improve our management resources and our operational and financial controls and systems, and these improvements may increase our expenses more than anticipated and result in a more complex business.
Our approach to agent management is designed to make deploying new software and services fast and easy for our MSP partners. Security . We have invested heavily to ensure that we are building solutions in a secure manner. Our Secure Software Development Lifecycle is a continuously improving process.
Our approach to agent management is designed to make deploying new software and services fast and easy for our MSP partners. Security . We have invested heavily to ensure that we are building solutions in a secure manner.
We are a global software company, generating approximately 51.3%, 53.6% and 52.2% of our total revenue from outside of the United States in each of the years ended December 31, 2022, 2021 and 2020.
We are a global software company, generating 51.2%, 51.3% and 53.6% of our total revenue from outside of the United States in the years ended December 31, 2023, 2022 and 2021.
Any defects or errors in our solutions could result in: • lost or delayed market acceptance and sales of our solutions; • a reduction in subscription or maintenance renewals; • diversion of development resources; • legal claims; and • injury to our reputation and our brand.
Any real or perceived defects, errors or vulnerabilities in our solutions could result in: • lost or delayed market acceptance and sales of our solutions; • a reduction in subscription or maintenance renewals; • diversion of development resources; • increased likelihood of a cyberattack; • legal claims; and • injury to our reputation and our brand.
We believe that replacing our key personnel with qualified successors is particularly challenging as we feel that our business model and approach to marketing and selling our solutions are unique.
We believe that replacing our key personnel with qualified successors is particularly challenging as we feel that our 30 Table of Contents evolving business model and approach to marketing and selling our solutions are unique.
Risks Related to Accounting and Taxation • We are subject to fluctuations in interest rates. • Failure to maintain proper and effective internal controls could have a material adverse effect on our business. • We are subject to potential changes in tax laws or regulations Risks Related to Ownership of Our Common Stock • The Sponsors have a controlling influence over matters requiring stockholder approval. • The Sponsors and their affiliated funds may pursue corporate opportunities independent of us that could present conflicts with our and our stockholders’ interests.
Risks Related to Accounting and Taxation • We are subject to fluctuations in foreign exchange and interest rates. • Failure to maintain proper and effective internal controls could have a material adverse effect on our business. • We are subject to potential changes in tax laws or regulations Risks Related to Ownership of Our Common Stock and Our Organizational Structure • The Sponsors have a controlling influence over matters requiring stockholder approval. • The Sponsors and their affiliated funds may pursue corporate opportunities independent of us that could present conflicts with our and our stockholders’ interests. • Our charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts.
Examples of such vendors are Kaseya, Datto (a Kaseya company) and ConnectWise. • Niche or domain-specific: Small to large enterprise vendors that provide solutions focused on a particular service that may be sold by MSPs, such as network monitoring, systems management, email security, remote access and support and data protection. Examples of such vendors are Auvik, Mimecast and Veeam.
Examples of such vendors are ConnectWise, Kaseya, and NinjaOne. • Niche or domain-specific: Small to large enterprise vendors that provide solutions focused on a particular service that may be sold by MSPs, such as network monitoring, systems management, email security, remote access and support and data protection. Examples of such vendors are Acronis, ManageEngine, Proofpoint, Sophos and Veeam.
Our recent and planned personnel additions may not become as productive as we would like or in a timely manner, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do or plan to do business. Our business depends on MSP partners renewing their subscription agreements.
Our recent and planned personnel additions may not become as productive as we would like or in a timely manner, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do or plan to do business.
Our business model allows us to grow with our MSP partners. MSP partners with annualized recurring revenue, or ARR, over $50,000 on our platform grew from 1,678 as of December 31, 2021 to 1,898 as of December 31, 2022, representing an increase of 13.1%.
Our business model allows us to grow with our MSP partners. MSP partners with annualized recurring revenue, or ARR, over $50,000 on our platform grew from 1,898 as of December 31, 2022 to 2,196 as of December 31, 2023, representing an increase of 15.7%.
We generated revenue of $371.8 million, $346.5 million and $302.9 million for the years ended December 31, 2022, 2021 and 2020, respectively, representing an increase of 14.4% from the year ended December 31, 2020 to the year ended December 31, 2021 and an increase of 7.3% from the year ended December 31, 2021 to the year ended December 31, 2022.
We generated revenue of $421.9 million, $371.8 million and $346.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, representing an increase of 7.3% from the year ended December 31, 2021 to the year ended December 31, 2022 and an increase of 13.5% from the year ended December 31, 2022 to the year ended December 31, 2023.
We offer our MSP partners the flexibility to purchase solutions with pricing based on committed volumes or on a “pay-as-you-go” model, where our partners pay based on the volume of our solutions they and their customers consume.
We offer our MSP partners the flexibility to purchase solutions with pricing based on committed volumes or on a “pay-as-you-go” model ranging from monthly to multi-year terms, where our partners pay based on the volume of our solutions they and their customers are committed to or consume on a monthly basis.
If our websites are displayed less prominently, or fail to appear in search result listings in response to search inquiries regarding IT management problems through Internet search engines for any reason, our website traffic could significantly decline, requiring us to incur increased marketing expenses to replace this traffic. Any failure to replace this traffic could reduce our revenue.
If our websites are displayed less prominently, or fail to appear in search result listings in response to search inquiries regarding observability, IT monitoring and management, backup, data recovery, or security problems through Internet search engines for any reason, our website traffic could significantly decline, requiring us to incur increased marketing expenses to replace this traffic.
We believe that we compete favorably on these factors. Our People We are a global software company. As of December 31, 2022, we had 1,462 employees fully dedicated to our business, of which 321 were employed in the United States and 1,141 were employed outside of the United States. Of these employees, 1,454 were employed full time.
We believe that we compete favorably on these factors. Our People We are a global software company. As of December 31, 2023, we had 1,584 employees fully dedicated to our business, of which 329 were employed in the United States and 1,255 were employed outside of the United States. Of these employees, 1,575 were employed full time.
Key Strengths of our Platform The key strengths of our platform and related offerings include: 1) Deep remote monitoring and management capabilities . Our leading remote monitoring and management capabilities provide our MSP partners with visibility and insights into the availability and performance of a wide range of systems and network infrastructure and devices, all through a centralized dashboard.
Our leading remote monitoring and management capabilities provide our MSP partners with visibility and insights into the availability and performance of a wide range of systems and network infrastructure and devices, all through a centralized dashboard.
We are subject to risks associated with international sales and operations including, but not limited to: • fluctuations in currency exchange rates; • the complexity of, or changes in, foreign regulatory requirements, including more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal data, particularly in Europe; • localization by our channel partners, including translation of our materials; • difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations; 25 Table of Contents • potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the repatriation of earnings and changes in tax rates; • the burdens of complying with a wide variety of foreign laws and different legal standards; • increased financial accounting and reporting burdens and complexities; • longer payment cycles and difficulties in collecting accounts receivable; • longer sales cycles; • political, social and economic instability; • war, terrorist attacks and security concerns in general; • reduced or varied protection for intellectual property rights in some countries and the risk of increased exposure to potential cyber attacks, theft or compromise of our systems, security, data, proprietary or confidential information or intellectual property as a result of our international operations, whether by state-sponsored malfeasance or other foreign entities or individuals; • laws and policies of the U.S. and other jurisdictions affecting international trade (including import and export control laws, tariffs and trade barriers); • the risk of U.S. regulation of foreign operations; and • other factors beyond our control such as natural disasters and pandemics.
We are subject to risks associated with international sales and operations including, but not limited to: • fluctuations in currency exchange rates in the markets where we do business, including the recently strengthened U.S. dollar, and other controls, regulations, and orders that might restrict our ability to repatriate cash; • volatility, uncertainties, and recessionary pressures in the global economy or in the economies of the countries in which we operate; • the complexity of, or changes in, foreign regulatory requirements, including more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal data, particularly in Europe; • localization by our channel partners, including translation of our materials; • difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations; • difficulties hiring local staff, differing employer/employee relationships, and the potential need for country-specific benefits, programs, and systems; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the repatriation of earnings and changes in tax rates; • the burdens of complying with a wide variety of foreign laws and different legal standards; • increased financial accounting and reporting burdens and complexities; • longer payment cycles and difficulties in collecting accounts receivable; • longer sales cycles; • social, economic and political instability; • epidemics and pandemics, terrorist attacks, wars, geopolitical conflicts, disputes and security concerns in general; • reduced or varied protection for intellectual property rights in some countries and the risk of increased exposure to potential cyber attacks, theft or compromise of our systems, security, data, proprietary or confidential information or intellectual 25 Table of Contents property as a result of our international operations, whether by state-sponsored malfeasance or other foreign entities or individuals; • laws and policies of the U.S. and other jurisdictions affecting international trade (including import and export control laws, tariffs and trade barriers); • the risk of U.S. regulation of foreign operations; and • other factors beyond our control such as natural disasters and pandemics.
If our subscription-based business model fails to yield the benefits that we expect, our results of operations could be negatively impacted. • We operate in highly competitive markets, which could make it difficult for us to acquire and retain MSP partners at our historic rates. • Our success depends on our ability to adapt to the rapidly changing needs of MSP partners and their SME customers. • If we fail to integrate our solutions with a variety of operating systems, software applications, platforms and hardware that are developed by others or ourselves, our solutions may become less competitive or obsolete and our results of operations would be harmed. • Acquisitions present many risks that could have an adverse effect on our business and results of operations. • We may not be able to achieve or sustain the same level of cash flows in the future. • Because our long-term success depends on our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States, our business is susceptible to risks associated with international operations.
If our subscription-based business model fails to yield the benefits that we expect, our results of operations could be negatively impacted. • We operate in highly competitive markets, which could make it difficult for us to acquire and retain MSP partners at our historic rates. • Our success depends on our ability to adapt to the rapidly changing needs of MSP partners and their SME customers. • If we fail to integrate our solutions with a variety of operating systems, software applications, platforms and hardware that are developed by others or ourselves, our solutions may become less competitive or obsolete and our results of operations would be harmed. • Acquisitions present many risks that could have an adverse effect on our business and results of operations. • We may not be able to achieve or sustain the same level of cash flows in the future. • Because our long-term success depends on our ability to operate our business internationally and increase sales of our solutions to our MSP partners located outside of the United States, our business is susceptible to risks associated with international operations. • We resell third-party software and integrate third-party software into our solutions that may be difficult to replace or cause errors or failures of our solutions that could lead to a loss of MSP partners or harm to our reputation and our operating results. • Material defects, errors or vulnerabilities in our solutions, the failure of our solutions to block malware or prevent a security breach, misuse of our solutions, or risks of product liability claims could harm our reputation, result in significant costs to us and impair our ability to sell our solutions.
This solution is designed to enable our MSP partners to: • protect against the latest threats without waiting for recurring scans or updates to signature definitions; 10 Table of Contents • reverse the effects of an attack through remediation and rollback to restore endpoints to their pre-attack state and minimize customer downtime; and • view summaries or detailed information about threats from the centralized dashboard of our platform.
This solution is designed to enable our MSP partners to: • protect against the latest threats without waiting for recurring scans or updates to signature definitions; • reverse the effects of an attack through remediation and rollback to restore endpoints to their pre-attack state and minimize customer downtime; • enhance network visibility, identify endpoints, and reduce and control customer attack surfaces; • proactively hunt for threats and offload the operational burden of endpoint management to security specialists; and 10 Table of Contents • view summaries or detailed information about threats from the centralized dashboard of our platform.
Employee Engagement We survey employees two times a year to ensure that all employees’ voices have an opportunity to be heard and we better understand the key areas where we can improve the employee experience.
Employee Engagement We survey employees a minimum of two times a year to ensure that all employees’ voices are heard, and so we can better understand the key areas where we can improve the employee experience.
Additionally, as of December 31, 2022, we had 1,898 MSP partners with ARR over $50,000 on our platform, up from 1,678 as of December 31, 2021, representing an increase of 13.1%.
Additionally, as of December 31, 2023, we had 2,196 MSP partners with ARR over $50,000 on our platform, up from 1,898 as of December 31, 2022, representing an increase of 15.7%.
We cannot provide assurances that key personnel, including our executive officers, will continue to be employed by us or that we will be able to attract and retain qualified personnel in the future.
In addition, we cannot provide assurances that key personnel, including our executive officers, will continue to be employed by us or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have an adverse effect on our business.
