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DATE

Thursday, May 7, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — John Pagliuca
  • Chief Financial Officer — Tim O'Brien

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TAKEAWAYS

  • Annual Recurring Revenue (ARR) -- $548 million, representing 11% growth on a reported basis and 8% growth in constant currency.
  • Total Revenue -- $134 million, which is $2 million above the high end of guidance, for 13% reported growth and 8% constant currency growth.
  • Subscription Revenue -- $132 million, up 13% on a reported basis and 9% in constant currency.
  • Adjusted EBITDA Margin -- 27% for the quarter, with adjusted EBITDA of $37 million.
  • Gross Margin -- 80%, compared to 81% in the prior-year period.
  • Trailing 12-Month Net Revenue Retention -- 106% on a reported basis and 103% in constant currency, with improvement both quarter over quarter and year over year.
  • Upmarket Customer Growth -- Number of customers contributing $50,000 or more in ARR grew by 13%, now representing 62% of total ARR.
  • Larger Account Penetration -- 41% of total ARR now comes from customers with over $100,000 ARR.
  • Geographic Revenue Mix -- 46% of revenue generated outside North America.
  • Unlevered Free Cash Flow -- $22 million for the quarter.
  • CapEx -- $4 million, including $3 million capitalized software costs, equating to 3% of revenue.
  • Net Leverage -- Net leverage of approximately 1.8x, with $118 million cash and $399 million outstanding loan principal.
  • Non-GAAP Earnings Per Share -- $0.09 with 189 million weighted average diluted shares outstanding.
  • Q2 2026 Outlook -- Revenue expected between $137.5 million and $138.5 million, for 5%-6% reported growth and 4% constant currency growth; adjusted EBITDA guidance of $39.5 million to $40.5 million (29% margin).
  • 2026 Full-Year Guidance -- Revenue of $554 million to $559 million (8%-9% reported growth), ARR of $581 million to $586 million (8%-9%), and adjusted EBITDA of $167 million to $171 million (30%-31% margin).
  • Unlevered Free Cash Flow Outlook -- Revised upward to $116 million to $120 million for the year.
  • Channel Performance -- 4 of top 5 new customer wins in the quarter, including Manchester City, originated via the VAR channel.
  • Security Operations and Data Protection -- Both categories outpaced overall company growth, with particular reference to cross-sell and upsell strength; data protection surpassed 3.5 million Microsoft 365 users and led net new ARR in the quarter.
  • Product Innovation -- Launches included N-zo (AI workflow assistant) and a custom model context protocol (MCP server); N-zo reported "up to 70% faster IT operations" for specific tasks and was highlighted for labor efficiency.
  • Portfolio Expansion -- Data Protection introduced Disaster Recovery as a Service (DRaaS) in limited preview to automate backup; Google Workspace backup planned for later in the year.
  • Security Operations Customer Growth -- Customer count for the security operations solution nearly doubled since the second quarter of 2025.
  • Large New Wins -- Reported an ARR deal of nearly $500,000 after standardizing security operations for a compliance-focused MSP.
  • Customer Sales Cycles -- CEO Pagliuca said, "as we continue to go upmarket, we are seeing a little bit of a lengthening of the sales cycle and a little bit more of a scrutiny around the ROI."
  • Pricing and Packaging -- Management expects a net positive impact "closer to the 1" point range for FY 2026.
  • Product Adoption Trends -- N-zo early phase will not be directly monetized; DRaaS to be monetized upon full launch later in 2026; Google Workspace backup phased into customer preview and not fully included in guidance.

SUMMARY

Management directly attributed net revenue retention gains to cross-selling managed detection and response (MDR) and favorable foreign exchange rates. Guidance projects back-half weighted ARR growth driven by new DRaaS and Google backup offerings, with pipeline development for both underway during the quarter and full launches planned for later in the year. N-able positioned its AI-driven automation—particularly N-zo and MCP server—as a lever to enhance customer efficiency and address MSP labor constraints, with explicit focus on increasing the technician-to-device ratio above industry benchmarks. Customer sentiment and industry research cited during the call highlight that heightened cyber risk and increasing attack sophistication are fueling demand for the company's unified platform, with Manchester City Football Club referenced as a high-profile new security partnership. Data protection segment momentum was called out, as DRaaS and new anomaly detection features address rising identity-based attack threats and the business resilience use case, while a near doubling of security operations customer count reflects traction with compliance-driven MSP accounts.

