SolarWinds Announces Fourth Quarter 2019 Results

Company also announces the appointment of Easwaran Sundaram to its Board of Directors

AUSTIN, Texas--()--SolarWinds Corporation (NYSE: SWI), a leading provider of powerful and affordable IT management software, today reported results for its fourth quarter ended December 31, 2019.

On a GAAP basis, reflecting our adoption of the new standard ASC 606 effective January 1, 2019:

  • Total revenue for the fourth quarter of $247.5 million, representing 11.9% growth on a reported basis.
  • Total recurring revenue for the fourth quarter of $202.9 million, representing 16.0% growth on a reported basis. Total recurring revenue includes:
    • Maintenance revenue for the fourth quarter of $115.6 million, representing 9.7% growth on a reported basis.
    • Subscription revenue for the fourth quarter of $87.3 million, representing 25.4% growth on a reported basis.
  • Net income for the fourth quarter of $13.2 million.

On a non-GAAP basis:

  • Non-GAAP total revenue for the fourth quarter of $249.4 million, representing 12.5% year-over-year growth on a reported basis and 13.3% year-over-year growth on a constant currency basis.
  • Non-GAAP total recurring revenue for the fourth quarter of $204.8 million, representing 16.8% year-over-year growth on a reported basis and 17.6% year-over-year growth on a constant currency basis. Non-GAAP total recurring revenue includes:
    • Non-GAAP maintenance revenue for the fourth quarter of $115.6 million, representing 9.3% growth on a reported basis.
    • Non-GAAP subscription revenue for the fourth quarter of $89.2 million, representing 28.1% growth on a reported basis.
  • Adjusted EBITDA for the fourth quarter of $122.9 million, representing a margin of 49.3% of non-GAAP total revenue.

For a reconciliation of our GAAP to non-GAAP results including adjustments for the impact of ASC 606, please see the tables below.

We had a solid finish to a successful 2019 delivering fourth quarter non-GAAP revenue of $249.4 million reflecting 13% year-over-year growth, which resulted in full year 2019 non-GAAP total revenue of $938.5 million,” said Kevin Thompson, SolarWinds’ President & Chief Executive Officer. “Our fourth quarter revenue performance was within the range of our outlook, led primarily by non-GAAP subscription revenue exceeding the high end of our outlook representing 28% growth year-over-year for the quarter. In 2019, we also made significant progress towards our goal of solving the full complement of IT management challenges for our customers. We expanded our footprint in IT Operations Management through the acquisition of Samanage in the second quarter and the acquisition of VividCortex late in the fourth quarter which completed our infrastructure and application management picture. We can now help technology professionals monitor and manage all the key components of hybrid IT infrastructure through what we believe is the broadest coverage of the modern IT infrastructure and application environments.”

In addition to solid 2019 non-GAAP total revenue growth, non-GAAP recurring revenue has grown 17% on a constant currency basis and non-GAAP recurring revenue accounted for 82% of total non-GAAP revenue for 2019. We also finished the year with strong profit margins exceeding the high end of our outlook for the year with full year 2019 Adjusted EBITDA of $453.6 million or an Adjusted EBITDA margin of 48% for 2019, despite the dilutive impact of the Samanage acquisition,” added Bart Kalsu, SolarWinds' Executive Vice President and Chief Financial Officer.

Additional highlights for the fourth quarter of 2019 include:

