N-able, Inc.NABL
N-able, Inc. Income Taxes Disclosure
Income Taxes
During the three months ended December 31, 2025, we adopted ASU No. 2023-09 on a prospective basis beginning with the year ended December 31, 2025. In accordance with the adoption of ASU No. 2023-09, we have included the required additional disclosures for the year ended December 31, 2025. Prior period disclosures have not been retrospectively adjusted
and may not be comparable to the current period presentation under the new standard. See Note 2. Summary of Significant Accounting Policies for additional information regarding ASU No. 2023-09.
U.S. and international components of income before income taxes were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| U.S. | $ | (55,495) | $ | (37,160) | $ | (26,289) | |||||||||||
| International | 57,886 | 91,430 | 70,615 | ||||||||||||||
| Income before income taxes | $ | 2,391 | $ | 54,270 | $ | 44,326 | |||||||||||
Income tax expense was composed of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | 682 | $ | — | |||||||||||
| State | 375 | 250 | 250 | ||||||||||||||
| International | 22,636 | 24,958 | 21,152 | ||||||||||||||
| 23,011 | 25,890 | 21,402 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | (1,561) | — | ||||||||||||||
| State | (3) | — | — | ||||||||||||||
| International | (3,585) | (1,017) | (488) | ||||||||||||||
| (3,588) | (2,578) | (488) | |||||||||||||||
| Income tax expense | $ | 19,423 | $ | 23,312 | $ | 20,914 | |||||||||||
The difference between the income tax expense (benefit) derived by applying the federal statutory income tax rate to our income before income taxes and the amount recognized in our Consolidated Financial Statements is as follows for the year ended December 31, 2025:
| Year Ended December 31, 2025 | ||||||||||||||
| (in thousands, except percentages) | ||||||||||||||
| Income before income taxes | $ | 2,391 | ||||||||||||
| Income Tax Expense | As a Percentage of Income Before Taxes | |||||||||||||
| U.S. - Federal: | $ | 502 | 21.0 | % | ||||||||||
| Nontaxable and Nondeductible Items: | ||||||||||||||
| Nondeductible executive compensation | 2,154 | 90.1 | % | |||||||||||
| Nondeductible legal and transaction costs | 2,317 | 96.9 | % | |||||||||||
| Prior period adjustments | 125 | 5.2 | % | |||||||||||
| Other nondeductible expense | 220 | 9.2 | % | |||||||||||
| Share-Based Payment Awards: | 1,019 | 42.6 | % | |||||||||||
| Cross-Border Tax Laws: | ||||||||||||||
| Global intangible low-taxed income | 405 | 16.9 | % | |||||||||||
| Changes in Valuation Allowance: | 5,485 | 229.4 | % | |||||||||||
U.S. - State and Local Income Taxes, Net of Federal Effect (1): | 250 | 10.5 | % | |||||||||||
| Foreign Tax Effects: | ||||||||||||||
| Canada | ||||||||||||||
| Statutory income tax rate differential | 632 | 26.4 | % | |||||||||||
| Nondeductible share-based payment awards | 2,014 | 84.2 | % | |||||||||||
| Research credits | (550) | (23.0) | % | |||||||||||
| Prior period adjustments | 321 | 13.4 | % | |||||||||||
| Other | 73 | 3.1 | % | |||||||||||
| Netherlands | ||||||||||||||
| Statutory income tax rate differential | 1,270 | 53.1 | % | |||||||||||
| Nondeductible share-based payment awards | 337 | 14.1 | % | |||||||||||
| Prior period adjustments | (1,324) | (55.4) | % | |||||||||||
| Changes in valuation allowance | 500 | 20.9 | % | |||||||||||
| Other | 18 | 0.8 | % | |||||||||||
| United Kingdom | ||||||||||||||
| Statutory income tax rate differential | 537 | 22.5 | % | |||||||||||
| Nondeductible share-based payment awards | 408 | 17.1 | % | |||||||||||
| Nondeductible license fee | 657 | 27.5 | % | |||||||||||
| Prior period adjustments | 861 | 36.0 | % | |||||||||||
| Other | 249 | 10.4 | % | |||||||||||
| Other Foreign Jurisdictions | ||||||||||||||
| Statutory income tax rate differential | 160 | 6.7 | % | |||||||||||
| Nondeductible share-based payment awards | 179 | 7.5 | % | |||||||||||
| Prior period adjustments | 360 | 15.1 | % | |||||||||||
| Other | 244 | 10.2 | % | |||||||||||
| Income Tax Expense | $ | 19,423 | 812.3 | % | ||||||||||
_____________________
(1) State taxes in Massachusetts, New Jersey, and California made up the majority (greater than 50 percent) of the tax effect in this category in 2025.