We operate a global, multi-cloud architecture in order to deliver the best customer experience across both speed and customer choice regarding data sovereignty. We operate our workloads out of a mix of private data centers, AWS and Azure. This global reach enables us to deliver extensive choice to partners who have various data storage requirements.
We operate a global, multi-cloud architecture in order to deliver the best customer experience across both speed and customer choice regarding data sovereignty. We operate our workloads out of a mix of private data centers, AWS and Azure.
If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruptions in connection with doing so. 27 Table of Contents Material defects or errors in our solutions could harm our reputation, result in significant costs to us and impair our ability to sell our solutions.
If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruptions in connection with doing so.
For the years ended December 31, 2022, 2021, and 2020 our net income (loss) was $16.7 million, $0.1 million and $(7.2) million, respectively, and our adjusted EBITDA was $114.7 million, $113.3 million and $120.6 million, respectively.
For the years ended December 31, 2023, 2022, and 2021 our net income was $23.4 million, $16.7 million and $0.1 million, respectively, and our adjusted EBITDA was $143.4 million, $114.7 million and $113.3 million, respectively.
If one or more of these risks occurs, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results could suffer.
If one or more of these risks occurs, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results could suffer. We have faced, and may continue to face, exposure to foreign currency exchange rate fluctuations.
Internationally, we augment our go-to-market approach with a targeted and localized distributor model. 8 Table of Contents We believe our differentiated go-to-market approach benefits our business for a number of reasons, including: 1) Sales reach extension . Our MSP partners effectively extend our sales reach into the worldwide SME market.
We believe our differentiated go-to-market approach benefits our business for a number of reasons, including: 1) Sales reach extension . Our MSP partners effectively extend our sales reach into the worldwide SME market.
We believe the availability of these services is essential to the management of our high-volume, transaction-oriented business model. We also use third-party vendors to manage our equity compensation plans and certain aspects of our financial reporting processes. As we expand our operations, we expect to utilize additional systems and service providers that may also be essential to managing our business.
We believe the availability of these services is essential to the management of our high-volume, transaction-oriented business model. As we expand our operations, we expect to utilize additional systems and service providers that may also be essential to managing our business.
Diversity, Equality and Belonging As a global company, we have the distinct advantage of employing talented and diverse individuals across different ethnicities, genders, races, religions, sexual orientations and generations, all supported through a focus on innovation and inclusion.
We want our employees to feel supported to do their best work and N-joy the Journey along the way. Diversity, Equality and Belonging As a global company, we have the distinct advantage of employing talented and diverse individuals across different ethnicities, genders, races, religions, sexual orientations and generations, all supported through a focus on innovation and inclusion.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf any of these representations, statements or undertakings are, or become, incomplete or inaccurate, or if we or SolarWinds breach any of the respective covenants in any of the Separation and Distribution-related agreements, the opinions of tax counsel and tax advisors could be invalid and the conclusions reached therein could be jeopardized. 40 Table of Contents Notwithstanding any opinion of tax counsel and tax advisors, the Internal Revenue Service (the “IRS”) could determine that the Separation and Distribution should be treated as a taxable transaction if it were to determine that any of the facts, assumptions, representations, statements or undertakings upon which any opinion of tax counsel and tax advisors was based were false or had been violated, or if it were to disagree with the conclusions in any opinion of tax counsel and tax advisors.
Biggest changeNotwithstanding any opinion of tax counsel and tax advisors, the Internal Revenue Service (the “IRS”) could determine that the Separation and Distribution should be treated as a taxable transaction if it were to determine that any of the facts, assumptions, representations, statements or undertakings upon which any opinion of tax counsel and tax advisors was based were false or had been violated, or if it were to disagree with the conclusions in any opinion of tax counsel and tax advisors.
The trading price of our common stock has been and could continue to be volatile, which could cause the value of your investment to decline. Technology stocks have historically experienced high levels of volatility. The trading price of our common stock has fluctuated, and may continue to fluctuate, substantially.
The trading price of our common stock has been and may continue to be volatile, which could cause the value of your investment to decline. Technology stocks have historically experienced high levels of volatility. The trading price of our common stock has fluctuated, and may continue to fluctuate, substantially.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards will have on our business or the businesses of our MSP partners, including, but not limited to the European Union’s General Data Protection Regulation and U.S. state privacy laws, which created a range of new compliance obligations, and significantly increased financial penalties for noncompliance.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards will have on our business or the businesses of our MSP partners, including, but not limited to the European Union’s General Data Protection Regulation, the UK’s General Data Protection Regulation and U.S. state privacy laws, which created a range of new compliance obligations, and significantly increased financial penalties for noncompliance.
Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in numerous risks and adverse consequences to our business, including that (a) our prevention, mitigation and remediation efforts may not be successful or sufficient, (b) our confidential and proprietary information, including our source code, as well as personal information related to current or former employees and MSP partners, may be accessed, exfiltrated, misappropriated, compromised or corrupted, (c) we incur significant financial, legal, reputational and other harms to our business, including, loss of business, decreased sales, severe reputational damage adversely affecting current and prospective customer, employee or vendor relations and investor confidence, U.S. or foreign regulatory investigations and enforcement actions, litigation, indemnity obligations, damages for contractual breach, penalties for violation of applicable laws or regulations, including laws and regulations in the United States and other jurisdictions relating to the collection, use and security of user and other personally identifiable information and data, significant costs for remediation, impairment of our ability to protect our intellectual property, stock price volatility and other significant liabilities, (d) our insurance coverage, including coverage relating to certain security and privacy damages and claim expenses, may not be available or sufficient to compensate for all liabilities we incur related to these matters or that we may face increased costs to obtain and maintain insurance in the future, 35 Table of Contents and (e) our steps to secure our internal environment, adapt and enhance our software development and build environments and ensure the security and integrity of the solutions that we deliver to our MSP partners may not be successful or sufficient to protect against future threat actors or cyberattacks.
Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in numerous risks and adverse consequences to our business, including that (a) our prevention, mitigation and remediation efforts may not be successful or sufficient, (b) our confidential and proprietary information, including our source code, as well as personal information related to current or former employees and MSP partners, may be accessed, exfiltrated, misappropriated, compromised or corrupted, (c) we incur significant financial, legal, reputational and other harms to our business, including, loss of business, decreased sales, severe reputational damage adversely affecting current and prospective customer, employee or vendor relations and investor confidence, U.S. or foreign regulatory investigations and enforcement actions, litigation, indemnity obligations, damages for contractual breach, penalties for violation of applicable laws or regulations, including laws and regulations in the United States and other jurisdictions relating to the collection, use and security of user and other personally identifiable information and data, significant costs for remediation, impairment of our ability to protect our intellectual property, stock price volatility and other significant liabilities, (d) our insurance coverage, including coverage relating to certain security and privacy damages and claim expenses, may not be available or sufficient to compensate for all liabilities we incur related to these matters or that we may face increased costs to obtain and maintain insurance in the future, and (e) our steps to secure our internal environment, adapt and enhance our software development and build environments and ensure the security and integrity of the solutions that we deliver to our MSP partners may not be successful or sufficient to protect against future threat actors or cyberattacks.
Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017, requires complex computations to be performed, significant judgments to be made in the interpretation of the provisions of the Tax Act, significant estimates in calculations and the preparation and analysis of information not previously relevant or regularly produced. The U.S.
Additionally, the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017, requires complex computations to be performed, significant judgments to be made in the interpretation of the provisions of the Tax Act, significant estimates in calculations and the preparation and analysis of information not previously relevant or regularly produced. The U.S.
Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our operating results. Based on our current corporate structure, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our operating results. Based on our current corporate structure, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
Our substantial indebtedness incurred under the credit agreement, combined with our other financial obligations and contractual commitments could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the funds available for operations, working capital, capital expenditures, acquisitions, product development and other purposes; • increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • restricting us from making investments or strategic acquisitions or causing us to make non-strategic divestitures; • requiring us under certain circumstances to repatriate earnings from our international operations in order to make payments on our indebtedness, which could subject us to local country income and withholding taxes and/or state income taxes that are not currently accrued in our financial statements; • requiring us to liquidate short-term or long-term investments in order to make payments on our indebtedness, which could generate losses; • exposing us to the risk of increased interest rates as borrowings under the credit agreement are subject to variable rates of interest; and • limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
Our substantial indebtedness incurred under the credit agreement, combined with our other financial obligations and contractual commitments could have important consequences, including: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the funds available for operations, working capital, capital expenditures, acquisitions, product development and other purposes; • increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness; • limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • restricting us from making investments or strategic acquisitions or causing us to make non-strategic divestitures; • requiring us under certain circumstances to repatriate earnings from our international operations in order to make payments on our indebtedness, which could subject us to local country income and withholding taxes and/or state income taxes that are not currently accrued in our financial statements; 33 Table of Contents • requiring us to liquidate short-term or long-term investments in order to make payments on our indebtedness, which could generate losses; • exposing us to the risk of increased interest rates as borrowings under the credit agreement are subject to variable rates of interest; and • limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
The covenants, among other things, limit our and certain of our subsidiaries’ abilities to: • incur additional indebtedness; • create or incur liens; • engage in mergers, consolidations, amalgamations, liquidations, dissolutions or dispositions; • make investments, acquisitions, loans (including guarantees), advances or capital contributions; • sell, transfer or otherwise dispose of assets, including capital stock of subsidiaries; • conduct, transact or otherwise engage in certain business or operations; • create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; • make prepayments or repurchases of debt that is subordinated with respect to right of payment; • modify certain documents governing debt that is subordinated with respect to right of payment; • pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and 32 Table of Contents • engage in certain transactions with affiliates.
The covenants, among other things, limit our and certain of our subsidiaries’ abilities to: • incur additional indebtedness; • create or incur liens; • engage in mergers, consolidations, amalgamations, liquidations, dissolutions or dispositions; • make investments, acquisitions, loans (including guarantees), advances or capital contributions; • sell, transfer or otherwise dispose of assets, including capital stock of subsidiaries; • conduct, transact or otherwise engage in certain business or operations; • create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries; • make prepayments or repurchases of debt that is subordinated with respect to right of payment; • modify certain documents governing debt that is subordinated with respect to right of payment; • pay dividends and distributions on, or redeem, repurchase or retire our capital stock; and • engage in certain transactions with affiliates.
Our restated charter also contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law (the “DGCL”), and prevents us from engaging in a business combination, such as a merger, with an interested stockholder (i.e., a person or group that acquires at least 15% of our voting stock) for a period of three years from the date such person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
Our restated charter also contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law (the “DGCL”), and prevents us from engaging in a business combination, such as a merger, with an 47 Table of Contents interested stockholder (i.e., a person or group that acquires at least 15% of our voting stock) for a period of three years from the date such person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
We rely primarily on a combination of patent, copyright, trademark, trade dress, unfair competition and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection. As of December 31, 2022, we had six issued patents.
We rely primarily on a combination of patent, copyright, trademark, trade dress, unfair competition and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection. As of December 31, 2023, we had six issued patents.
As of December 31, 2022, the Sponsors collectively owned in the aggregate approximately 111,564,512 shares of our common stock. We granted registration rights to the Sponsors with respect to shares of our common stock. Any shares registered pursuant to the registration rights agreement will be freely tradable in the public market, subject to compliance with applicable restrictions.
As of December 31, 2023, the Sponsors collectively owned in the aggregate approximately 111,564,512 shares of our common stock. We granted registration rights to the Sponsors with respect to shares of our common stock. Any shares registered pursuant to the registration rights agreement will be freely tradable in the public market, subject to compliance with applicable restrictions.
We are a controlled company within the meaning of the NYSE rules and, as a result, qualify for and may rely on exemptions from certain corporate governance requirements. As of December 31, 2022, the Sponsors beneficially owned a majority of the combined voting power of all classes of our outstanding voting stock.
We are a controlled company within the meaning of the NYSE rules and, as a result, qualify for and may rely on exemptions from certain corporate governance requirements. As of December 31, 2023, the Sponsors beneficially owned a majority of the combined voting power of all classes of our outstanding voting stock.
Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group 48 Table of Contents of persons acting together is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including the requirements that: • a majority of the board of directors consist of independent directors as defined under the rules of the NYSE; • the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including the requirements that: • a majority of the board of directors consist of independent directors as defined under the rules of the NYSE; • the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
If we were required to pay any significant amount of money in satisfaction of claims under these laws, or any similar laws enacted by other jurisdictions, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any of these laws, our business, operating results and financial condition could be adversely affected.
If we were required to pay any significant amount of money in satisfaction of claims under these laws, or any similar laws enacted by other jurisdictions, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any of these laws, our business, operating results and financial condition could be 41 Table of Contents adversely affected.
We derived portions of the historical financial information included in this Annual Report on Form 10-K from SolarWinds’ Consolidated Financial Statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future.
We derived portions of the historical financial information included in this Annual Report on Form 10-K from SolarWinds’ Consolidated Financial Statements, and this information does not necessarily reflect the results of operations and financial 43 Table of Contents position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future.
In addition, the legal standards, both in the United States and in foreign countries, relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.
In addition, the legal standards, both in the United States and in foreign countries, relating to the validity, enforceability and scope of protection of intellectual 35 Table of Contents property rights are uncertain and still evolving. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.
With respect to the files that may have contained data relating to trial and product activation of our N-central On Demand solutions, although we are unable to determine the actual content of such files, the information included in such files could have contained MSP partner user names and N-central On Demand initial passwords generated by N-able.
With respect to the files that may have contained data relating to trial and product activation of our N-central On Demand solutions, although we are unable to determine the actual content of such files, the information included in such files could have contained MSP partner usernames and N-central On Demand initial passwords generated by N-able.
These requirements will not apply to us as long as we remain a controlled company. We may take advantage of these exemptions. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These requirements will not apply to us as long as we remain a controlled company. We may take advantage of these exemptions. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. 49 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These matters may include: • the composition of our board of directors, which has the authority to direct our business and to appoint and remove our officers; • approving or rejecting a merger, consolidation or other business combination; 46 Table of Contents • raising future capital; and • amending our restated charter and restated bylaws, which govern the rights attached to our common stock.
These matters may include: • the composition of our board of directors, which has the authority to direct our business and to appoint and remove our officers; • approving or rejecting a merger, consolidation or other business combination; • raising future capital; and • amending our restated charter and restated bylaws, which govern the rights attached to our common stock.
Changes in export or import laws or corresponding sanctions may delay 39 Table of Contents the introduction and sale of our solutions in international markets, or, in some cases, prevent the export or import of our solutions to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and results of operations.
Changes in export or import laws or corresponding sanctions may delay the introduction and sale of our solutions in international markets, or, in some cases, prevent the export or import of our solutions to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and results of operations.
Such shares are freely tradable in the public market to the extent sold pursuant to the registration statement filed by us pursuant to our obligations. Our issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.
Such shares are freely tradable in the public market to the extent sold pursuant to the registration statement filed by us pursuant to our obligations. 46 Table of Contents Our issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.
These provisions could also 45 Table of Contents make it difficult for stockholders to elect directors who are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management.
These provisions could also make it difficult for stockholders to elect directors who are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management.
The allocation of intellectual property rights and data between SolarWinds and us as part of the Separation and Distribution, the shared use of certain intellectual property rights and data following the Separation and Distribution and restrictions on the use of intellectual property rights, could adversely impact our reputation, our ability to enforce certain intellectual property rights and our competitive position.
The allocation of intellectual property rights and data between SolarWinds and us as part of the Separation and Distribution, the shared use of certain intellectual property rights and data following the Separation and Distribution and 44 Table of Contents restrictions on the use of intellectual property rights, could adversely impact our reputation, our ability to enforce certain intellectual property rights and our competitive position.
As part of SolarWinds, we benefited from SolarWinds’ 41 Table of Contents operating diversity, size, purchasing power, borrowing leverage and available capital for investments that will no longer be accessible after the Separation and Distribution.
As part of SolarWinds, we benefited from SolarWinds’ operating diversity, size, purchasing power, borrowing leverage and available capital for investments that will no longer be accessible after the Separation and Distribution.
SolarWinds has notified us that it has identified all personal information contained in 36 Table of Contents the emails of these accounts, and has informed us that it has provided notices to any impacted individuals and other parties as required.
SolarWinds has notified us that it has identified all personal information contained in the emails of these accounts, and has informed us that it has provided notices to any impacted individuals and other parties as required.
Customers have and may in the future defer purchasing or choose to cancel or not renew their agreements or subscriptions with us as a result of the Cyber Incident.
Customers have and may in the future defer purchasing or choose to cancel 37 Table of Contents or not renew their agreements or subscriptions with us as a result of the Cyber Incident.
If securities or industry analysts publish misleading or unfavorable research about our business, our stock price and trading volume could decline. The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business.
If securities or industry analysts were to downgrade our stock, publish misleading or unfavorable research about our business or fail to publish reports on our business, our stock price and trading volume could decline. The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business.
Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our MSP partners’ and our compliance, operating and other costs, as well as the costs of our solutions. Further, these events could decrease the capital we have available to operate our business.
Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our MSP partners’ and our compliance, operating and other costs, as well as the costs of our solutions. Further, these events could decrease the capital we have available to operate our business. Any or all of these events could adversely impact our business and financial performance.
In addition, we expect that being a public company subject to these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
In addition, although our premiums for the current year decreased, being a public company subject to these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Once it is required to do so, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed.
In the future, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed, operated or reviewed.
Factors that could cause fluctuations in the trading price of our common stock include the following: • announcements of new solutions or technologies, commercial relationships, acquisitions or other events by us or our competitors; • changes in how MSP partners perceive the benefits of our offerings; • changes in subscription revenue from quarter to quarter; • departures of key personnel; • price and volume fluctuations in the overall stock market from time to time; • fluctuations in the trading volume of our shares or the size of our public float; • sales of large blocks of our common stock, including sales by our Sponsors; • actual or anticipated changes or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • changes in actual or future expectations of investors or securities analysts; • litigation involving us, our industry or both; 44 Table of Contents • cybersecurity incidents; • regulatory developments in the United States, foreign countries or both; • general economic conditions and trends; • major catastrophic events in our domestic and foreign markets; and • “flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed.
Factors that could cause fluctuations in the trading price of our common stock include the following: • announcements of new solutions or technologies, commercial relationships, acquisitions or other events by us or our competitors; • changes in how MSP partners perceive the benefits of our offerings; • changes in subscription revenue from quarter to quarter; • departures of key personnel; • price and volume fluctuations in the overall stock market from time to time; • fluctuations in the trading volume of our shares or the size of our public float; • sales of large blocks of our common stock, including sales by our Sponsors; • actual or anticipated changes or fluctuations in our operating results; • whether our operating results meet the expectations of securities analysts or investors; • changes in actual or future expectations of investors or securities analysts; • litigation involving us, our industry or both; • cybersecurity incidents; • regulatory developments in the United States, foreign countries or both; • general macroeconomic conditions and trends, including market impacts related to the wars in Ukraine and the Middle East, geopolitical tensions in China, inflation, changes in interest rates and the COVID-19 pandemic; • major catastrophic events in our domestic and foreign markets; and • “flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed.
Notwithstanding this, directors designated by the Sponsors do not comprise a majority of our cybersecurity committee and the chair of such committee is not a director designated by the Sponsors. In addition, Thoma Bravo does not currently have any designees serving as directors.
Notwithstanding this, directors designated by the Sponsors do not comprise a majority of our cybersecurity committee and the chair of such committee is not a director designated by the Sponsors. In addition, Thoma Bravo does not currently have any designees serving as directors, although they retain their right to designate directors.
So long as the Sponsors beneficially own shares of our outstanding common stock representing at least a majority of the votes entitled to be cast by the holders of our outstanding voting stock, they can effectively control and direct our board of directors. Currently, two members of our board of directors, Messrs.
Although directors affiliated with the Sponsors currently only represent two of our seven directors, so long as the Sponsors beneficially own shares of our outstanding common stock representing at least a majority of the votes entitled to be cast by the holders of our outstanding voting stock, they can effectively control and direct our board of directors.
In addition, in connection with the private placement completed just prior to the Separation and Distribution, we granted registration rights to the Investors with respect to the 20,623,282 aggregate shares of our common stock purchased by them in the Private Placement, of which 10,148,828 remain unsold by the selling stockholders as of December 31, 2022.
In addition, in connection with the private placement completed just prior to the Separation and Distribution, we granted registration rights to certain investors with respect to the 20,623,282 aggregate shares of our common stock purchased by them in the Private Placement, of which 8,314,146 remain unsold by the selling stockholders as of December 31, 2023.
Any of these risks could be difficult to eliminate or manage, and if not addressed, could have a negative effect on our business, operating results and financial condition. 34 Table of Contents Risks Related to Cybersecurity Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ systems, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ environments, the theft or misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business.
Risks Related to Cybersecurity Cyberattacks, including the Cyber Incident, and other security incidents have resulted, and in the future may result, in compromises or breaches of our, our MSP partners’, or their SME customers’ systems, the insertion of malicious code, malware, ransomware or other vulnerabilities into our, our MSP partners’, or their SME customers’ systems, the exploitation of vulnerabilities in our, our MSP partners’, or their SME customers’ environments, the theft or misappropriation of our, our MSP partners’, or their SME customers’ proprietary and confidential information, and interference with our, our MSP partners’, or their SME customers’ operations, exposure to legal and other liabilities, higher MSP partner and employee attrition and the loss of key personnel, negative impacts to our sales, renewals and upgrades and reputational harm and other serious negative consequences, any or all of which could materially harm our business.
SolarWinds has agreed to indemnify us, and we have agreed to indemnify SolarWinds, for certain liabilities. Claims for indemnification by SolarWinds, or a failure by SolarWinds to provide sufficient indemnification to us, could negatively impact our business, results of operations and financial position.
Claims for indemnification by SolarWinds, or a failure by SolarWinds to provide sufficient indemnification to us, could negatively impact our business, results of operations and financial position. Pursuant to the Separation and Distribution Agreement and certain other agreements with SolarWinds, SolarWinds has agreed to indemnify us, and we have agreed to indemnify SolarWinds, for certain liabilities.
Our restated charter provides that no officer or director of the Company who is also an officer, director, employee, partner, managing director, principal, independent contractor or other affiliate of either of the Sponsors will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual pursues or acquires a corporate opportunity for its own account or the account of an affiliate, as applicable, instead of us, directs a corporate opportunity to any other person instead of us or does not communicate information regarding a corporate opportunity to us.
The Sponsors and their affiliated funds may also pursue acquisitions that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. 48 Table of Contents Our restated charter provides that no officer or director of the Company who is also an officer, director, employee, partner, managing director, principal, independent contractor or other affiliate of either of the Sponsors will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual pursues or acquires a corporate opportunity for its own account or the account of an affiliate, as applicable, instead of us, directs a corporate opportunity to any other person instead of us or does not communicate information regarding a corporate opportunity to us.
While we were profitable as part of SolarWinds, we cannot assure that our profits will continue at a similar level to historical periods now that we are an independent, publicly traded company.
While we were profitable as part of SolarWinds, we cannot assure that our profits will continue at a similar level to historical periods now that we are an independent, publicly traded company. SolarWinds has agreed to indemnify us, and we have agreed to indemnify SolarWinds, for certain liabilities.
As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and the Sponsors, whose interests may be adverse to ours in some circumstances. The Sponsors and their affiliated funds may pursue corporate opportunities independent of us that could present conflicts with our and our stockholders’ interests.
As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and the Sponsors, whose interests may be adverse to ours in some circumstances.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. Any changes to these existing tax laws could adversely affect our domestic and international business operations and our business and financial performance.
Our business and financial performance could be negatively impacted by changes in tax laws or regulations. 39 Table of Contents New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
The market price of our common stock may be higher or lower than the price you pay for our common stock, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock.
The market price of our common stock may be higher or lower than the price you pay for our common stock, depending on many factors, some of which are beyond our control and may not be related 45 Table of Contents to our operating performance.
Although we have and expect to continue to deploy significant resources as part of our security infrastructure, we cannot ensure that our steps to secure our internal environment, improve our software development and build environments and protect the security and integrity of the solutions that we deliver will be successful or sufficient to protect against future threat actors or cyberattacks or perceived by existing and prospective MSP partners as sufficient to address the harm caused by the Cyber Incident.
