NABL earnings call transcript, November 5, 2026

Following our prepared remarks, we will open the line for a question and answer session. This call is being simultaneously webcast on our investor relations website at investors.enable.com. There you can also find our... earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities, and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risk and uncertainty. Including those highlighted in today's earnings release and our filings of the SEC, and actual results may differ materially from those expressed or implied. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call unless otherwise specified when we refer. to financial measures, we will be referring to non-GAAP financial measures. The reconciliation of certain GAAP and non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website.

Now, I will turn the call over to John.

And thank you all for joining us today. As cyber threats escalate, we believe that every business, no matter its size, deserves enterprise-grade protection. That conviction is translating its real-world impact. End-to-end cybersecurity platform protecting over 500,000 businesses worldwide. It's also reflected in our profitable growth. Third quarter ARR was $553 million, growing 5% year-over-year. Constant currency. Adjusted EBITDA was $44 million, representing a margin of 32%. We believe these results reflect a durable business, and I want to spend our time today on what is driving that durability and where NABL goes next. I'll frame our discussions around the key dynamics shaping our market opportunity, our growth drivers, and where we are focused on stronger execution. Let's start with market opportunity. The headlines tell a clear story. AI is empowering the adversary and attacks are growing in scale, speed, and sophistication. IT environments are also becoming more complex as AI agents become one more thing to monitor and secure. Our recent AI fog report. Reflects these headlines and shows the pressure these dynamics are placing on security teams. We commissioned an independent survey of nearly 600 security decision makers and practitioners. 86% saw alert volumes increase in the last 12 months. And 55% said alert noise disrupts their incident response daily or several times a week.

This research builds on our state of the SOC report early in the year, which showed that defenders face an alert every 30 seconds. The takeaway is simple. Defenders are overrun. They face more attacks, more alerts, and more complexity than they can absorb. These dynamics drive foundational demand for cybersecurity, and they shape our strategy in three ways. First, delivering... ...efficiency through intelligent automation. Stretch technicians need to do more with less, and our focus on delivering AI-infused automation lifts their productivity and helps control labor costs. Second, delivering best-of-breed products. Against an AI-enabled... ...adversary, good enough security is no longer good enough. Our best-of-breed product strategy is designed for that standard. Third, bring enterprise-grade capabilities to businesses of all sizes. Smaller businesses... ...often face the same threats as larger enterprises, but often lack the same resources. Our channel-led model gives us reach across both segments. Now, let's turn to how we are capturing this opportunity. Let's start with our growth drivers. First up is data protection. Cove, our cloud-first data protection solution, is our largest growth engine that is quickly becoming the backup platform of choice for businesses. The numbers tell the story. Cove recently surpassed 4 million Microsoft 365 mailboxes, protects over 200,000 businesses, and continues to grow well ahead of the company as a whole. Cove's success is a clear example of our strategy at work.

Its simplicity and automation reduce the labor required to protect each customer, and it delivers enterprise-grade protection at a price and service level that work for businesses of all sizes. We're extending these same principles to disaster recovery. Recovery as a Service, or DRAST. It already has hundreds of customers and surpassed $1 million in ARR within months of release. DRAST can let customers restore operations in minutes straight from our cloud. That means faster recovery. No capital expense outlay, and no infrastructure to manage. It is a step up in protection, and with threats rising and downtime costing more, DRAST gives customers a critical route back to business. Building on this momentum, Google Workspace Backup recently went into preview. It's off to a strong start, adding thousands of users in the first day alone. MSPs often protect hundreds of businesses with environments spanning both Microsoft and Google. Covering both from one console is a particularly strong value. Proposition for them. We are giving customers a clear reason to consolidate on Cove and we expect Google coverage to both widen our adjustable market and help our win rates. Let me share two customer examples that demonstrate why Cove is winning. A European MSP chose Cove to standardize this backup offering, an initial deal worth over $350,000 in ARR. Previously, their backup environment was fragmented across multiple solutions, creating complexity in management, billing, and visibility. With Cove, they saw an opportunity not only

to simplify and standardize their operations, but also to create new revenue streams by packaging differentiated backup and DRAS offerings to their customers. It's a strong example of how Cove can drive both operational efficiency and revenue expansion for MSP. In another example, a customer had been juggling traditional backup products, local repositories, and hardware dependent platforms. With Cove, backup administration effort fell over 50% in deployment time. The data dropped from hours to minutes. When a real recovery event hit, they restored terabytes of data in a matter of hours and were fully operational by morning. Two different customers, same story. Cove replaces complexity with simplicity. And is ready when it matters most. Industry research is validating our solution. Infotech recently ranked Cove number one overall in its enterprise backup data quadrant, including number one for business value created and number one for likelihood to recommend. The rankings come from real world customer feedback. And Cove beat a wide field of competitors, including well known enterprise focused industry leaders. The market is choosing Cove. And we're excited to extend our lead in this mission critical category, turning to security operation businesses increasingly run on a growing digital estate and protecting all of it means security. Teens are buried in threats and alerts. Staffing an around-the-clock team is hard for anyone, and especially for MSPs managing IT for many businesses at once.

