Good afternoon. Thank you for attending today's N-able Acquires Adlumin conference call. My name is Makaya, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. At this time, I'd like to pass the conference over to our host, Griffin Gyr, Investor Relations. You may proceed.
Thanks, Operator, and welcome, everyone, to N-able's call to discuss the acquisition of Adlumin. With me today are John Pagliuca, N-able's President and CEO, and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.n-able.com. Certain statements made during this call are forward-looking statements, including statements regarding N-able's acquisition of Adlumin and its anticipated benefits to N-able and its customers, the acquisition's anticipated impact on N-able's growth, free cash flow, and results, expected synergies from the acquisition, N-able's ability to expand its sales channels and cross-selling opportunities as a result of this acquisition, and other statements about future expectations, prospects, estimates, and other matters that are dependent on future events or developments.
These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in the press release regarding the transaction and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in the press release regarding the transaction and our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. You can also find a supplemental slide deck discussing the transaction 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. Information regarding these non-GAAP measures is available in our press release for the acquisition, available on our Investor Relations website. And now, I will turn the call over to John.
Thank you, Griffin. And thank you, everyone, for joining us today. We are excited to announce that we've acquired Adlumin, our XDR and MDR partner. This acquisition completes the third leg of the stool, bringing IT management, data protection, and security together under one roof, empowering MSPs, MSSPs, and IT professionals to better safeguard the IT assets that power today's digital world. By combining Adlumin's cutting-edge XDR technology and security operations MDR capabilities with N-able's robust security suite, data protection solution, and IT management platform, we feel we are decisively elevating our ability to secure and manage customer IT environments. Together with Adlumin, we are setting a new standard. So what brought us here? It's straightforward. Customers have increasingly told us that XDR and MDR are a top priority for them and a solution that they wanted N-able to provide.
We evaluated numerous companies to help us meet this need, and it was apparent that Adlumin's winning cloud-native solution was the right answer for our customers, which led to our partnership last year. This partnership has done exceedingly well. The solution has been one of our fastest-growing SKUs ever at this stage of its development and has powered material ARR growth. Based on this, we've determined that progressing from partners to a unified organization is the right next step. As one unit, we expect to achieve stronger technical integrations that drive better customer outcomes, leverage Adlumin's reseller and up-market relationships to expand N-able's sales channels, and better utilize our approximately 25,000 worldwide customers to magnify the reach of the Adlumin XDR/MDR solution. Ultimately, together, we can unlock the full economic opportunity and scale our growth even further. Now, let's take a look at Adlumin's differentiated value proposition.
Through their extended detection and response software, XDR, and managed detection and response services, MDR, Adlumin has built a world-class organization that helps solve today's pressing security challenges. From a technology standpoint, Adlumin XDR has a distinctive approach that delivers compelling value. Adlumin has an open platform that ingests data from the network, cloud, endpoints, SaaS applications, employees, and system logs, allowing technicians to see and act broadly across their full IT environments. This enables comprehensive risk mapping and focused remediation efforts. Without the ability to see and interact cleanly with the entire IT estate, technicians are playing a losing game of whack-a-mole. They are left trying to piece together where they have coverage gaps between their often multi-vendor, multi-product software stacks, wasting significant time struggling to implement changes and responding to events.
We have carefully evaluated the competitive landscape and firmly believe the breadth of data sources Adlumin's XDR software aggregates is a competitive differentiator that provides better outcomes to our customers. Adlumin complements this software by also providing human interpretation of security events. This MDR component is powerful. The shortage of skilled cybersecurity labor has consistently been a major industry challenge. In its cybersecurity ecosystem report, industry analyst firm Canalys estimated the cybersecurity services market to be a $163 billion TAM in 2024, almost twice the size of the cybersecurity technology market. And more importantly, growing quickly at 13% year- over- year. And even when the right human talent is found, it can often be cost-prohibitive. Adlumin elegantly addresses this by providing outsourced labor, which allows IT professionals to augment their operation efficiently.
With incredibly simple activation and built-in automated remediation, MDR provides 24/7 SOC capabilities, giving customers the help and expertise they need to combat threat fatigue in today's always-on world. Also, both XDR and MDR are offered in a single platform. With many competitors being MDR-only or software-only, Adlumin's approach resonates with partners who previously operated two platforms to accomplish what Adlumin does in one. This ability to purchase XDR-only or purchase the joint XDR and MDR significantly broadens our market appeal and is one of the strongest pieces of positive customer feedback we hear. We've seen this value firsthand through our partnership with Adlumin, and the proof is in the pudding. Critically, we've gotten to know the Adlumin team well through this partnership. We've seen their ability to execute at a high level, and they share our belief in empowering customers with powerful technology.
They are a first-class organization with high-caliber people, and we're delighted to welcome them aboard and continue building with them. We believe acquiring this complementary solution is the right strategic play. Customers have explicitly requested XDR and MDR, and filling this gap in our portfolio drives numerous benefits. With XDR and MDR, we are adding another beachhead to N-able. We can also employ more optionality in pricing and packaging. This is particularly impactful when bundling XDR and MDR with our existing software offerings, allowing us to drive compelling economics at scale across the IT suite. It also creates a better together story from a product perspective. Owning XDR and MDR allows us to build deeper, broader, and more impactful integrations between our products than we could in a partnership. Security, in many ways, is a data problem.