  • CFO O'Brien cited, "meaningful monetization across data growth, servers and cloud assets alongside more traditional drivers such as users and devices," emphasizing multiple, diversified revenue streams beyond standard headcount-based metrics.
  • Nearly half of revenue was international, and management stated there was not any slowdown from any geopolitical issues such as those in the Middle East, supporting the global demand thesis.
  • Product adoption for N-zo is impacting customer retention and operational efficiency, but monetization is deferred until expansion of use cases and coworker functionality is achieved.
  • CEO Pagliuca described industry awareness rising around agent-driven risks, with DRaaS enabling "immediate failover" and near-instant business recovery, which is driving stronger data protection demand.
  • For 2026, pricing and packaging changes are projected to deliver a "slight benefit," with management guiding to a 1-point net improvement in annual financials.

INDUSTRY GLOSSARY

  • VAR (Value-Added Reseller): A channel partner that adds features or services to a core product and resells bundled solutions.
  • MDR (Managed Detection and Response): A service combining advanced threat detection technology and human expertise to identify and respond to cybersecurity threats.
  • DRaaS (Disaster Recovery as a Service): A cloud-based service that enables organizations to back up and recover IT infrastructure and data in the event of disruption.
  • UEM (Unified Endpoint Management): Technology for managing and securing all end-user devices within an organization from a single platform.
  • GRR (Gross Revenue Retention): The percentage of recurring revenue retained from existing customers, excluding expansion and contraction.
  • NRR (Net Revenue Retention): The percentage of recurring revenue retained and expanded from existing customers over a period, accounting for upgrades and downgrades.
  • Agentic: Refers to self-directed AI software agents that initiate and execute IT workflows, often autonomously.
  • MCP Server (Model Context Protocol Server): A proprietary server that securely connects external AI tools to live operational data, enabling real-time interaction and automation within the N-able platform.

Full Conference Call Transcript

John Pagliuca: Thank you, Griffin, and welcome, everyone, to our call this morning. Today, we'll review our first quarter results, discuss key trends we're seeing through recent industry engagements and highlight how AI innovation is tangibly expanding our software opportunity. We will focus particularly on our AI innovation, where we are automating work historically delivered through labor-intensive services, helping organizations operate more efficiently and securely while also growing our TAM. This progress matters now as advancements in frontier models are fundamentally rewriting the threat landscape, compressing response times for defenders and empowering attackers to exploit vulnerabilities at unprecedented speed and scale.

We believe our end-to-end cyber resilience platform is purpose-built for this moment, positioning N-able to lead as cybersecurity reaches an inflection point. Let's jump right in. Starting with the quarter, our results were strong. First quarter ARR was $548 million, growing 8% year-over-year in constant currency, and adjusted EBITDA margin was 27%. Quarterly gross and net revenue dollar retention both improved quarter-over-quarter and year-over-year, with trailing 12-month net retention now at 106%. Let's walk through the drivers of that performance. First, we continue to see momentum upmarket. The number of customers with over $50,000 of ARR grew by 13% year-over-year, and this cohort now represents 62% of N-able's total ARR.

In addition, customers with over $100,000 of ARR represent 41% of our annual recurring revenue. This upmarket progress is further exemplified by our selection as Manchester City Football Club's official cybersecurity partner. As the club operates at global scale on the field, N-able protects its critical data and systems, securing its digital environment off the field. The partnership underscores our ability to serve complex, high-profile organizations. More broadly, given the strong retention in our upmarket cohorts, we believe our success in this segment provides a solid foundation for future growth. Second, our channel expansion strategy is working. 4 of our top 5 new customer wins in the quarter, including the Manchester City deal, were through value-added resellers, or VAR channel.