  • SolarWinds expanded its Database Performance offering through the acquisition of VividCortex, a leading database performance management product with an emphasis on monitoring and managing databases commonly used in cloud-native applications. This SaaS-based offering will complement SolarWinds’ award-winning Database Performance Analyzer (DPA) the on-premises and cloud-deployed product SolarWinds offers today to serve the needs of businesses of all sizes. With this addition, the company can now offer IT teams the ability to go deep on app traces, infrastructure monitoring, metrics, both traditional and cloud-native database performance, digital experience monitoring, logs and network monitoring.
  • SolarWinds also launched Identity Monitor, an easy-to-use solution designed to help IT and security professionals strengthen their security posture and combat instances of account fraud, loss of revenue, brand damage and spam by automating account takeover prevention. This latest release deepens SolarWinds’ commitment to making security solutions accessible to organizations of all sizes.
  • SolarWinds released a wave of updates to its Orion Platform and Application Performance Management suite, bringing new and expanded Microsoft Azure support to SolarWinds customers. These updates extend SolarWinds’ support for organizations investing in Microsoft Azure as their strategic digital transformation partner and offers technology professionals the comprehensive ability to monitor, manage and secure hybrid IT operations.
  • In keeping with its long tradition of offering valuable free tools to technology professionals, SolarWinds introduced SolarWinds AppOptics Dev Edition, a free version of its SaaS infrastructure and application performance management solution. AppOptics Dev Edition offers the same rich features of the full AppOptics solution in a scaled-back version well-suited for development environments, enabling technology professionals at any stage in the APM journey to test, optimize and troubleshoot business applications before they go live in production operations.

SolarWinds also announced today that it increased its board of directors to 11 members and appointed Easwaran “Eash” Sundaram to serve on its Board of Directors, each effective February 25, 2020. Mr. Sundaram will also serve as a member of the board’s audit committee effective upon his appointment. Mr. Sundaram currently serves as the Executive Vice President, Chief Digital & Technology Officer of JetBlue Airways Corporation.

Kevin Thompson stated, “We are excited to welcome Eash to SolarWinds’ Board of Directors. Eash is a well-rounded business executive, in addition to being an experienced CIO. He has a deep understanding of today’s hybrid IT architectures and the challenges that digital transformation initiatives introduce for IT teams. His first-hand knowledge of the criticality of delivering the level of application and IT performance that a business demands will be incredibly valuable to us as we strive to deliver technology that meets our customers’ needs.”

Balance Sheet

At December 31, 2019, total cash and cash equivalents were $173.4 million and total debt was $1.9 billion.

The financial results included in this press release are preliminary and pending final review by the company and its external auditors. Financial results will not be final until SolarWinds files its annual report on Form 10-K for the period. Information about SolarWinds' use of non-GAAP financial measures is provided below under “Non-GAAP Financial Measures.”

Financial Outlook

As of February 4, 2020, SolarWinds is providing its financial outlook for the first quarter of 2020 and full year 2020. The financial information below represents forward-looking non-GAAP financial information, including an estimate of non-GAAP revenue and revenue growth on a constant currency basis, adjusted EBITDA and non-GAAP diluted earnings per share, for the first quarter of 2020 and for the full year 2020. These non-GAAP financial measures exclude, among other items mentioned below, stock-based compensation expense and related employer-paid payroll taxes, amortization and costs related to non-recurring items. We have not reconciled our estimates of these non-GAAP financial measures to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, these excluded items in future periods. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these excluded items could be material to our results computed in accordance with GAAP in future periods. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

Financial Outlook for First Quarter of 2020

SolarWinds’ management currently expects to achieve the following results for the first quarter of 2020:

  • Non-GAAP total revenue in the range of $243.5 to $248.5 million, representing growth over the first quarter of 2019 non-GAAP total revenue of 12.8% to 15.2%, or 13.5% to 15.9% on a constant currency basis assuming the same average foreign currency exchange rates as those in the first quarter of 2019.
  • Adjusted EBITDA in the range of $108.0 to $112.0 million, representing 44.4% to 45.1% of non-GAAP total revenue.
  • Non-GAAP diluted earnings per share of $0.20 to $0.21.
  • Weighted average outstanding diluted shares of approximately 313.6 million.

Financial Outlook for Full Year 2020

SolarWinds’ management currently expects to achieve the following results for the full year 2020:

  • Non-GAAP total revenue in the range of $1.035 to $1.055 billion, representing growth over 2019 non-GAAP revenue of 10.3% to 12.4%, or 10.5% to 12.6% on a constant currency basis assuming the same average foreign currency exchange rates as those in 2019.
  • Adjusted EBITDA in the range of $475.0 to $485.0 million, representing approximately 46.0% of non-GAAP total revenue.
  • Non-GAAP diluted earnings per share of $0.88 to $0.91.
  • Weighted average outstanding diluted shares of approximately 317.2 million.