Although we have and expect to continue to deploy significant resources as part of our security infrastructure, we cannot ensure that our steps to secure our internal environment, improve our software development and build environments and protect the security and integrity of the solutions that we deliver will be successful or sufficient to protect against future threat actors or cyberattacks or perceived by existing and prospective MSP partners as sufficient to address the harm caused by the Cyber Incident. 38 Table of Contents Risks Related to Accounting and Taxation Failure to maintain proper and effective internal controls could have a material adverse effect on our business, operating results and stock price.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock. 47 Table of Contents Our restated charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our restated charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
The credit agreement includes customary events of default, including, among others, failure to pay principal, interest or other amounts; material inaccuracy of representations and warranties; violation of covenants; specified cross-default and cross-acceleration to other material indebtedness; certain bankruptcy and insolvency events; certain ERISA events; certain undischarged judgments; material invalidity of guarantees or grant of security interest; and change of control.
Even if our credit agreement is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants. 34 Table of Contents The credit agreement includes customary events of default, including, among others, failure to pay principal, interest or other amounts; material inaccuracy of representations and warranties; violation of covenants; specified cross-default and cross-acceleration to other material indebtedness; certain bankruptcy and insolvency events; certain ERISA events; certain undischarged judgments; material invalidity of guarantees or grant of security interest; and change of control.
These circumstances could adversely affect our ability to protect our competitive position in the industry and otherwise adversely affect our business, financial condition and results of operations. 43 Table of Contents Risks Related to Ownership of Our Common Stock The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, the requirements of the Sarbanes-Oxley Act and the requirements of the NYSE, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
Risks Related to Ownership of Our Common Stock and Our Organizational Structure The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, the requirements of the Sarbanes-Oxley Act and the requirements of the NYSE, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future.
Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective.
If these tax benefits are changed, terminated, not extended or comparable new tax incentives are not introduced, we expect that our effective income tax rate and/or our operating expenses could increase significantly, which could materially adversely affect our financial condition and results of operations.
If these tax benefits are changed, terminated, not extended or comparable new tax incentives are not introduced, we expect that our effective income tax rate and/or our operating expenses could increase significantly, which could materially adversely affect our financial condition and results of operations. 40 Table of Contents Risks Related to Governmental Regulation We are subject to various global data privacy and security regulations, which could result in additional costs and liabilities to us.
By virtue of the role our products play in helping to manage and secure the environments and systems of our MSP partners and their SME customers, attacks on our systems and products can result in similar impacts on our MSP partners’ and their SME customers’ systems and data.
By virtue of the role our products play in helping to manage and secure the environments and systems of our MSP partners and their SME customers, attacks on our systems and products can result in similar impacts on our MSP partners’ and their SME customers’ systems and data. 36 Table of Contents Cybersecurity has become increasingly important to our MSP partners as their SME customers experience increased security threats while more of their workforce works remotely.
Risks Related to Governmental Regulation We are subject to various global data privacy and security regulations, which could result in additional costs and liabilities to us. Our business is subject to a wide variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data.
Our business is subject to a wide variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data.
These data protection and privacy-related laws and regulations continue to evolve and are expected to result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and 38 Table of Contents sanctions and increased costs of compliance.
These data protection and privacy-related laws and regulations continue to evolve and are expected to result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance. In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, and state privacy and breach notification laws.
We cannot be certain that third parties do not have blocking patents that could be used to prevent us from marketing or practicing our patented software or technology. 33 Table of Contents We endeavor to enter into agreements with our employees and contractors and with parties with which we do business in order to limit access to and disclosure of our trade secrets and other proprietary information.
We endeavor to enter into agreements with our employees and contractors and with parties with which we do business in order to limit access to and disclosure of our trade secrets and other proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use, misappropriation or reverse engineering of our technology.
In addition, the Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules.
In addition, the Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes.
Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way in which we conduct our business. Our business and financial performance could be negatively impacted by changes in tax laws or regulations.
New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way in which we conduct our business.
We could incur significant liability if the Separation and Distribution is determined to be a taxable transaction, and, in certain circumstances, we could be required to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition and results of operations could be adversely affected. 42 Table of Contents We could incur significant liability if the Separation and Distribution is determined to be a taxable transaction, and, in certain circumstances, we could be required to indemnify SolarWinds for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
Risks Related to Our Indebtedness We have substantial indebtedness, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and meet our obligations with respect to our indebtedness. 31 Table of Contents We entered into a credit agreement in July 2021 and, as of December 31, 2022, our total indebtedness outstanding under the credit agreement, net of debt issuance costs, was $337.0 million and we had $60 million of additional unused borrowing capacity under our revolving credit facility.
We entered into a credit agreement in July 2021 and, as of December 31, 2023, our total indebtedness outstanding under the credit agreement, net of debt issuance costs, was $335.0 million and we had $60 million of additional unused borrowing capacity under our revolving credit facility.
The enforcement of our intellectual property rights also depends on our legal actions against these infringers being successful, but these actions may not be successful, even when our rights have been infringed. Further, any litigation, whether or not resolved in our favor, could be costly and time-consuming.
Moreover, others may independently develop technologies that are competitive to ours and may infringe our intellectual property. The enforcement of our intellectual property rights also depends on our legal actions against these infringers being successful, but these actions may not be successful, even when our rights have been infringed.
The potential impact of cybersecurity breaches or incidents affecting MSP partners’ remote monitoring of multiple SME customers’ networks and devices is significant. Moreover, the number and scale of cyberattacks have continued to increase and the methods and techniques used by threat actors, including sophisticated “supply-chain” attacks such as the Cyber Incident, continue to evolve at a rapid pace.
Moreover, the number and scale of cyberattacks have continued to increase and the methods and techniques used by threat actors, including sophisticated “supply-chain” attacks such as the Cyber Incident, continue to evolve at a rapid pace. As a result, we may be unable to identify current attacks, anticipate these attacks or implement adequate security measures.
Furthermore, while we generally must comply with Section 404 of the Sarbanes-Oxley Act for the year ending December 31, 2022, we are not required to have our independent registered public accounting firm attest to the effectiveness of our internal controls until our first annual report subsequent to our ceasing to be an emerging growth company.
Furthermore, because we have ceased to be an emerging growth company as of December 31, 2023, we are now required to have our independent registered public accounting firm attest to the effectiveness of our internal controls.
Cybersecurity has become increasingly important to our MSP partners as their SME customers experience increased security threats while more of their workforce works remotely during the COVID-19 pandemic. Larger volumes of remote devices are connecting to SMEs’ networks driving increased vulnerability and incidences of ransomware and phishing attacks are growing, making security a high priority for SMEs.
Larger volumes of remote devices are connecting to SMEs’ networks driving increased vulnerability and incidences of ransomware and phishing attacks are growing, making security a high priority for SMEs. The potential impact of cybersecurity breaches or incidents affecting MSP partners’ remote monitoring of multiple SME customers’ networks and devices is significant.
We may be unable to prevent our competitors or others from using such contributed software source code.
We may be unable to prevent our competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage, and if not addressed, could have a negative effect on our business, operating results and financial condition.
The Sponsors have a controlling influence over matters requiring stockholder approval. As of December 31, 2022, the Sponsors collectively owned in the aggregate approximately 111,564,512 shares of our common stock, representing approximately 61.7% of the voting power of our common stock as of such time.
As of December 31, 2023, Silver Lake and Thoma Bravo, together with their respective funds and, as applicable, their co-investors (collectively, the “Sponsors”) collectively owned in the aggregate approximately 111,564,512 shares of our common stock, representing approximately 60.9% of the voting power of our common stock as of such time.
Pursuant to the Separation and Distribution Agreement and certain other agreements with SolarWinds, SolarWinds has agreed to indemnify us, and we have agreed to indemnify SolarWinds, for certain liabilities. Claims for indemnification by SolarWinds could have negative consequences for our financial position.
Claims for indemnification by SolarWinds could have negative consequences for our financial position.
The Sponsors and their affiliated funds may also pursue acquisitions that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
The Sponsors and their affiliated funds may pursue corporate opportunities independent of us that could present conflicts with our and our stockholders’ interests.
Removed
Even if our credit agreement is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants.
Added
A pandemic, epidemic or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially affect how we and our customers are operating our businesses and our financial results. We are subject to risks related to public health crises such as the COVID-19 pandemic.
Removed
We cannot be certain that the steps we have taken will prevent unauthorized use, misappropriation or reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours and may infringe our intellectual property.
Added
The COVID-19 pandemic and policies and regulations implemented by governments in response to the COVID-19 pandemic, most of which have been lifted, have had a significant impact, both directly and indirectly, on global businesses and commerce and indirect effects such as worker shortages and supply chain constraints continue to impact segments of the economy.
Removed
As a result, we may be unable to identify current attacks, anticipate these attacks or implement adequate security measures.
Added
Future global health concerns could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.
Removed
Risks Related to Accounting and Taxation Failure to maintain proper and effective internal controls could have a material adverse effect on our business, operating results and stock price.
Added
The impact to our business from any future pandemics or health epidemics depends on multiple factors that cannot be accurately predicted, such as their duration and scope, the extent and effectiveness of containment actions, the disruption caused by such actions, and the efficacy and rates of vaccines.
Removed
While we had been adhering to these laws and regulations as a subsidiary of SolarWinds, we will need to demonstrate our ability to manage our compliance with these corporate governance laws and regulations as an independent, public company. Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.
Added
Future pandemics or health epidemics could have severe impacts on our business and our customers’ and prospective customers’ businesses. For instance, as a result of the COVID-19 pandemic, we experienced a deceleration in our year-over-year subscription revenue growth rate in the second quarter of 2020 as compared to our growth rates in prior periods.
Removed
Any or all of these events could adversely impact our business and financial performance. 37 Table of Contents Additionally, the U.S.
Added
We attributed this deceleration primarily to increased churn and downgrades from existing MSP partners and slower MSP partner adds. Future pandemics or health epidemics may also adversely affect our productivity, employee morale, future sales, operating results, and overall financial performance.
Removed
In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, and state privacy and breach notification laws.
Added
Pandemics, health epidemics, or outbreaks of infectious diseases may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Removed
If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition and results of operations could be adversely affected.
Added
Risks Related to Our Indebtedness We have substantial indebtedness, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and meet our obligations with respect to our indebtedness.
Removed
The terms of the agreements that we entered into with SolarWinds in connection with the Separation and Distribution may limit our ability to take certain actions, which may prevent us from pursuing opportunities to raise capital, acquire other businesses or provide equity incentives to our employees, which could impair our ability to grow.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease office space domestically and internationally in various locations for our operations, including facilities located in Austin, Texas; Bucharest, Romania; Calgary, Canada; Coimbra, Portugal; Dundee, United Kingdom; Edinburgh, United Kingdom; Emmeloord, Netherlands; Lisbon, Portugal; Manila, Philippines; Minsk, Belarus; Morrisville, North Carolina; Ottawa, Canada; Sydney, Australia; Utrecht, Netherlands; Warsaw, Poland; Uster, Switzerland; and Vienna, Austria.
Biggest changeWe lease office space domestically and internationally in various locations for our operations, including facilities located in Austin, Texas; Bucharest, Romania; Dundee, United Kingdom; Edinburgh, United Kingdom; Emmeloord, Netherlands; Lisbon, Portugal; Manila, Philippines; Minsk, Belarus; Morrisville, North Carolina; Ottawa, Canada; Sydney, Australia; Utrecht, Netherlands; Warsaw, Poland; Uster, Switzerland; and Vienna, Austria.
Our leases are all classified as operating and have remaining terms of less than one year to 9.4 years. We believe the facilities that we are leasing are adequate for the foreseeable future. If we require additional or substitute space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.
Our leases are all classified as operating and have remaining terms of less than one year to 8.4 years. We believe the facilities that we are leasing are adequate for the foreseeable future. If we require additional or substitute space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAt this time, neither we nor any of our subsidiaries is a party to, and none of our respective property is the subject of, any legal proceeding that, if determined adversely to us, would have a material adverse effect on us. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 49 Table of Contents PART II
Biggest changeAt this time, neither we nor any of our subsidiaries is a party to, and none of our respective property is the subject of, any legal proceeding that, if determined adversely to us, would have a material adverse effect on us. 51 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe information contained in the Stock Performance Graph shall not be deemed to be soliciting material or to be filed with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 50 Table of Contents Issuer Purchases of Securities During the fourth quarter of the fiscal year covered by this report, the Company repurchased shares of its common stock, as follows.