With an established MSP motion that counts 25% of CRN's top 150 MSPs as customers and our scaling VAR presence, our broad channel footprint enables us to capture demand across the market. Third, the depth and breadth of our platform is resonating. Strength in cross-sell and upsell underpinned improvement in both gross and net retention as customers realize value in expanding and consolidating with N-able. From a category perspective, security operations and data protection continue to outpace total company growth as customers prioritize advanced remediation and recovery capabilities in the face of rising cyber risk. Reflecting on the quarter, the business executed well and our strategy delivered strong results.

Let's now switch gears and discuss key observations from recent industry engagements. During the quarter, we engaged across the ecosystem through our annual customer conference in power, a major industry event such as RSA and ongoing dialogue with third-party research firms. One major takeaway is that we believe cybersecurity continues to experience strong secular tailwinds. We are consistently hearing from customers that the worsening threat environment and rising IT complexity are driving increased need for stronger cybersecurity solutions. This sentiment is reinforced by our internal data and third-party research. Our 2026 state of the SOC report, which is informed by telemetry and frontline response data from N-able SOC, we observed an alert every 30 seconds.

We also saw a dramatic rise in perimeter-based attacks with 50% of attacks bypassing endpoint controls entirely. Manual triage approaches are not able to keep pace with the scope and velocity, emphasizing the need for modern, machine-driven defense. Industry research firm, Futurum, reported a similarly challenging attack environment. In their 2025 Cybersecurity Global Enterprise decision-making survey report, Futurum highlighted that 46% of organizations surveyed experienced more than 3 significant security incidents over the past year. We do not see these dynamics abating, particularly as advances in AI continue to lower the barrier to entry for increasingly sophisticated cyberattacks. Together, these factors give us confidence that our mission to protect businesses from evolving cyber threats is underpinned by strong market demand.

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

Our conversations at our customer conference in power reflected a broadly bullish sentiment, improve efficiency and create new revenue streams for MSPs. While adoption is still early, customers are clear that they want a trusted partner to help them navigate the technological wave so they can focus on operating their businesses. In summary, our industry engagements reinforce our view that industry demand is strong and increasingly favors AI-powered integrated platform-based approach. This brings us to our innovation and how our software is expanding our opportunity by automating work historically delivered through services. Our platform is rapidly evolving from a system of record to a system of action, increasingly completing tasks previously handled by technicians. This evolution unlocks significant economic opportunity.

Industry analysts such as Omdia estimate annual security services spend at about $200 billion, roughly twice the size of security software spend. We see a similar labor-heavy cost structure within our MSP customer base. Our field work indicates MSPs operate at approximately 10% EBITDA margins with a sizable portion of their cost structure composed of labor. As our intelligent software completes workflows historically owned by labor, we help our customers operate more efficiently and improve margins while expanding our monetization surface from software budgets into a much larger labor-driven services opportunity. A concrete example helps illustrate the opportunity we are driving. Technicians are the revenue engine for MSPs.

The more IT assets, including AI that each MSP technician can manage, the more revenue an MSP can generate. The challenge is that technicians have practical limits. A common industry benchmark is roughly 1 technician for every 200 devices. This creates a growth ceiling in the structurally tight IT labor market and pressures MSPs profitability as they must continually hire additional technicians to support more customers. Our aim is for our software to improve that ratio, empowering a single technician to manage 500, 1,000 or even more IT assets. Delivering this creates a win-win for our customers and N-able.

Our customers can scale their businesses without linear increase in labor costs, and we can gain market share as MSPs consolidate around platforms that can help them grow their businesses more efficiently. Importantly, this is not a future state. We are delivering progress today. In UEM, we recently introduced N-zo, our AI workflow assistant and our custom model context protocol, or MCP server. These advancements mark an important step forward in AI-driven IT operations. For certain tasks, N-zo delivers up to 70% faster IT operations by enabling teams to interact with their environments using natural language and agentic workflows. Our MCP server goes a step further.