Additional details on our outlook will be provided on the conference call.

Conference Call and Webcast

In conjunction with this announcement, SolarWinds will host a conference call today to discuss its financial results and its business at 4:00 p.m. CT (5:00 p.m. ET/2:00 p.m. PT). A live webcast of the call will be available on the SolarWinds Investor Relations website at http://investors.solarwinds.com. A live dial-in will be available domestically at (877) 823-8676 and internationally at +1 (647) 689-4178. To access the live call, please dial in 5-10 minutes before the scheduled start time. A replay of the webcast will be available on a temporary basis shortly after the event on the SolarWinds Investor Relations website.

Forward-Looking Statements

This press release contains “forward-looking” statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the first quarter and full year 2020. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “aim,” “anticipate,” “believe,” “can,” “could,” “seek,” “should,” “feel,” “expect,” “will,” “would,” “plan,” “project,” “intend,” “estimate,” “continue,” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: (a) the inability to generate significant volumes of high quality sales leads from our digital marketing initiatives and convert such leads into new business at acceptable conversion rates; (b) the inability to sell products to new customers or to sell additional products or upgrades to our existing customers; (c) any decline in our renewal or net retention rates; (d) our inability to successfully identify, complete, and integrate acquisitions and manage our growth effectively; (e) risks associated with our international operations; (f) our status as a controlled company; (g) the possibility that general economic conditions or uncertainty cause information technology spending to be reduced or purchasing decisions to be delayed; (h) the timing and success of new product introductions and product upgrades by SolarWinds or its competitors; (i) the possibility that our operating income could fluctuate and may decline as percentage of revenue as we make further expenditures to expand our operations in order to support additional growth in our business; (j) potential foreign exchange gains and losses related to expenses and sales denominated in currencies other than the functional currency of an associated entity; and (k) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission, including the risk factors discussed in our Annual Report on Form 10-K for the period ended December 31, 2018 filed on February 25, 2019 and the Form 10-K that SolarWinds anticipates filing on or before March 2, 2020. All information provided in this release is as of the date hereof and SolarWinds undertakes no duty to update this information except as required by law.

Adoption of the New Revenue Recognition Standard

Effective January 1, 2019, we adopted FASB Accounting Standards Codification (ASC) No. 2014-09 “Revenue from Contracts with Customers,” or ASC 606, using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented in compliance with the new revenue recognition standard ASC 606. Historical financial results for reporting periods prior to 2019 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard, ASC 605 “Revenue Recognition,” or ASC 605. In the interest of comparability during the transition year to ASC 606, we present our financial results for the fourth quarter in accordance with both ASC 606 and ASC 605. Unless stated otherwise, year-over-year growth rates are calculated using financial results under ASC 606 for the current period and financial results under ASC 605 for the corresponding period in the prior year.

Adoption of the New Lease Accounting Standard

Effective December 31, 2019, as we no longer qualify as an emerging growth company, we retroactively adopted the FASB ASC No. 2016-02 “Leases (Topic 842),” or ASC 842, as of January 1, 2019 using the optional transition method in which an entity can apply the new standard at the adoption date without adjusting comparative prior periods. Historical financial results for reporting periods prior to 2019 are presented in conformity with amounts previously disclosed under the prior lease accounting standard. The adoption of the new standard resulted in leases currently designated as operating leases being reported on our consolidated balance sheet at their net present value, which increased total assets and total liabilities. The standard did not have a material impact to our consolidated statement of operations or consolidated statement of cash flows for 2019.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance our understanding, and aid in the period-to-period comparison, of our performance. We believe that these non-GAAP financial measures provide supplemental information that is meaningful when assessing our operating performance because they exclude the impact of certain amounts that our management and board of directors do not consider part of core operating results when assessing our operational performance, allocating resources, preparing annual budgets and determining compensation. Accordingly, these non-GAAP financial measures may provide insight to investors into the motivation and decision-making of management in operating the business.

SolarWinds also believes that these non-GAAP financial measures are used by investors and security analysts to (a) compare and evaluate its performance from period to period and (b) compare its performance to those of its competitors. These non-GAAP measures exclude certain items that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

There are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, do not reflect a comprehensive system of accounting and may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. Certain items that are excluded from these non-GAAP financial measures can have a material impact on operating and net income (loss).