Biggest changeThe information contained in the Stock Performance Graph shall not be deemed to be soliciting material or to be filed with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing. 53 Table of Contents
Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock for the period between July 20, 2021 (our first day as a publicly traded company) and December 31, 2022, with the cumulative total return of (i) the S&P 500 Index and (ii) the S&P 500 Software & Services Index.
Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock for the period between July 20, 2021 (our first day as a publicly traded company) and December 31, 2023, with the cumulative total return of (i) the S&P 500 Index and (ii) the S&P 500 Software & Services Index.
Our initial public offering, or IPO, was priced at $16.00 per share on July 19, 2021. On March 6, 2023, the last reported sales price of our common stock on the NYSE was $12.29 per share and, as of March 6, 2023, there were 41 holders of record of our common stock.
Our initial public offering, or IPO, was priced at $16.00 per share on July 19, 2021. On February 22, 2024, the last reported sales price of our common stock on the NYSE was $12.92 per share and, as of February 22, 2024, there were 38 holders of record of our common stock.
Removed
Period Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan or Program (in thousands) October 1 - 31, 2022 — $ — — $ — November 1 - 30, 2022 — $ — — — December 1 - 31, 2022 600 $ — — — Total 600 — ________________ (1) All repurchases relate to employee held restricted stock that is subject to vesting.
Removed
Unvested shares are subject to a right of repurchase by us in the event the employee stockholder ceases to be employed or engaged (as applicable) by us prior to vesting. All shares in the above table were shares repurchased as a result of us exercising this right and not pursuant to a publicly announced plan or program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCost of Revenue Year Ended December 31, 2021 2020 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Cost of revenue $ 46,677 13.5 % $ 38,916 12.8 % $ 7,761 Amortization of acquired technologies 5,755 1.7 24,257 8.0 (18,502) Total cost of revenue $ 52,432 15.2 % $ 63,173 20.8 % $ (10,741) Total cost of revenue decreased $10.7 million, or 17.0%,in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily due to a decrease of $18.5 million in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016, partially offset by an increase in royalties and public cloud infrastructure and hosting fees of $4.7 million, an increase of $2.1 million in depreciation and other amortization, and an increase in personnel costs of $0.6 million, which includes an increase in stock-based compensation expense of $0.3 million. 59 Table of Contents Operating Expenses Year Ended December 31, 2021 2020 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Sales and marketing $ 112,678 32.5 % $ 82,034 27.1 % $ 30,644 Research and development 53,959 15.6 42,719 14.1 11,240 General and administrative 80,575 23.3 57,331 18.9 23,244 Amortization of acquired intangibles 13,482 3.9 23,848 7.9 (10,366) Total operating expenses $ 260,694 75.3 % $ 205,932 68.0 % $ 54,762 Sales and Marketing.
Biggest changeOther revenue increased $0.6 million, or 7.1%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to an increase in professional services revenue. 59 Table of Contents Cost of Revenue Year Ended December 31, 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Cost of revenue $ 66,369 15.7 % $ 56,133 15.1 % $ 10,236 Amortization of acquired technologies 1,839 0.4 2,477 0.7 (638) Total cost of revenue $ 68,208 16.1 % $ 58,610 15.8 % $ 9,598 Total cost of revenue increased $9.6 million, or 16.4%, in the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in public cloud infrastructure and hosting fees and royalties related to our subscription products of $6.5 million, an increase in personnel costs driven by headcount and salary increases of $0.9 million, which includes an increase in stock-based compensation expense of $0.2 million, and an increase in depreciation of servers and amortization of capitalized internal-use software costs of $3.1 million, partially offset by a decrease in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations of $0.7 million and a decrease in allocated facilities and IT costs of $0.3 million.
Cost of revenue consists of technical support personnel costs, public cloud infrastructure and hosting fees, royalty fees and an allocation of overhead costs for our subscription revenue and maintenance services. We allocate facilities, depreciation, benefits and IT costs based on headcount. • Amortization of Acquired Technologies.
Cost of revenue consists of public cloud infrastructure and hosting fees, an allocation of overhead costs for our subscription revenue and maintenance services, royalty fees and technical support personnel costs. We allocate facilities, depreciation, IT and benefits costs based on headcount. • Amortization of Acquired Technologies.
Other Income (Expense), Net Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Other income (expense), net $ 1,881 0.5 % $ (1,266) (0.4) % $ 3,147 Other expense, net increased by $3.1 million, or 248.6%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the impact of changes in foreign currency exchange rates related to various accounts for the period and dividend income from our money market fund financial assets.
Other Income (Expense), Net Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Other Income (expense), net $ 1,881 0.5 % $ (1,266) (0.4) % $ 3,147 Other (expense), net increased by $3.1 million, or 248.6%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the impact of changes in foreign currency exchange rates related to various accounts for the period and dividend income from our money market fund financial assets.
General and administrative expenses decreased $9.5 million, or 11.7%, primarily due to a decrease of $17.0 million in costs associated with our separation from SolarWinds, partially offset by a $2.9 million increase in personnel costs driven by headcount and salary increases, which includes an increase of $2.5 million in stock-based compensation expense, an increase of $1.3 million in depreciation of leasehold improvements, computers, furniture and equipment to support our domestic and international office locations, an increase in director and officer liability insurance costs of $1.1 million as a result of becoming a standalone company upon the Separation and Distribution, an increase in restructuring-related costs of $1.0 million, an increase in contract services costs of $0.9 million, and an increase in acquisition-related costs of $0.2 million and net gains on contingent consideration of $0.1 million related to the July 1, 2022 acquisition of Spinpanel.
General and administrative expenses decreased $9.5 million, or 11.7%, due to a decrease of $17.0 million in costs associated with our separation from SolarWinds, partially offset by a $2.9 million increase in personnel costs driven by headcount and salary increases, which includes an increase of $2.5 million in stock-based compensation expense, an increase of $1.3 million in depreciation of leasehold improvements, computers, furniture and equipment to support our domestic and international office locations, an increase in director and officer liability insurance costs of $1.1 million as a result of becoming a standalone company upon the Separation and Distribution, an increase in restructuring-related costs of $1.0 million, an increase in contract services costs of $0.9 million, and an increase in acquisition-related costs of $0.2 million and net gains on contingent consideration of $0.1 million related to the July 1, 2022 acquisition of Spinpanel.
Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including operating income and net income (loss) and our other GAAP results. In evaluating adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.
Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including operating income and net income and our other GAAP results. In evaluating adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.
Because of these unique characteristics of stock-based compensation and related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance. • Amortization of Acquired Intangible Assets . We provide non-GAAP information that excludes expenses related to purchased intangible assets associated with our acquisitions.
Because of these unique characteristics of stock-based compensation and related employer-paid payroll taxes, management excludes these expenses when analyzing the organization’s business performance. • Amortization of Acquired Technologies and Intangible Assets . We provide non-GAAP information that excludes expenses related to purchased technologies and intangible assets associated with our acquisitions.
The decline in our annual dollar-based net revenue retention rate for the year ended December 31, 2022 compared to the year ended December 31, 2021 was due to adverse movements in foreign currency exchange rates.
The decline in our annual dollar-based net revenue retention rate for the year ended December 31, 2022 compared to the year ended December 31, 2021 was due to adverse movements in foreign currency exchange rates. Other Revenue .
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for further details of the allocated costs. 53 Table of Contents Fourth Quarter Financial Highlights Revenue We deliver a platform of integrated solutions that enables our MSP partners to manage and secure the IT environments and assets for their SME end customers, as well as more efficiently manage their own businesses.
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for further details of the allocated costs. 56 Table of Contents Fourth Quarter Financial Highlights Revenue We deliver a platform of integrated solutions that enables our MSP partners to manage and secure the IT environments and assets for their SME end customers, as well as more efficiently manage their own businesses.
Income Tax Expense Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Income before income taxes $ 30,425 8.2 % $ 11,592 3.3 % $ 18,833 Income tax expense 13,718 3.7 11,479 3.3 2,239 Effective tax rate 45.1 % 99.0 % (53.9) % Our income tax expense for the year ended December 31, 2022 increased by $2.2 million as compared to the year ended December 31, 2021.
Income Tax Expense Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Income before income taxes $ 30,425 8.2 % $ 11,592 3.3 % $ 18,833 Income tax expense 13,718 3.7 11,479 3.3 2,239 Effective tax rate 45.1 % 99.0 % (53.9) % Our income tax expense for the year ended December 31, 2022 decreased by $2.2 million as compared to the year ended December 31, 2021.
Some of these limitations include: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; 62 Table of Contents • adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our related party debt; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Some of these limitations include: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our related party debt; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Beginning in the third quarter of 2020, and continuing through the fourth quarter of 2022, we have seen the impact on revenue growth continue to dissipate. Please see Item 1A. Risk Factors in this Annual Report on Form 10-K for additional discussion regarding risks to our business that may result from the COVID-19 pandemic. Subscription Revenue.
Beginning in the third quarter of 2020, and continuing through the fourth quarter of 2023, we have seen the impact on revenue growth continue to dissipate. Please see Item 1A. Risk Factors in this Annual Report on Form 10-K for additional discussion regarding risks to our business that may result from the COVID-19 pandemic. Subscription Revenue.
Of the expenses SolarWinds recorded related to the Cyber Incident through the Separation and Distribution date of July 19, 2021, none have been allocated to the N-able business and, as a result of the indemnification provisions under the Separation and Distribution Agreement entered into in connection with the Separation and Distribution (the “Separation and Distribution Agreement”), we have not recorded any contingent liabilities with respect to the Cyber Incident as of December 31, 2022.
Of the expenses SolarWinds recorded related to the Cyber Incident through the Separation and Distribution date of July 19, 2021, none have been allocated to the N-able business and, as a result of the indemnification provisions under the Separation and Distribution Agreement entered into in connection with the Separation and Distribution (the “Separation and Distribution Agreement”), we have not recorded any contingent liabilities with respect to the Cyber Incident as of December 31, 2023 and 2022, respectively.
The effective tax rate decreased to 45.1% for the year ended December 31, 2021 primarily due to changes in income before income taxes by jurisdiction, offset by the valuation allowance recognized on the deferred tax assets in the U.S. and non-deductible stock-based compensation and costs associated with the Separation and Distribution.
The effective tax rate decreased to 45.1% for the year ended December 31, 2022 primarily due to changes in income before income taxes by jurisdiction, offset by the valuation allowance recognized on the deferred tax assets in the U.S. and non-deductible stock-based compensation and costs associated with the Separation and Distribution.
During the year ended December 31, 2022, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
During the year ended December 31, 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
MSP partners with maintenance agreements are entitled to receive technical 54 Table of Contents support and unspecified upgrades or enhancements to new versions of their solutions on a when-and-if-available basis for the specified agreement period. Cost of Revenue • Cost of Revenue.
MSP partners with maintenance 57 Table of Contents agreements are entitled to receive technical support and unspecified upgrades or enhancements to new versions of their solutions on a when-and-if-available basis for the specified agreement period. Cost of Revenue • Cost of Revenue.
We generally invoice subscription agreements monthly based on usage or in advance over the subscription period on either a monthly or annual basis. • Other Revenue. Other revenue consists primarily of revenue from the sale of our maintenance services associated with the historical sales of perpetual licenses.
We generally invoice subscription agreements monthly based on usage or in advance over the subscription period on either a monthly or annual basis. • Other Revenue. Other revenue consists primarily of revenue from the sale of our maintenance services associated with the historical sales of perpetual licenses and revenue from professional services.
Qualitative factors include industry and market considerations, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers and other relevant events and circumstances affecting the reporting unit. On October 1, 2022, we performed the annual qualitative assessment for our reporting unit.
Qualitative factors include industry and market considerations, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers and other relevant events and circumstances affecting the reporting unit. On October 1, 2023, we performed the annual qualitative assessment for our reporting unit.
Our annual dollar-based net revenue retention rate for our subscription products was approximately 103% and 110% for the year ended December 31, 2022 and 2021, respectively, and was driven primarily by strong customer retention and expansion in our MSP products.
Our annual dollar-based net revenue retention rate for our subscription products was approximately 103% and 110% for the years ended December 31, 2022 and 2021, respectively, and was driven primarily by strong customer retention and expansion in our MSP products.