Securely connecting external AI tools like Claud, ChatGPT and Microsoft Copilot directly to live operational data inside N-able UEM. This means AI no longer just tells customers what's wrong. It helps fix it real time with the control and governance our partners require. Together, these capabilities are empowering IT teams to move faster, reduce manual effort and act directly within the environments where they already work. This progress directly improves the technician to managed device ratio we discussed earlier. UEM's value proposition is showing clearly in execution. 6 of our top 10 new customer lands flowed through our UEM solution.

A standout example is one of the fastest-growing quick service U.K. restaurant brands that was looking for a trusted partner to ensure the digital operations work seamlessly. They deployed our UEM in late 2025 across 100 locations, gaining real-time visibility into the devices, automating routine fixes and significantly reducing downtime. We recently built on that success, signing the U.S. group and expanding the relationship significantly. We are also automating historically manual-intensive work in data protection, where we recently introduced Disaster Recovery as a Service, or DRaaS. We are eliminating the need for customers to manage backup infrastructure themselves, reducing cost, time, risk and operational headache. This shifts backup management from a labor-intensive activity to a software-led capability.

Beyond efficiency, DRaaS meaningfully strengthens customer security posture. In the event of data loss, businesses can there instantly recover critical systems, minimizing their downtime and maintaining their operations. We also expanded our anomaly detection capabilities, which help identify changes to backup environments. With threat actors increasingly using identity-based attacks to steal credentials and target backups from inside the organization, including altering retention policies or deleting servers, this advancement has real impact. Building on that momentum, we are excited about the planned addition of Google Workspace backup coverage later this year. From a broader perspective, we continue to see durable demand drivers for data protection.

With time to exploit turning negative and adversaries exploiting vulnerabilities before patches exist, the criticality of our ability to protect and restore data is heightened. As we look ahead to a world with agents owning more workloads for businesses, the possibility of agents making costly mistakes also rises. We see the need to effectively undo agent mistakes and restore operations through a clean prior state as a potential demand catalyst for our data protection solution. Our execution and value are showing up in the numbers. Data protection has now surpassed 3.5 million Microsoft 365 users and led our net new ARR growth in the quarter.

Finally, in security operations, we are extending the same system of action approach into one of the most labor-intensive areas of cybersecurity. Businesses are facing more complex attacks and N-able is helping them operate, contain and scale security without standing up their own SOC. Our security operations solution is a system of action at its core as AI handles the bulk of our threats automatically. This is a critical differentiator. With breakout time shortening to minutes, the ability to neutralize threats in real time could be the difference between a contained event and a successful breach. Customer count has nearly doubled since the second quarter of 2025, reflecting our traction here. A recent customer win demonstrates the solution in action.

A compliance-focused MSP serving regulated industries was facing challenges managing a fragmented security stack spanning multiple EDR, MDR and semi tools. We standardized the security operation, replacing multiple legacy providers with a unified scalable model, driving ARR of nearly $500,000. Importantly, AI reinforces the role our platform plays in the Agentic world. From an operating standpoint, AI is embedded into our platform, and we are deeply embedded in our customer environments and workflows. This positions us to serve as a control plane to govern and secure agents as they become more prevalent across their IT and security environments. Customers can access AI where they already operate.

We pair that accessibility with a technical experience built on proven infrastructure, extensive data, deterministic workflows, domain context and rigorous compliance standards. From a demand perspective, we see AI increasing both the volume and severity of threats while also expanding the amount and criticality of data that must be protected. These forces directly drive the need for our solutions. Our trusted brand and established go-to-market further positions us to translate innovation and demand into real-world adoption. To close, we're executing with discipline as we pursue the large and compelling cybersecurity opportunity.

We believe AI is expanding our software opportunity by enabling us to automate more workflows and reinforcing the critical role we play in helping customers navigate a more complex and hostile digital environment. With that, I'll turn it over to Tim and then circle back for closing remarks. Tim?