Enable helps solve this pain point. Our AI sock cuts through the noise. And our experts step in when a threat escalates. We maintained a high pace of innovation this quarter on both fronts. Often, it starts with the noise. Every customer is different, and static rules can't keep up. Our software learns what normal looks like for each customer and adapts, so the real threats rise to the top. Over 90% of investigations are automated by AI, freeing our analysts to focus on the threats that matter most. For the threats that do escalate, we've made incident response available to MSPs. When an incident escalates, our experts step in. It's the around-the-clock team MSPs don't have to build. Together, that means efficient protection across the whole estate without the burden of building a SOC. The result is showing security operations is now solidly past $50 million in ARR, with nine figures, the next plan milestone. Now to where we are sharpening our focus, starting with Unified Endpoint Management, or UEM. This area is under- pressure as technicians work out how AI changes the way they run IT operations, from the tools they use to their broader organizational structure. This was shown in an MSP survey we conducted earlier this year, where MSPs ranked AI and automation as their number one technical challenge. Two forces explain why. The first is the elevated threat landscape. Cybercrime is now industrialized, with attackers now able to find and exploit vulnerabilities in hours. Keeping pace increasingly depends on automation. The second is cost.

Labor is a sizable part of an MSP cost structure, and much of it goes to repetitive tasks like finding patches and monitoring endpoints. This work is slow and hard to scale. Our answer is to deliver autonomous endpoint management, where AI handouts. handles most of that repetitive work. It's a win-win. MSPs can protect more assets with the same team. Over time, we believe this positions us to address not only software budgets, but also a portion of the labor budgets our customers incur today. We are making real progress with two recent advances standing out. AI accelerated vulnerability and patch management and more value from Enzo, our AI workflow assistant. Starting with vulnerability and patch management. Attackers go after gaps. So how quickly customers close the matters. Our solution is designed to find those gaps, rank them by how severe the risk is and how important the asset is and fix them at scale. It does this across hundreds of. Third party applications on Windows, Mac OS and Linux. Then there is Enzo, which is now part of that workflow. Technicians can ask a question in plain English through Enzo's patch expert and vulnerability expert and get an answer based on. Live data from the customer's own environment. That means less time digging through reports and more time fixing, which helps each technician cover more devices. Turning to endpoint detection and response. Or EDR. Customer expectations have risen in this category. And we recently added several new core and adjacent capabilities. They include protection against AI driven threats, FedRAMP options for regulated customers, cloud data.

Coverage and a managed EDR tier. All said, we are bringing a wave of new capability in UEM and EDR, enabling us to compete for more customers and in more situations. Next, go to market. We're building a stronger foundation. As we shared last quarter, Russell Rose had joined us as our new chief revenue officer in July, bringing more than 25 years of channel and enterprise cybersecurity experience. He came in with three clear priorities. First, expand our full channel strategy so we reach the partner segments where our platform delivers the most value. Second, deepen our upmarket motion because our portfolio now solves more complex needs across security, data protection, and data protection. AI and compliance. And third, drive operational excellence across the revenue organization so the growth we add is durable and efficient. A go-to-market shift of this size takes time to play out. We continue to expect some near-term variability, but we are working to build a stronger, more durable growth engine for 2027 and beyond. And there are encouraging early signs we're headed in the right direction. Two channel developments show that progress. In Australia, we announced a partnership with LIDER, a key distribution partner. MSPs, resellers, system integrators, and channel partners nationwide can now access our security portfolio through LIDER's established network with local expert support.

And a dedicated partner program. We also became a security vendor for a leading UK partner and continue to expand across the channel. More doors, more partners, more ways to reach the business that need us.

Before we conclude, let's discuss how we are planning to sustain growth from here. Two areas of execution are central to our plans. Product innovation and go to market excellence. On innovation, we are increasing our data protection surface area, adding ENTRA ID capabilities as we expand into the identity layer. We are also expanding our security operations platform, and we plan to monetize agents delivering AI that completes task technicians manually handled today. We also expect our expanded endpoint portfolio to drive positive impact. We believe these developments give more reason for customers to stay within ABLE, more for us to sell to our existing base, and more ways to win new customers. On go-to-market, our new playbook is taking shape. From how we work with the channel to how we move up market, and we will update you as it lands. These two areas touch every part of our growth algorithm, retention, expansion, and new customers. They give us real levers to sustain our top-line momentum. And with strong execution, can power faster growth. The levers are in our hands, and we are determined to turn them into results. With that said, I'll turn it over to Tim before circling back for closing remarks. Tim?