Specifically, we have implemented in-product security enhancements to the N-able portfolio of products, including, multi-factor authentication, unified single sign-on services, and secure secret vaults. We have also introduced new identity and access controls, scanning and remediation technologies and standards and monitoring tooling across our enterprise IT and production environments.
Specifically, we have implemented in-product security enhancements to the N-able portfolio of products, including, multi-factor authentication, unified single sign-on services, and 55 Table of Contents secure secret vaults. We have also introduced new identity and access controls, scanning and remediation technologies and standards and monitoring tooling across our enterprise IT and production environments.
As of October 1, 2022, there were no unanticipated changes or negative indicators in the above qualitative factors that would impact the fair value of our reporting unit as of the annual impairment analysis date.
As of October 1, 2023, there were no unanticipated changes or negative indicators in the above qualitative factors that would impact the fair value of our reporting unit as of the annual impairment analysis date.
Sales and marketing expenses also include the cost of digital marketing programs such as paid search, search engine optimization and management and website maintenance and design, as well as the cost of events for existing and prospective customers.
Sales and marketing expenses also include the cost of digital marketing programs such as paid search, search engine optimization and management and website maintenance and design, marketing development funds, as well as the cost of events for existing and prospective customers.
SolarWinds has not identified Sunburst in any of its more than 70 non-Orion products and tools, including, as 52 Table of Contents previously disclosed, any of our N-able solutions. SolarWinds, together with its partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident.
SolarWinds has not identified SUNBURST in any of its more than 70 non-Orion products and tools, including, as previously disclosed, any of our N-able solutions. SolarWinds, together with its partners, have undertaken extensive measures to investigate, contain, eradicate, and remediate the Cyber Incident.
If a tax position is not considered more-likely-than-not to be sustained solely on its technical merits, no benefits of the position are to be recognized in the financial statements. If a tax position meets the more-likely-than-not threshold, it should be measured based on the largest benefit that is more than 50 percent likely to be realized.
If a tax position is not considered more-likely-than-not to be sustained solely on its technical merits, no benefits 70 Table of Contents of the position are to be recognized in the financial statements. If a tax position meets the more-likely-than-not threshold, it should be measured based on the largest benefit that is more than 50 percent likely to be realized.
See Note 13. Relationship with Parent and Related Entities a nd Note 7. Debt in the Notes to Consolidated Financial Statements for further details regarding our related party debt.
See Note 13. Relationship with Parent and Related Entities a nd Note 9. Debt in the Notes to Consolidated Financial Statements for further details regarding our related party debt.
Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, for a full description of recent accounting pronouncements, which is incorporated herein by reference.
Recent Accounting Pronouncements See Note 2. Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, for a full description of recent accounting pronouncements, which is incorporated herein by reference.
Non-GAAP Operating Income and Non-GAAP Operating Margin We provide non-GAAP operating income and related non-GAAP operating margins excluding such items as stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangible assets, acquisition related costs, spin-off costs and restructuring costs and other.
Non-GAAP Operating Income and Non-GAAP Operating Margin We provide non-GAAP operating income and related non-GAAP operating margins excluding such items as stock-based compensation expense and related employer-paid payroll taxes, amortization of acquired intangible assets, acquisition related 64 Table of Contents costs, spin-off costs and restructuring costs and other.
The fair value of identifiable intangible assets is based on significant judgments 65 Table of Contents made by management. We typically engage third-party valuation appraisal firms to assist us in determining the fair values and useful lives of the assets acquired.
The fair value of identifiable intangible assets is based on significant judgments made by management. We typically engage third-party valuation appraisal firms to assist us in determining the fair values and useful lives of the assets acquired.
Cash Flow We have built our business to generate strong cash flow over the long term. For the three months ended December 31, 2022 and 2021, cash flows from operations were $18.4 million and $19.2 million, respectively.
Cash Flow We have built our business to generate strong cash flow over the long term. For the three months ended December 31, 2023 and 2022, cash flows from operations were $31.2 million and $18.4 million, respectively.
As SolarWinds previously disclosed in its investigatory updates, it has substantially completed this process and believes the threat actor is no longer active in its environments. In response to the Cyber Incident and in connection with the Separation and Distribution, we are working to further enhance security, monitoring and authentication of our solutions.
As SolarWinds previously disclosed in its investigatory updates, it has substantially completed this process and believes the threat actor is no longer active in its environments. In response to the Cyber Incident and in connection with the Separation and Distribution, we continue to work to further enhance security, monitoring and authentication of our solutions.
We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired intangible assets can be inconsistent in amount and 61 Table of Contents frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period.
We believe that eliminating this expense from our non-GAAP measures is useful to investors because the amortization of acquired technologies and intangible assets can be inconsistent in amount and frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period.
Other Expense Other expense primarily consists of interest expense related to our credit agreement and related party debt and losses resulting from changes in exchange rates on foreign currency denominated accounts, partially offset by gains resulting from changes in exchange rates on foreign currency denominated accounts and dividend income from our money market fund financial assets. See Item 7A.
Other Expense, Net Other expense, net primarily consists of interest expense related to the Credit Agreement and losses resulting from changes in exchange rates on foreign currency denominated accounts, partially offset by gains resulting from changes in exchange rates on foreign currency denominated accounts and dividend income from our money market fund financial assets. See Item 7A.
Revenue from the United Kingdom was approximately 10.3% and 11.1% of total revenue for the year ended December 31, 2022 and 2021, respectively. Other than the United States and the United Kingdom, no single country accounted for 10% or more of our total revenue during these periods.
Revenue from the United Kingdom was approximately 10.3% and 11.1% of total revenue for the years ended December 31, 2022 and 2021, respectively. Other than the United States and the United Kingdom, no single country accounted for 10% or more of our total revenue during these periods. Recurring Revenue Subscription Revenue.
Our Adjusted EBITDA, calculated as net income of $7.0 million and $2.1 million for the three months ended December 31, 2022 and 2021, respectively, excluding amortization of acquired intangible assets and developed technology of $2.6 million and $3.1 million, respectively, depreciation expense of $3.5 million and $5.6 million, respectively, income tax expense of $3.4 million and $1.9 million, respectively, interest expense, net of $6.4 million and $4.8 million, respectively, unrealized foreign currency (gains) losses of $(2.1) million and $0.2 million, respectively, acquisition related costs of $(0.2) million and zero, respectively, spin-off costs of $0.3 million and $1.1 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $8.7 million and $8.7 million, respectively, and restructuring costs and other of $1.7 million and $0.3 million, respectively, was $31.2 million and $27.8 million for the three months ended December 31, 2022 and 2021, respectively.
Our Adjusted EBITDA, calculated as net income of $9.4 million and $7.0 million for the three months ended December 31, 2023 and 2022, respectively, excluding amortization of acquired intangible assets and developed technology of $1.6 million and $2.6 million, respectively, depreciation expense of $3.9 million and $3.5 million, respectively, income tax expense of $7.4 million and $3.4 million, respectively, interest expense, net of $7.7 million and $6.4 million, respectively, unrealized foreign currency gains of $(1.8) million and $(2.1) million, respectively, acquisition related costs of $(0.5) million and $(0.2) million, respectively, spin-off costs of $0.1 million and $0.3 million, respectively, stock-based compensation expense and related employer-paid payroll taxes of $10.9 million and $8.7 million, respectively, and restructuring costs and other of $0.5 million and $1.7 million, respectively, was $39.2 million and $31.2 million for the three months ended December 31, 2023 and 2022, respectively.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 47% of our total ARR as of December 31, 2021 to approximately 51% of our total ARR as of December 31, 2022. We determine ARR as the annualized recurring revenue as of the last month of a given period.
Over the same period, MSP partners with over $50,000 of ARR on our platform grew from approximately 51% of our total ARR as of December 31, 2022 to approximately 56% of our total ARR as of December 31, 2023. We determine ARR as the annualized recurring revenue as of the last month of a given period.
Quantitative and Qualitative Disclosures About Market Risk for additional information on how interest rates impact our financial results. Foreign Currency As a global company, we face exposure to adverse movements in foreign currency exchange rates.
Quantitative and Qualitative Disclosures About Market Risk for additional information on how interest rates impact our financial results. 58 Table of Contents Foreign Currency As a global company, we face exposure to adverse movements in foreign currency exchange rates.
We base revenue by geography on the shipping address of each MSP partner. Based on MSP partner location, revenue from the United States was approximately 48.7% and 46.4% of total revenue for the year ended December 31, 2022 and 2021, respectively.
We base revenue by geography on the billing address of each MSP partner. Based on MSP partner location, revenue from the United States was approximately 48.7% and 46.4% of total revenue for the years ended December 31, 2022 and 2021, respectively.
For the years ended December 31, 2020 and 2019, as well as the period ended July 19, 2021, income taxes as presented in the financial statements of N-able attribute current and deferred income taxes of SolarWinds to stand-alone financial statements of N-able in a manner that is systematic, rational and consistent with the asset and liability method prescribed by Financial Accounting Standards Board (“FASB”) ASC Topic 740: Income Taxes (“ASC 740”).
For the period ended July 19, 2021, income taxes as presented in the financial statements of N-able attribute current and deferred income taxes of SolarWinds to stand-alone financial statements of N-able in a manner that is systematic, rational and consistent with the asset and liability method prescribed by Financial Accounting Standards Board (“FASB”) ASC Topic 740: Income Taxes (“ASC 740”).
Purchases of intangible assets consist of capitalized research and development costs. Net cash used in investing activities decreased for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to decreases in capital expenditures, partially offset by increases in acquisitions, net of cash acquired, and increases in capitalized research and development costs.
Purchases of intangible assets consist of capitalized research and development costs. Net cash used in investing activities decreased for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a decrease in acquisitions, net of cash acquired, partially offset by increases in capital expenditures and capitalized research and development costs.
As of December 31, 2022, we have recorded a valuation allowance of $2.0 million in the U.S. and $1.6 million outside the U.S., respectively. As of December 31, 2021, we have recorded a valuation allowance of $2.9 million in the U.S.
As of December 31, 2022, we recorded a valuation allowance of $2.0 million in the U.S. and $1.6 million outside the U.S., respectively.
We expect to continue to grow our research and development organization domestically and internationally and also to incur additional expenses associated with bringing new product offerings to market and our enhancements of security, monitoring and authentication of our solutions. • General and Administrative.
We expect to continue to grow our research and development organization over time and also to incur additional expenses associated with bringing new product offerings to market and our enhancements of security, monitoring and authentication of our solutions. • General and Administrative.
Operating Expenses Operating expenses consist of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Personnel costs include salaries, bonuses and stock-based compensation and related employer-paid payroll taxes, as well as an allocation of our facilities, depreciation, benefits and IT costs.
Operating Expenses Operating expenses consist of sales and marketing, research and development and general and administrative expenses as well as amortization of acquired intangibles. Generally, personnel costs are the most significant component of operating expenses and include salaries, bonuses and stock-based compensation and related employer-paid payroll taxes, as well as an allocation of our facilities, depreciation, IT and benefits costs.
In general, our sales cycles and time from contract to revenue recognition are primarily short in nature and based on trends through the fiscal year ended December 31, 2022, we believe that the adverse impacts of the Cyber Incident on our financial results have diminished in the absence of new discoveries or events.
In general, our sales cycles and time from contract to revenue recognition are primarily short in nature and based on trends through the fiscal year ended December 31, 2023, we believe that the adverse impacts of the Cyber Incident on our financial results have diminished.
Other revenue decreased $1.2 million, or 11.4%, for the year ended December 31, 2021 compared to the year ended December 31, 2020 due to decreases in sales of our perpetual licenses and the related maintenance agreements. As of the three months ended March 31, 2020, we have discontinued perpetual license upgrades.
Other revenue decreased $0.5 million, or 4.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to decreases in sales of our perpetual licenses and the related maintenance agreements. As of the three months ended March 31, 2020, we have discontinued perpetual license upgrades.
Our performance obligations primarily relate to our SaaS solutions, subscription-based term licenses and maintenance support including unspecified upgrades or enhancements to new versions of our solutions. 66 Table of Contents We allocate the transaction price of the agreement to each distinct performance obligation based on a relative stand-alone selling price basis.