As a result, these non-GAAP financial measures have limitations and should not be considered in isolation from, or as a substitute for, the most comparable GAAP measures. SolarWinds' management and board of directors compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measure. Set forth in the tables below are the corresponding GAAP financial measures for each non-GAAP financial measure presented. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures that are set forth in the tables below.

Non-GAAP Revenue. We define non-GAAP subscription revenue, non-GAAP maintenance revenue, non-GAAP license revenue, and non-GAAP total revenue as subscription revenue, maintenance revenue, license revenue, and total revenue, respectively, excluding the impact of purchase accounting from our take private transaction in early 2016 and other acquisitions. The non-GAAP revenue growth rates we provide are calculated using non-GAAP revenue from the comparable prior period. We monitor these measures to assess our performance because we believe our revenue growth rates would be overstated without these adjustments. We believe presenting non-GAAP subscription revenue, non-GAAP maintenance revenue, non-GAAP license revenue and non-GAAP total revenue aids in the comparability between periods and in assessing our overall operating performance.

Non-GAAP Revenue on a Constant Currency Basis. We provide non-GAAP revenue on a constant currency basis to provide a framework for assessing our performance and expectations regarding future performance excluding the effect of foreign currency rate fluctuations. To present this information, current period results and future period estimated results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at the average exchange rates in effect during the corresponding prior period presented. We believe that providing non-GAAP revenue on a constant currency basis facilitates the comparison of non-GAAP revenue to prior periods.

Non-GAAP Cost of Revenue and Non-GAAP Operating Income. We provide non-GAAP cost of revenue and non-GAAP operating income and related non-GAAP margins using non-GAAP revenue as discussed above and excluding such items as the write-down of deferred revenue related to purchase accounting, amortization of acquired intangible assets, stock-based compensation expense and related employer-paid payroll taxes, acquisition and Sponsor related costs and restructuring charges and other. Management believes these measures are useful for the following reasons:

  • Amortization of Acquired Intangible Assets. We provide non-GAAP information that excludes expenses related to purchased intangible assets associated with our acquisitions. 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 frequency and is significantly impacted by the timing and magnitude of our acquisition transactions, which also vary in frequency from period to period. Accordingly, we analyze the performance of our operations in each period without regard to such expenses.
  • 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. We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types. Employer-paid payroll taxes on stock-based compensation is dependent on our stock price and the timing of the taxable events related to the equity awards, over which our management has little control, and does not correlate to the core operation of our business. 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.
  • Acquisition and Sponsor Related Costs. We exclude certain expense items resulting from our take private transaction in early 2016 and other acquisitions, such as legal, accounting and advisory fees, changes in fair value of contingent consideration, costs related to integrating the acquired businesses, deferred compensation, severance and retention expense. We consider these adjustments, to some extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, acquisitions result in operating expenses that would not otherwise have been incurred by us in the normal course of our organic business operations. We believe that providing these non-GAAP measures that exclude acquisition and Sponsor related costs, allows users of our financial statements to better review and understand the historical and current results of our continuing operations, and also facilitates comparisons to our historical results and results of less acquisitive peer companies, both with and without such adjustments.
  • Restructuring Charges and Other. We provide non-GAAP information that excludes restructuring charges such as severance and the estimated costs of exiting and terminating facility lease commitments, as they relate to our corporate restructuring and exit activities and charges related to the separation of employment with executives of the Company. These charges are inconsistent in amount and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our operating performance and comparisons to our past operating performance.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Diluted Share. We believe that the use of non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share is helpful to our investors to clarify and enhance their understanding of past performance and future prospects. Non-GAAP net income (loss) is calculated as net income (loss) excluding the adjustments to non-GAAP revenue, non-GAAP cost of revenue and non-GAAP operating income, losses on extinguishment of debt, certain other non-operating gains and losses and the income tax effect of the non-GAAP exclusions. We define non-GAAP net income (loss) per diluted share as non-GAAP net income (loss) divided by the non-GAAP weighted average outstanding common shares, proforma, which is calculated as if to reflect the conversion of Class A Common Stock and shares issued for accrued dividends and shares issued at our initial public offering as if each occurred at the beginning of each respective period.