And thank you all for joining us today. Let's begin with the headline view before we get into the figures. The macro backdrop for cybersecurity remains positive, and we see our positioning and strategy as sound. Our end-to-end platform helps protect businesses. of all sizes. Our growth drivers in data protection and security operations are resonating, and we are acting on the areas of focus John outlined to strengthen the business. Importantly, we are finding growth with profitability with our full year 2026 guidance calling for an adjusted EBITDA margin of approximately 29%. That profitability gives us strength and flexibility, and we are using it with intention. In the third quarter, we repurchased approximately 10.2 million shares for $38.7 million or approximately 5% of our shares outstanding. These purchases reflect our confidence in the long term value of the business. Approximately $56 million remained on our authorization as of the end of the third quarter. Now let me walk you through the details of the quarter. For our third quarter results, total ARR was $553 million, growing at 5% year-over-year on a reported and constant currency basis. Total revenue was 137. $10 million, representing approximately 5% year-over-year growth on a reported and constant currency basis. Subscription revenue was $136 million, representing approximately 5% year-over-year growth.

We ended the quarter with 2,716 customers that contributed $50,000 or more of ARR, which is up approximately 4% year-over-year growth. Customers with $50,000 or more of ARR now represent approximately 63% of our total ARR, up from approximately 61% a year ago.

Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 105% 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- gap basis and exclude the items outlined in the gap to non-gap reconciliations provided in today's press release. Third quarter gross margin was 78% compared to 81% in the same period. in 2025. Third quarter adjusted EBITDA was $43.6 million, representing approximately 32% adjusted EBITDA margin. Unlevered free cash flow was 30%. $40 million in the third quarter. CapEx, inclusive of $2 million of capitalized software development costs, was $9 million or 7% of revenue in the third quarter. We ended the quarter with approximately $92 million of cash and an outstanding loan principal balance of approximately $397 million, representing net leverage of approximately 1.9 times.

Quarter end, we have also drawn the full $75 million of our delayed draw term loan. Also, as a reminder, the final installment payment for the AdLumen acquisition, totaling approximately $67 million, is due in the fourth quarter. Non-GAAP earnings per share was $0.12 in the third quarter, based on $187 million weighted average diluted shares. Let's now turn to our financial outlook. Our guidance and core incorporates the following elements. First is the impact of updated FX rates. We are now using FX rates of 1.11 for the euro and 1.33 for the pound. Relative to our prior guidance, this drives an approximately $3 million headwind to full year 2026 ARR and a $750,000 headwind to full year 2026 revenue with most of the revenue headwind flowing through to adjusted EBITDA. Second, renewal rates in the third quarter were roughly in line with first half renewal rates and our fourth quarter guidance assumed similar performance. Moving to the fourth quarter of 2026, we expect total revenue. In the range of 133 to $134 million representing approximately three to 4% year over year growth on a reported basis and four to 5% on a constant currency basis. We expect fourth quarter adjusted EBITDA. In the range of 39.6 to $40.6 million representing an adjusted EBITDA margin of approximately 30%. For the full year 2026 our total revenue outlook. is approximately 541 to $542 million representing approximately six to 7% year over year growth on a reported basis and 5% on a constant currency basis.

Our full year ARR outlook is five. 158 to $560 million representing three to 4% year over year growth on a reported basis and 5% on a constant currency basis. We expect full year adjusted EBITDA of 158.5. to $159.5 million representing an adjusted EBITDA margin of approximately 29%. Looking ahead briefly, we see our full year 2026 constant currency ARR growth. as the right framing for 2027 top line performance as we build towards acceleration over time. With that in mind, we plan to keep investing in 2027 to drive this growth in product innovation. Go to market engine and agentic AI, along with some one time expenses. The market opportunity is compelling, and we believe continuing to invest to capture this demand is the path that creates the most value. We expect our full year 2026 unlevered free cash flow to be approximately 116 to 118 million dollars. We expect capex, which includes capitalized software development costs, to be approximately 6% of total revenue for 2026. We expect cash interest payments of approximately 28 million dollars, assuming interest rates remain in line with current levels. We expect total weighted average diluted shares outstanding of approximately 178 million to 181 million for the fourth quarter and 186 million to 187 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 25% for both the fourth quarter and the full year. Now, I will turn it over to John for closing remarks.

Bringing this all together, demand for cybersecurity is large. urgent and growing. And AI is raising the stakes for every business we serve. The answer is smarter, more powerful software that is well governed. We have a profitable growing business, a strong platform, a new go to market leader and a clear plan. Every business deserves enterprise-grade protection, and that is what we are focused on delivering. And with that, operator, we are ready for questions.

Your first question comes from the line of Mike Seacos with Needham. Mike, your line is now open.

Thank you all for joining us today and look forward to speaking to you in the next quarter.