Determining the distinct performance obligations in an agreement requires judgment. Our performance obligations primarily relate to our SaaS solutions, subscription-based term licenses and maintenance support including unspecified upgrades or enhancements to new versions of our solutions. We allocate the transaction price of the agreement to each distinct performance obligation based on a relative stand-alone selling price basis.
Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Subscription revenue $ 362,609 97.5 % $ 336,845 97.2 % $ 25,764 Other revenue 9,160 2.5 9,611 2.8 (451) Total subscription and other revenue $ 371,769 100.0 % $ 346,456 100.0 % $ 25,313 Total revenue increased $25.3 million or 7.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by growth in sales of our data protection and security solutions.
Income Taxes in the Notes to Consolidated Financial Statements . 61 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Subscription Revenue $ 362,609 97.5 % $ 336,845 97.2 % $ 25,764 Other revenue 9,160 2.5 9,611 2.8 (451) Total subscription and other revenue $ 371,769 100.0 % $ 346,456 100.0 % $ 25,313 Total revenue increased $25.3 million, or 7.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, driven by our data protection and security solutions.
Accordingly, the income tax provisions of N-able for these periods were prepared following the separate return method. Under this method, we recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the respective carrying amounts and tax basis of our assets and liabilities.
Accordingly, the income tax provision of N-able for the period was prepared following the separate return method. Under this method, we recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the respective carrying amounts and tax basis of our assets and liabilities.
We expect to continue to grow our general and administrative organization domestically and internationally to support continued growth of our business. • Amortization of Acquired Intangibles.
We expect to continue to grow our general and administrative organization over time to support continued growth of our business. • Amortization of Acquired Intangibles.
Our subscription revenue increased slightly as a percentage of our total revenue for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Our subscription revenue increased slightly as a percentage of our total revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Amortization of acquired intangibles decreased $10.4 million, or 43.5%, primarily due to a decrease in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016 and the impact of changes in foreign currency exchange rates.
Amortization of acquired intangibles decreased $7.6 million, or 56.6%, primarily due to a decrease in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016 and the impact of changes in foreign currency exchange rates.
We intend either to invest our foreign earnings permanently into foreign operations or to remit these earnings to our U.S. entities in a tax-efficient manner. The Tax Act imposed a mandatory transition tax on accumulated foreign earnings and eliminates U.S. federal income taxes on foreign subsidiary distribution.
We intend either to invest our foreign earnings permanently into foreign operations or to remit these earnings to our United States entities in a tax-efficient manner. The U.S. Tax Cuts and Jobs Act of 2017 imposed a mandatory transition tax on accumulated foreign earnings and eliminates United States federal income taxes on foreign subsidiary distributions.
Management believes these measures are useful for the following reasons: • Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes associated with our employees’ participation in N-able's stock-based incentive compensation plans.
We define non-GAAP operating margin as non-GAAP operating income divided by total revenue. Management believes these measures are useful for the following reasons: • Stock-Based Compensation Expense and Related Employer-Paid Payroll Taxes. We provide non-GAAP information that excludes expenses related to stock-based compensation and related employer-paid payroll taxes associated with our employees’ participation in N-able's stock-based incentive compensation plans.
Our total revenue was $95.8 million and $89.5 million for the three months ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had approximately 25,000 customers.
Our total revenue was $108.4 million and $95.8 million for the three months ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had approximately 25,000 customers.
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for further details regarding our borrowings due to affiliates.
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for further details regarding amounts due to or from affiliates.
The net cash outflow of $3.8 million and $19.9 million resulting from the changes in our operating assets and liabilities for the year ended December 31, 2022 and 2021, respectively, excluding the changes noted above, was primarily due to the timing of sales, cash payments and receipts.
The net cash inflow of $2.1 million and net cash outflow of $3.8 million resulting from the changes in our operating assets and liabilities for the years ended December 31, 2023 and 2022, respectively, excluding the changes noted above, was primarily due to the timing of sales, cash payments and receipts.
Our cash flows from operations were reduced by cash payments for interest of $5.3 million and $2.6 million for the three months ended December 31, 2022 and 2021, respectively, and cash payments for income taxes of $3.1 million and $4.0 million for the three months ended December 31, 2022 and 2021, respectively.
Our cash flows from operations were reduced by cash payments for interest of $7.3 million and $5.3 million for the three months ended December 31, 2023 and 2022, respectively, and cash payments for income taxes of $3.9 million and $3.1 million for the three months ended December 31, 2023 and 2022, respectively.
We amortize to cost of revenue capitalized costs of technologies acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the July 1, 2022 acquisition of Spinpanel B.V. (“Spinpanel”).
We amortize to cost of revenue capitalized costs of technologies acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the July 1, 2022 acquisition of Spinpanel B.V. (“Spinpanel”). Amortization related to the take private transaction of SolarWinds concluded during the three months ended March 31, 2023.
We had total employees of 1,462 and 1,399 as of December 31, 2022 and 2021, respectively.
We had total employees of 1,584 and 1,462 as of December 31, 2023 and 2022, respectively.
We amortize to operating expenses capitalized costs of intangible assets primarily acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the July 1, 2022 acquisition of Spinpanel.
We amortize to operating expenses capitalized costs of intangible assets primarily acquired in connection with the take private transaction of SolarWinds in early 2016 and subsequent business combinations, including the July 1, 2022 acquisition of Spinpanel. Amortization related to the take private transaction of SolarWinds concluded during the three months ended March 31, 2023.
As our sales and operating cash flows are primarily generated by international entities in the United Kingdom and Canada, our international subsidiaries held approximately $65.7 million of cash and cash equivalents, of which 60.5%, 19.1% and 8.4% were held in United States Dollars, Euros, and British Pound Sterling, respectively.
As our sales and operating cash flows are primarily generated by international entities in the United Kingdom and Canada, our international subsidiaries held approximately $146.1 million of cash and cash equivalents, of which 76.2%, 15.3% and 2.8% were held in United States Dollars, Euros, and British Pound Sterling, respectively.
Interest Expense, Net Year Ended December 31, 2021 2020 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Interest expense, net $ (20,472) (5.9) % $ (28,137) (9.3) % $ 7,665 Interest expense, net decreased by $7.7 million, or 27.2%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to repayment of borrowings under our long-term related party debt and the impact of lower interest rates under the Credit Agreement compared to our long-term related party debt.
Interest Expense, Net Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Interest expense, net $ (18,852) (5.1) % $ (20,472) (5.9) % $ 1,620 63 Table of Contents Interest expense, net decreased by $1.6 million, or 7.9%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to repayment of borrowings under our long-term related party debt and the impact of lower interest rates under the Credit Agreement compared to our long-term related party debt.
Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See Item 1A. Risk Factors and Item 7A.
Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk for additional information on how foreign currency impacts our financial results.
General and administrative expenses primarily consist of personnel costs for executives, finance, legal, human resources, business applications and other administrative personnel, general restructuring charges and other acquisition-related costs, professional fees and other general corporate expenses.
General and administrative expenses primarily consist of personnel costs for executives, finance, legal, human resources, business applications and other administrative personnel, general restructuring charges and other acquisition-related costs, professional fees and other general corporate expenses, as well as an allocation of our facilities, depreciation, IT and benefits costs.
Summary of Cash Flows Summarized cash flow information is as follows: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by operating activities $ 71,413 $ 45,341 Net cash used in investing activities (30,209) (34,833) Net cash used in financing activities (10,402) (42,322) Effect of exchange rate changes on cash and cash equivalents 1,309 (1,240) Net increase (decrease) in cash and cash equivalents $ 32,111 $ (33,054) Operating Activities Our primary source of cash from operating activities is cash collections from our MSP partners and our distributors.
Summary of Cash Flows Summarized cash flow information is as follows: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 90,089 $ 71,413 Net cash used in investing activities (22,336) (30,209) Net cash used in financing activities (15,173) (10,402) Effect of exchange rate changes on cash and cash equivalents 1,621 1,309 Net increase (decrease) in cash and cash equivalents $ 54,201 $ 32,111 Operating Activities Our primary source of cash from operating activities is cash collections from our MSP partners and our distributors.
SolarWinds Cyber Incident As previously disclosed, SolarWinds was the victim of a cyberattack on its Orion Software Platform and internal systems, or the Cyber Incident. SolarWinds has confirmed to us that it has concluded its internal investigations related to the Cyber Incident.
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for further details. SolarWinds Cyber Incident As previously disclosed, SolarWinds was the victim of a cyberattack on its Orion Software Platform and internal systems, or the Cyber Incident. SolarWinds has confirmed to us that it has concluded its internal investigations related to the Cyber Incident.
See Note 13. Relationship with Parent and Related Entities and Note 9. Debt in the Notes to Consolidated Financial Statements for additional information regarding our related party debt and Credit Agreement, respectively.
Debt in the Notes to Consolidated Financial Statements for additional information regarding our related party debt and Credit Agreement, respectively.
Revenue from the United Kingdom was approximately 11.1% and 10.4% of total revenue for the year ended December 31, 2021 and 2020, respectively. Other than the United States and the United Kingdom, no single country accounted for 10% or more of our total revenue during these periods. Recurring Revenue Subscription Revenue.
Revenue from the United Kingdom was approximately 10.2% and 10.3% of total revenue for the years ended December 31, 2023 and 2022, respectively. Other than the United States and the United Kingdom, no single country accounted for 10% or more of our total revenue during these periods.
We had total borrowings of $337.0 million and $338.9 million as of December 31, 2022 and 2021, respectively, net of debt issuance costs of $8.6 million and $10.2 million, respectively.
We had total borrowings of $335.0 million and $337.0 million as of December 31, 2023 and 2022, respectively, net of debt issuance costs of $7.1 million and $8.6 million, respectively.
Our stock-based compensation expense increased during the year ended December 31, 2022 as compared to the prior fiscal year primarily due to the impact of both the conversion of existing unvested and unexercised equity awards in connection with the Separation and Distribution and new equity awards granted to employees following the Separation and Distribution through December 31, 2022.
Our stock-based compensation expense increased during the year ended December 31, 2023 as compared to the prior fiscal year primarily due to the impact of new equity awards that were granted to employees following the Separation and Distribution through December 31, 2023. • Sales and Marketing.
As such, we determined there were no indicators of impairment and that it was more likely than not that the fair value of our reporting unit was greater than its carrying value and therefore performing the next step of impairment test was unnecessary.
As such, we determined there were no indicators of impairment and that it was more likely than not that the fair value of our reporting unit was greater than its carrying value and therefore performing the next step of the impairment test was unnecessary. 69 Table of Contents Fair value determination of our reporting unit requires considerable judgment and is sensitive to changes in underlying assumptions and factors.
The factors used to assess the likelihood of realization include our latest forecast of future taxable income, available tax planning strategies that could be implemented, reversal of taxable temporary differences and carryback potential to realize the net deferred tax assets.
The factors used to assess the likelihood of realization include our latest forecast of future taxable income, available tax planning strategies that could be implemented, reversal of taxable temporary differences and carryback potential to realize the net deferred tax assets. As of December 31, 2023, we recorded a valuation allowance of $4.9 million in the U.S.
We expect to continue to grow our sales and marketing organization domestically and internationally to drive new MSP partner adds, expand with existing MSP partners and pursue initiatives designed to help our MSP partners succeed and grow. • Research and Development. Research and development expenses primarily consist of related personnel costs.
We expect to continue to grow our sales and marketing organization over time to drive new MSP partner adds, retain and expand with existing MSP partners and pursue initiatives designed to help our MSP partners succeed and grow. • Research and Development.
As of the three months ended March 31, 2020, we have discontinued perpetual license upgrades. 56 Table of Contents Cost of Revenue Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Cost of revenue $ 56,133 15.1 % $ 46,677 13.5 % $ 9,456 Amortization of acquired technologies 2,477 0.7 5,755 1.7 (3,278) Total cost of revenue $ 58,610 15.8 % $ 52,432 15.2 % $ 6,178 Total cost of revenue increased $6.2 million, or 11.8%, in the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in royalties and public cloud infrastructure and hosting fees related to our subscription products of $4.6 million, an increase in personnel costs of $2.2 million driven by headcount and salary increases to support new MSP partners and additional solution offerings, which includes an increase of $0.2 million in stock-based compensation expense, an increase in allocated costs of $1.9 million, and an increase in depreciation and other amortization of $1.2 million, partially offset by a decrease of $3.3 million in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016.