Tim O?Brien: Thank you, John, and thank you all for joining us today. Our first quarter performance reflected the execution drivers John discussed, including continued upmarket momentum, strong contribution from both our MSP and VAR channels and expanding platform adoption. Our innovation is also broadening the scope of what our software can deliver, unlocking significant opportunity as we automate work historically delivered through services. From a strategic and capital allocation perspective, our focus remains investing behind durable demand for cybersecurity solutions while delivering a robust financial profile. Before diving into the results and outlook, I also want to share perspective on how we believe our business is positioned for growth in an increasingly agentic era. Our revenue model is diversified.

We have meaningful monetization across data growth, servers and cloud assets alongside more traditional drivers such as users and devices. We believe this diversified exposure powers multiple paths to growth. Looking ahead, we see a significant new monetization opportunity as customers increasingly adopt agents and other non-human identities across their environments. As these new IT assets introduce requirements around security, governance and resilience, we believe we are well positioned to help customers secure, govern and back up these new IT assets. At the same time, we intend to continue innovating by delivering our own agents, building on our existing platform capabilities and system of action.

Taken together, we believe these dynamics reinforce the durability of our model and create additional long-term growth opportunities as the market evolves. I'll now walk through our first quarter results, provide additional detail on the drivers of our performance and discuss our outlook for 2026. First, let's discuss our results for the first quarter. For our first quarter results, total ARR was $548 million, growing at 11% year-over-year on a reported basis and 8% on a constant currency basis. Total revenue was $134 million, $2 million above the high end of our guidance, representing approximately 13% year-over-year growth on a reported basis and 8% on a constant currency basis.

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

Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. First quarter gross margin was 80% compared to 81% in the same period in 2025. First quarter adjusted EBITDA was $37 million, representing approximately 27% adjusted EBITDA margin. Unlevered free cash flow was $22 million in the first quarter. CapEx, inclusive of $3 million of capitalized software development costs, was $4 million or 3% of revenue in the first quarter. We ended the quarter with approximately $118 million of cash and an outstanding loan principal balance of approximately $399 million, representing net leverage of approximately 1.8x.

Non-GAAP earnings per share was $0.09 in the first quarter based on 189 million weighted average diluted shares. Turning to our financial outlook, which assumes FX rates of $1.17 for the euro and $1.34 for the pound. For the second quarter of 2026, we expect total revenue in the range of $137.5 million to $138.5 million, representing approximately 5% to 6% year-over-year growth on a reported basis and 4% on a constant currency basis. We expect second quarter adjusted EBITDA in the range of $39.5 million to $40.5 million, representing an adjusted EBITDA margin of approximately 29%.

As a reminder, revenue growth is impacted by the timing and magnitude of on-premise deals and related revenue recognition dynamics, and we continue to view ARR as the best velocity metric for our business. For the full year 2026, our total revenue outlook is approximately $554 million to $559 million, representing approximately 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. Our full year ARR outlook is $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis. We expect full year adjusted EBITDA of $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%.

We are raising our unlevered free cash flow outlook and expect our unlevered free cash flow to be approximately $116 million to $120 million. We expect CapEx, which includes capitalized software development costs to be approximately 5% of total revenue for 2026. We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. We expect total weighted average diluted shares outstanding of approximately 189 million to 192 million for the second quarter and $188 million to $192 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 24% to 27% for both the second quarter and the full year.

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

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

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

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

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

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

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

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

John Pagliuca: It's much more top of mind. I think there's a realization across the landscape that the need to recover and the need for business resilience and continuity in the world of this agentic era is going to become more and more top of mind. If you think about backup in general, the last couple of years, it's been dominated by this cybersecurity bit, right, ransomware or attacks from threat actors and the ability to back it up. Right along for a long time, there's also friendly fire. In other words, if an employee unintentionally or intentionally deletes a bunch of data.

Well, now we have all these agents in some state in an autonomous state that if not governed the right way, have the same ability to go delete data. I think there's a realization that this will happen. This could happen across small organizations or large organizations and the ability to get back up and running is top of mind. Frankly, that's why we pitch business resilience, not cyber resilience. That's what -- we know when we're talking to our MSPs and we're talking to mid-market companies and small, medium enterprises, what they're really worried about is avoiding disruption. If there is disruption, how quick can we get back up and running. That's why we're really excited about DRaaS.