By combining Adlumin's advanced security operations with N-able's leading IT management and security platform, N-able can bring more data to bear and drive better security outcomes. This enhanced capability will enable customers to deliver greater protection and more efficient services. For years now, we've been talking about mattering where it matters most to our customers. This acquisition makes us matter more than ever. Our ability to drive critical outcomes for customers, managing their IT assets, back up their IT environments, and secure their digital assets is profoundly elevated. With Adlumin brought into the fold, I don't believe there's a company in our space that can drive the same customer impact as we can. We are positioned to consolidate MSP and SME IT spend, and we're ready to get to work. While Tim will discuss the financial impact further, I'll give you the main takeaways.
This acquisition is intended to propel our growth. Security is a top customer priority, and XDR and MDR are established growth markets. We now own leading IP in these critical categories. From a profit perspective, while Adlumin has operated with negative operating margins and unleveraged cash flow, which is expected for a company at their stage, we anticipate the Adlumin business will contribute to our free cash flow results by the fourth quarter of 2025. That said, we will keep a sharp eye on profitability, as illustrated by our strong EBITDA margins. We saw an opportunity to take market share with this leading solution and are investing accordingly.
With a validated product-market fit and elevated threat levels continuing to drive urgent demand for security, we are excited about the acquisition of Adlumin and to further accelerate our success as a united organization. We have been carefully searching for the right M&A opportunity, and we firmly believe this is the right product for our customers, the right fit for our platform portfolio, and the right team to merge with our 1,600+ N-ableites. With that, I'll turn it over to Tim.
Thanks, John. This is an exciting time for N-able, Adlumin, and our customers. I'm thrilled to welcome the Adlumin team to N-able. Let's first hit the key deal points. The aggregate consideration payable by N-able in connection with the acquisition consists of approximately $100 million in cash at the closing, subject to customary adjustments for cash, indebtedness, working capital, and transaction expenses. Approximately 1.57 million shares of the company's common stock issued at the closing. $120 million in cash installments of $52.5 million and $67.5 million, respectively, on the first and second anniversary of the closing, and up to an aggregate $30 million in cash earn-out payments payable in 2025 and 2026, based upon the achievement of certain performance metrics against defined targets. Turning to the key aspects of Adlumin's operations and the reasons underlying our excitement for this deal. This is a growth company.
Adlumin is on track to exit 2024 with approximately $22 million of ARR growing at over 60% year- over- year, net of the N-able partnership. Like N-able, approximately 100% of their revenue is recurring in nature. They have over 800 customers net of the N-able partnership. They also have a sizable number of reseller partners. Both these numbers are growing at pace. They have built a solution that resonates with customers, and they are taking market share. We anticipate the integration of this business to be immediately accretive to ARR growth, and we aim to continue their admirable growth trajectory. We see specific opportunities to drive growth in the following ways. First, magnify the reach and awareness of their powerful solution with our worldwide go-to-market organization and approximately 25,000 customers. Second, leverage their reseller and mid-market partnerships to expand new sales channels for the N-able portfolio of products.
Third, utilize XDR and MDR as another door for new customer acquisition that can open up cross-sell opportunities across our growing suite. And fourth, use XDR and MDR as part of a bundling strategy to drive exceptional value for MSPs looking to manage, back up, and secure their IT stacks. We also expect to realize synergies. Adlumin has prioritized growth over profit at this early stage of development, which is reflected in our updated guidance. We expect it to be accretive to our Unleveraged Free Cash Flow dollars by the fourth quarter of 2025. Importantly, given our scale, we see the potential for cost optimization while still investing in product differentiation and growth. With this transformative acquisition, we would also like to provide updated guidance. To be clear, we do not see any material change in core business performance since our last guidance.
The change in our updated guidance compared to our previous guidance solely reflects the acquisition of Adlumin and the impact of current FX rates. For the fourth quarter of 2024, we now expect total revenue in the range of $113.3 million-$114.8 million, representing 5%-6% year-over-year growth on a reported and constant currency basis. We expect fourth quarter Adjusted EBITDA in the range of $35 million-$35.5 million, representing an Adjusted EBITDA margin of approximately 31%. For the full year 2024, we now expect total revenue of $463 million-$464.5 million, representing approximately 10% year-over-year growth on a reported and constant currency basis. We now expect full-year Adjusted EBITDA of $166.3 million-$166.8 million, representing an approximately 36% Adjusted EBITDA margin. We also now expect Adjusted EBITDA conversion to Unleveraged Free Cash Flow to be approximately 60% for the full year.
We expect our non-GAAP tax rate to be approximately 35% in the fourth quarter and 26% for the full year. To conclude, we believe that this acquisition is a big win for N-able and a better together business outcome that elevates our go-to-market capabilities, propels our growth, and provides a clear path to cash flow accretion. We are incredibly energized by this acquisition and the value we believe it will create for our customers, the N-able business, and our shareholders. With that, I will turn it over for questions.
We will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your touchtone pad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate and queue. There are no questions at this time. I will hand it back to the management team for any further or closing remarks.
Thank you, Operator. We appreciate the opportunity to share this exciting news. And on behalf of our 1,600+ N-ableites across the globe, I am thrilled to officially welcome Adlumin to N-able.
That concludes today's conference call. Thank you. You may now disconnect your line.