Cost of Revenue Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Cost of revenue $ 56,133 15.1 % $ 46,677 13.5 % $ 9,456 Amortization of acquired technologies 2,477 0.7 5,755 1.7 (3,278) Total cost of revenue $ 58,610 15.8 % $ 52,432 15.1 % $ 6,178 Total cost of revenue increased $6.2 million, or 11.8%, in the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in royalties and public cloud infrastructure and hosting fees related to our subscription products of $4.6 million, an increase in personnel costs of $2.2 million driven by headcount and salary increases to support new MSP partners and additional solution offerings, which includes an increase of $0.2 million in stock-based compensation expense, an increase in allocated costs of $1.9 million, and an increase in depreciation and other amortization of $1.2 million, partially offset by a decrease of $3.3 million in amortization of intangible assets acquired in connection with the take private transaction of SolarWinds in early 2016. 62 Table of Contents Operating Expenses Year Ended December 31, 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Change (in thousands, except percentages) Sales and marketing $ 125,301 33.7 % $ 112,678 32.5 % $ 12,623 Research and development 63,484 17.1 53,959 15.6 9,525 General and administrative 71,125 19.1 80,575 23.3 (9,450) Amortization of acquired intangibles 5,853 1.6 13,482 3.9 (7,629) Total operating expenses $ 265,763 71.5 % $ 260,694 75.3 % $ 5,069 Sales and Marketing.
Additionally, as of December 31, 2022, we had 1,898 MSP partners with ARR over $50,000 on our platform, up from 1,678 as of December 31, 2021, representing an increase of 13.1%.
Additionally, as of December 31, 2023, we had 2,196 MSP partners with annualized recurring revenue, or ARR, over $50,000 on our platform, up from 1,898 as of December 31, 2022, representing an increase of approximately 16%.
We base revenue by geography on the shipping address of each MSP partner. Based on MSP partner location, revenue from the United States was approximately 46.4% and 47.8% of total revenue for the year ended December 31, 2021 and 2020, respectively.
We base revenue by geography on the billing address of each MSP partner. Based on MSP partner location, revenue from the United States was approximately 48.8% and 48.7% of total revenue for the years ended December 31, 2023 and 2022, respectively.
Although we are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary businesses, applications or technologies, we may enter into these types of arrangements, which could reduce our cash and cash equivalents, require us to seek additional equity or debt financing or repatriate cash generated by our international operations.
In addition, as contemplated by the Separation and Distribution agreement, cash in excess of $50.0 million was distributed by the Company to SolarWinds during the three months ended September 30, 2021. 67 Table of Contents Although we are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary businesses, applications or technologies, we may enter into these types of arrangements, which could reduce our cash and cash equivalents, require us to seek additional equity or debt financing or repatriate cash generated by our international operations.
We increased our worldwide general and administrative employee headcount in connection with the Separation and Distribution. See Note 3. Acquisitions , Note 7. Fair Value Measurements , and Note 15. Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information regarding the acquisition of Spinpanel. Amortization of Acquired Intangibles.
See Note 3. Acquisitions , Note 7. Fair Value Measurements , and Note 15. Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information regarding the acquisition of Spinpanel. 60 Table of Contents Amortization of Acquired Intangibles.
Fair value determination of our reporting unit requires considerable judgment and is sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the qualitative goodwill impairment test will prove to be an accurate prediction of future results.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the qualitative goodwill impairment test will prove to be an accurate prediction of future results.
In addition to our total borrowings, we are also committed to cash interest payments of approximately $146.4 million over the term of the Credit Agreement, based upon an interest rate as of December 31, 2022 of 7.73%. See Note 9.
In addition to our total borrowings, we are also committed to cash interest payments of approximately $129.7 million over the term of the Credit Agreement, based upon an interest rate as of December 31, 2023 of 8.40%. See Note 9. Debt in the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement.
Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of adjusted EBITDA. Adjusted EBITDA is not a presentation made in accordance with GAAP and the use of the term varies from others in our industry.
Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of adjusted EBITDA.
Actual costs that would have been incurred if we had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions in various areas, such as information technology and infrastructure.
Actual costs that would have been incurred if we had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions in various areas, such as information technology and infrastructure. In addition, the expenses reflected in the Consolidated Financial Statements may not be indicative of related expenses that will be incurred in the future by N-able.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur Consolidated Statements of Operations and Balance Sheets accounts are also impacted by the re-measurement of non-functional currency transactions such as cash accounts held by our overseas subsidiaries, accounts receivable denominated in foreign currencies, deferred revenue and accounts payable denominated in foreign currencies. 68 Table of Contents Foreign Currency Transaction Risk Our foreign currency exposures typically arise from selling annual and multi-year subscriptions in multiple currencies, accounts receivable, and other intercompany transactions.
Biggest changeOur Consolidated Statements of Operations and Balance Sheets accounts are also impacted by the re-measurement of non-functional currency transactions such as cash accounts held by our overseas subsidiaries, accounts receivable denominated in foreign currencies, deferred revenue and accounts payable denominated in foreign currencies.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference to the Consolidated Financial Statements set forth on pages F-1 through F-39 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreements with our accountants on accounting and financial disclosure matters.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference to the Consolidated Financial Statements set forth on pages F-1 through F-40 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreements with our accountants on accounting and financial disclosure matters.
We do not have material exposure to market risk with respect to our cash and cash equivalents, as these consist primarily of highly liquid investments purchased with original maturities of three months or less as of December 31, 2022 and 2021, respectively. See Note 13.
We do not have material exposure to market risk with respect to our cash and cash equivalents, as these consist primarily of highly liquid investments purchased with original maturities of three months or less as of December 31, 2023 and 2022, respectively. See Note 13.
This hypothetical change in interest expense has been calculated based on the variable rate borrowings outstanding as of December 31, 2022 and 2021 and a 100 basis point per annum change in interest rate applied over a one-year period.
This hypothetical change in interest expense has been calculated based on the variable rate borrowings outstanding as of December 31, 2023 and 2022 and a 100 basis point per annum change in interest rate applied over a one-year period.
If there is a change in foreign currency exchange rates, the amounts of assets, liabilities, revenue, operating expenses and cash flows that we report in U.S. dollars for foreign subsidiaries that transact in international currencies may be higher or lower to what we would have reported if using a constant currency rate.
If there is a change in foreign currency exchange rates, the amounts of assets, liabilities, revenue, operating expenses and cash flows that we report in U.S. dollars for foreign subsidiaries that transact in international currencies may be higher or lower to what we would have reported 72 Table of Contents if using a constant currency rate.
We hold cash and cash equivalents for working capital purposes. Our investments are made for capital preservation purposes, and we do not enter into investments for trading or speculative purposes. We had total borrowings under the Credit Agreement, net of debt issuance costs, of $337.0 million and $338.9 million as of December 31, 2022 and 2021, respectively.
We hold cash and cash equivalents for working capital purposes. Our investments are made for capital preservation purposes, and we do not enter into investments for trading or speculative purposes. We had total borrowings under the Credit Agreement, net of debt issuance costs, of $335.0 million and $337.0 million as of December 31, 2023 and 2022, respectively.
The JOBS Act allows emerging growth companies to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.
The JOBS Act allows EGCs to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash and cash equivalents of $98.8 million and $66.7 million as of December 31, 2022 and 2021, respectively. Our cash and cash equivalents consist of bank demand deposits and money market funds and do not have material exposure to market risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We had cash and cash equivalents of $153.0 million and $98.8 million as of December 31, 2023 and 2022, respectively. Our cash and cash equivalents consist of bank demand deposits and money market funds and do not have material exposure to market risk.
These exposures may change over time as business practices evolve and economic conditions change, including as a result of the impact on the global economy of, or governmental actions taken in response, to the COVID-19 pandemic or the Russia-Ukraine conflict.
These exposures may change over time as business practices evolve and economic conditions change, including as a result of the impact on the global economy of, or governmental actions taken in response to, the Russia-Ukraine conflict or escalating conflicts in the Middle East.
The borrowings denominated in Euros under the Revolving Facility bear interest at a floating rate of an Adjusted EURIBOR rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%.
Under the Credit Agreement, borrowings denominated in Euros under the Revolving Facility bear interest at a floating rate of an Adjusted Euro Interbank Offered Rate (“EURIBOR”) rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%.
The conversion of the foreign subsidiaries’ financial statements into U.S. dollars will also lead to remeasurement gains and losses recorded in income, or translation gains or losses that are recorded as a component of accumulated other comprehensive income (loss). Emerging Growth Company We qualify as an emerging growth company, as defined in the JOBS Act.
The conversion of the foreign subsidiaries’ financial statements into U.S. dollars will also lead to remeasurement gains and losses recorded in income, or translation gains or losses that are recorded as a component of accumulated other comprehensive income (loss).
Borrowings denominated in U.S. dollars under the Revolving Facility bear interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%.
Under the Credit Agreement, borrowings denominated in U.S. dollars under the Revolving Facility bore interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.0%) for a specified interest period plus an applicable margin of 3.00%, until the LIBOR-based rate was replaced, as described below.
As of December 31, 2022 and 2021, the annual weighted-average interest rate on borrowings was 7.73% and 3.50%, respectively. If there was a hypothetical 100 basis point increase in interest rates, the annual impact to interest expense would be approximately $3.5 million as of December 31, 2022 and 2021, respectively.
If there was a hypothetical 100 basis point increase in interest rates, the annual impact to interest expense would be approximately $3.4 million and $3.5 million as of December 31, 2023 and 2022, respectively.
We intend to utilize these transition periods, which may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act. ITEM 8.
For so long as we qualified as an EGC, we utilized these transition periods, which may make it difficult to compare our financial statements for applicable periods to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for additional information regarding our related party debt. Foreign Currency Exchange Risk As a global company, we face exposure to adverse movements in foreign currency exchange rates. We primarily conduct business in the following locations: the United States, United Kingdom, Europe and Canada.
Foreign Currency Exchange Risk As a global company, we face exposure to adverse movements in foreign currency exchange rates. We primarily conduct business in the following locations: the United States, United Kingdom, Europe and Canada.
Borrowings under the Term Loan bear interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.5%) for a specified interest period plus an applicable margin of 3.00%. Each margin is subject to reductions to 2.75% and 1.75%, respectively, based on our first lien net leverage ratio.
Under the Credit Agreement, borrowings under the Term Loan bore interest at a floating rate of an Adjusted LIBOR rate (subject to a “floor” of 0.5%) for a specified interest period plus an applicable margin of 3.00%, until the LIBOR-based rate was replaced, as described below.
Added
Each margin is subject to reductions to 2.75% and 1.75%, respectively, based on our first lien net leverage ratio. 71 Table of Contents On June 26, 2023, the parties entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement.
Added
Amendment No. 1 amended the Credit Agreement to, among other things, replace the LIBOR-based rate included in the Credit Agreement with a SOFR-based rate, as an interest rate benchmark. Other than the foregoing, the material terms of the Credit Agreement described herein remain unchanged.
Added
The effective interest rate on our outstanding debt remained as a LIBOR-based rate until August 31, 2023, at which point it transitioned to a SOFR-based rate. As of December 31, 2023 and 2022, the annual weighted-average interest rate on borrowings was 8.40% and 7.73%, respectively.
Added
Relationship with Parent and Related Entities in the Notes to Consolidated Financial Statements for additional information regarding our related party debt. See Note 9.
Added
Debt of the Notes to Consolidated Financial Statements for further details regarding the Credit Agreement and Interest Expense, Net of Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison for the years ended December 31, 2023, 2022 and 2021 for further details on the current and expected continued impact of interest rates on borrowings under the Credit Agreement.
Added
Foreign Currency Transaction Risk Our foreign currency exposures typically arise from selling monthly, annual, and multi-year subscriptions in multiple currencies, accounts receivable, and other intercompany transactions.
Added
Emerging Growth Company We historically qualified as an “emerging growth company” (“EGC”) as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Added
Based on the market value of our common stock held by non-affiliates as of June 30, 2023 (the last business day of the most recently completed second fiscal quarter), we ceased to qualify as an EGC as of the end of the fiscal year ending December 31, 2023.
Added
As a result, we are no longer able to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Added
In addition, we are no longer able to use the extended transition period for complying with new or revised accounting standards available to emerging growth companies and will be required to adopt new or revised accounting standards as of the effective dates for public companies. ITEM 8.

Other NABL 10-K year-over-year comparisons