DRaaS provides an immediate failover or near immediate failover. If something happens via a threat actor or friendly player or because an agent goes rogue on you, you have the ability to fill over and keep your business going. All of these things are creating a bunch more demand. There is, I'd say, a realization across the industry that this is more and more of a real thing as agents continue to proliferate across the IT environment.

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

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

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

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

Tim O?Brien: Yes. On the NRR, Jason?

Jason Ader: Yes.

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

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

John Pagliuca: Yes. Look, I think the #1 thing is that we're really well positioned in this agentic era, and that's not a future state. That's a now state. we've introduced N-zo, which is an AI assistant in our UEM offering, which is really going to take a lot of the high-volume operational work off the load of our technicians. This is our first really or our continuation of turning labor into software. We're excited about that. We plan to do it, and we are doing it across all 3 fronts. We pride ourselves on being the platform of choice for MSPs before the attack, during the attack and after the attack.

We're layering in an agentic technology to take the labor off of our MSPs, making them more efficient, making them more profitable. In turn, we expect better GRR, better NRR and being more of a critical piece of the MSP and the internal IT departments go forward. The best way of doing that, frankly, is to make sure that AI is helping them run their business and driving the efficiency. And we believe we're well positioned there.

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

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

John Pagliuca: Joe, definitely in customer conversations. I wouldn't say it's necessarily showing up in pipeline. Look, patching and vulnerability management is a fundamental layer in cyber resilience and an overall business resilience. We've been preaching that for a while. I think it just makes it more top of mind and folks need to make sure that they have a level of autonomous patching and vulnerability management regardless of the environment. As it relates to backup, I think I brought this up earlier with the previous call from Mike and his team, it just provides another tailwind as to the use case, why you need to be able to back things up and more importantly, recover and recover in a near-time way.

I think it's really just driving a lot more conversation and awareness across the industry. By and large, my MSPs that are in the upper quartile, they've been practicing this layered security approach. We've been helping them with that layered security approach. Again, this is why we think our best-of-breed platform approach is the right one for our customers and because it helps tie in together and drive a lot more efficiency before the attack, during the attack and after the attack, whether it's agentic or not.

It's definitely making some of these conversations that might have been out of vogue, more in vogue, but -- and that's overall good for the community, good for the industry and good for N-able.

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

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

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

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

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

That's why, again, we believe the way that we're positioned before the attack, and we talk about before the attack, that is patching, that is vulnerability management that is monitoring and managing and during the attack with our threat hunting and our XDR, which is AI infused and then, of course, recovery if you need to get things back up and going, we believe that's the right formula for internal IT departments and MSPs.

Tying these all together and adding an agentic layer that takes away from some of the high-volume operational work from a technician, that's the right formula because at the end of the day, what AI will also do for the bad guys is accelerate their speed and their volume for the threats. We need to be able to give our customers the ability to fight fire with fire and provide them AI-infused or AI-led technology so they can keep up with the speed. Often, a human is the bottleneck, and it's our job here at N-able to give them the software.

It's not a labor burden, but it's on technology to, one, keep their customers safe and also drive their efficiency. We mentioned in the prepared remarks, an average MSP has an EBITDA of 10%. A lot of that's because of the labor and on the high-volume mundane tasks. As we usher in the AI technology, our hope is to really break that linearity in the model, number one, to help them improve their EBITDA, but also be able to make sure that they're thing off any threats as a result of some of the AI in the wrong hand type of thing.

All of this, frankly, is pointing, I think, to an area where cybersecurity will see a tailwind and it's making it more top of mind.

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

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

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

Now in N-zo, we're not going to directly monetize this in this first phase, but what we're seeing is MSPs coming back saying, "Hey, that saves me hours. You're improving certain tasks that I'm doing by 70% and the feedback has been good. That being said, the use cases are limited right now. Our plan is to continue to expand those use cases as we continue to get some of those reviews and savings from the labor. DRaaS, just to be clear, that one will be directly monetizable. N-zo in its initial phase is really going to be about helping the customer experience, driving our GRR and helping them improve their profits as well.

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

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

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

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

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

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

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