The difference between the income tax expense (benefit) derived by applying the federal statutory income tax rate to our income before income taxes and the amount recognized in our Consolidated Financial Statements is as follows for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Expense derived by applying the federal statutory income tax rate to income before income taxes | $ | 11,396 | $ | 9,308 | |||||||
| State taxes, net of federal benefit | 250 | 250 | |||||||||
| Research and experimentation tax credits | (550) | — | |||||||||
| Global intangible low-taxed income | — | (49) | |||||||||
| Withholding tax | — | 79 | |||||||||
| Transaction costs | 1,024 | 399 | |||||||||
| Non-taxable change in contingent consideration liability | (1,480) | — | |||||||||
| Non-deductible executive compensation | 3,155 | 2,099 | |||||||||
| Valuation allowance for deferred tax assets | 3,737 | 2,867 | |||||||||
| Stock-based compensation | 1,301 | 2,569 | |||||||||
| Meals and entertainment | 328 | 224 | |||||||||
| Effect of foreign operations | 4,317 | 2,328 | |||||||||
| Other | (166) | 840 | |||||||||
| Income tax expense | $ | 23,312 | $ | 20,914 | |||||||
The components of the net deferred tax amounts recognized in the accompanying Consolidated Balance Sheets were:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for doubtful accounts | $ | 1,187 | $ | 392 | |||||||
| Accrued expenses | 76 | 17 | |||||||||
| Net operating loss | 18,159 | 14,763 | |||||||||
| Stock-based compensation | 4,206 | 3,876 | |||||||||
| Interest expense | 9,046 | 4,292 | |||||||||
| Deferred revenue | 162 | 635 | |||||||||
| Capitalized research and development expense | 30 | 2,599 | |||||||||
| Leases | 788 | 782 | |||||||||
| Other credits | 240 | 22 | |||||||||
| Total deferred tax assets | 33,894 | 27,378 | |||||||||
| Valuation allowance | (14,049) | (7,764) | |||||||||
| Deferred tax assets, net of valuation allowance | 19,845 | 19,614 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment | 1,880 | 1,578 | |||||||||
| Prepaid expenses | 1,161 | 983 | |||||||||
| Leases | 1,461 | 1,271 | |||||||||
| Unrealized exchange loss | 12 | 36 | |||||||||
| Intangibles | 12,766 | 17,168 | |||||||||
| Total deferred tax liabilities | 17,280 | 21,036 | |||||||||
| Net deferred tax asset (liability) | $ | 2,565 | $ | (1,422) | |||||||
Total cash paid for income taxes, net of refunds, is as follows for the year ended December 31, 2025:
| Year Ended December 31, 2025 | ||||||||||||||
| (in thousands, except percentages) | ||||||||||||||
| Payments | $ | 19,455 | 108 | % | ||||||||||
| Refunds | (1,391) | |||||||||||||
| Total payments, net of refunds | $ | 18,064 | ||||||||||||
| As a Percentage of Total Payments, Net of Refunds | ||||||||||||||
| U.S. payments, net of refunds | $ | 74 | 0.4 | % | ||||||||||
| Foreign payments, net of refunds | ||||||||||||||
| Canada | $ | 2,498 | 13.8 | % | ||||||||||
| Netherlands | 6,605 | 36.6 | % | |||||||||||
| United Kingdom | 7,650 | 42.3 | % | |||||||||||
| Other | 1,237 | 6.8 | % | |||||||||||
| $ | 17,990 | 99.6 | % | |||||||||||
| Total payments, net of refunds | $ | 18,064 | 100.0 | % | ||||||||||
As of December 31, 2025 and 2024, we have federal and state net operating loss carryforwards of approximately $75.9 million and $60.0 million, respectively. These net operating loss carryforwards begin to expire in 2029. Pursuant to the Separation and Distribution that occurred on July 19, 2021, all pre-Separation and Distribution combined state net operating losses remain with SolarWinds.
As of December 31, 2025 and 2024, we have foreign net operating loss carry forwards of approximately $6.3 million, which can be carried forward indefinitely.
We establish valuation allowances when necessary to reduce deferred tax assets to amounts expected to be realized. During the year ended December 31, 2025, we recorded additional valuation allowance of $5.8 million in the U.S. and $0.5 million outside the U.S. During the year ended December 31, 2024, we recorded additional valuation allowance of $2.4 million in the U.S. and $0.5 million outside the U.S. 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. On July 4, 2025, the President signed into law H.R. 1, the “One Big Beautiful Bill Act” (“OBBBA”). Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of domestic research and development expenditures under Internal Revenue Code (IRC) Section 174, extension of bonus depreciation, the restoration of an EBITDA-based interest limitation deduction, and revisions to international tax regimes. The overall financial statement impact of the OBBBA is not material.
The Tax Act imposes a mandatory transition tax on accumulated foreign earnings as of December 31, 2017. Effective January 1, 2018, the Tax Act creates a new territorial tax system in which we will recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. For the year ended December 31, 2021, we did not incur a global intangible low-taxed income, or GILTI, liability; however, to the extent that we incur expense under the GILTI provisions, we will treat it as a component of income tax expense in the period incurred. As a result of the Tax Act, our accumulated foreign earnings as of December 31, 2017 and 2018 have been subjected to U.S. tax. Moreover, all future foreign earnings will be subject to a new territorial tax system and dividends received deduction regime in the U.S. In 2024, the Company decided that it would no longer permanently reinvest the majority of its undistributed earnings in non-US subsidiaries. Since these undistributed earnings had been previously taxed under the Tax Act, the impact of changing our assertion related to the undistributed earnings of our foreign subsidiaries did not have a material impact to our financial statements. As of December 31, 2025, we continued our permanent reinvestment assertion in only four foreign jurisdictions. The undistributed earnings of these four foreign subsidiaries of approximately $21.9 million are permanently reinvested outside the U.S. Accordingly, no provision for foreign withholding tax, foreign exchange gain/loss, or state income taxes associated with a distribution of these
earnings has been made. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not material to our financial statements.
As of December 31, 2025, we do not have any accrued interest and penalties related to unrecognized tax benefits.
We had no gross unrecognized tax benefits as of December 31, 2025 and 2024, respectively, and there were no changes in the balances of our gross unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023, respectively. We do not believe that it is reasonably possible that our unrecognized tax benefits will significantly change in the next twelve months.
In 2021, the Organization for Economic Co-operation and Development ("OECD") released model rules for a global minimum tax known as Pillar Two. Under such rules, a minimum effective tax rate of 15% would apply to multinational companies with consolidated revenues above €750.0 million. Although we operate in one or more jurisdictions that have substantively enacted Pillar Two legislation, we have not exceeded the revenue threshold of €750.0 million and as such are not subject to the Pillar Two rules.
We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2021 through 2024 tax years generally remain open and subject to examination by federal, state and foreign tax authorities. We are currently under examination by the IRS for the tax years 2013 through the period ending February 2016. A Form 870-AD was signed with the Internal Revenue Service on January 22, 2025 related to tax years 2013 through the period ending February 2016. During the three months ended March 31, 2021, we finalized a settlement agreement with the IRS for the tax years 2011 to 2012. We are currently under audit by the Massachusetts Department of Revenue for the 2015 through February 2016 tax years, and the Texas Comptroller for the 2015 through 2018 tax years. We are currently under audit by the Canada Revenue Agency (“CRA”) for the tax years 2021 and 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Mar 8, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.