Adjusted EBITDA and Adjusted EBITDA Margin. We regularly monitor adjusted EBITDA and adjusted EBITDA margin, as it is a measure we use to assess our operating performance. We define adjusted EBITDA as net income or loss, excluding the impact of purchase accounting on total revenue, amortization of acquired intangible assets and developed technology, depreciation expense, stock-based compensation expense and related employer-paid payroll taxes, restructuring and other charges, acquisition and Sponsor related costs, interest expense, net, debt extinguishment and refinancing costs, unrealized foreign currency (gains) losses, and income tax expense (benefit). We define adjusted EBITDA margin as adjusted EBITDA divided by non-GAAP revenue. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: 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 excludes the impact of the write-down of deferred revenue due to purchase accounting in connection with our acquisition, and therefore includes revenue that will never be recognized under GAAP; 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 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.

Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate cash flow from operations, after the deduction of capital expenditures and prior to the impact of our capital structure, acquisition and Sponsor related costs, restructuring costs, employer-paid payroll taxes on stock awards and other one time items, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

#SWIfinancials

About SolarWinds

SolarWinds (NYSE:SWI) is a leading provider of powerful and affordable IT infrastructure management software. Our products give organizations worldwide, regardless of type, size or IT infrastructure complexity, the power to monitor and manage the performance of their IT environments, whether on-premises, in the cloud, or in hybrid models. We continuously engage with all types of technology professionals—IT operations professionals, DevOps professionals, and managed service providers (MSPs)—to understand the challenges they face maintaining high-performing and highly available IT infrastructures. The insights we gain from engaging with them, in places like our THWACK online community, allow us to build products that solve well-understood IT management challenges in ways that technology professionals want them solved. This focus on the user and commitment to excellence in end-to-end hybrid IT performance management has established SolarWinds as a worldwide leader in network management software and MSP solutions. Learn more today at www.solarwinds.com.

The SolarWinds, SolarWinds & Design, Orion, and THWACK trademarks are the exclusive property of SolarWinds Worldwide, LLC or its affiliates, are registered with the U.S. Patent and Trademark Office, and may be registered or pending registration in other countries. All other SolarWinds trademarks, service marks, and logos may be common law marks or are registered or pending registration. All other trademarks mentioned herein are used for identification purposes only and are trademarks of (and may be registered trademarks of) their respective companies.

© 2020 SolarWinds Worldwide, LLC. All rights reserved.

 

SolarWinds Corporation

Consolidated Balance Sheets

(In thousands, except share and per share information)

(Unaudited)

 

 

December 31,

 

2019

 

2018

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

 

173,372

 

 

$

 

382,620

 

Accounts receivable, net of allowances of $3,171 and $3,196 as of December 31, 2019 and 2018, respectively

 

121,930

 

 

 

100,528

 

Income tax receivable

 

1,117

 

 

 

893

 

Prepaid and other current assets

 

23,480

 

 

 

16,267

 

Total current assets

 

319,899

 

 

 

500,308

 

Property and equipment, net

 

38,945

 

 

 

35,864

 

Operating lease assets

 

89,825

 

 

 

Deferred taxes

 

4,533

 

 

 

6,873

 

Goodwill

 

4,058,198

 

 

 

3,683,961

 

Intangible assets, net

 

771,513

 

 

 

956,261

 

Other assets, net

 

27,829

 

 

 

11,382

 

Total assets

$

 

5,310,742

 

 

$

 

5,194,649

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

 

13,796

 

 

$

 

9,742

 

Accrued liabilities and other

 

47,035

 

 

 

52,055

 

Current operating lease liabilities

 

14,093

 

 

 

Accrued interest payable

 

248

 

 

 

290

 

Income taxes payable

 

15,714

 

 

 

15,682

 

Current portion of deferred revenue

 

312,227

 

 

 

270,433

 

Current debt obligation

 

19,900

 

 

 

19,900

 

Total current liabilities

 

423,013

 

 

 

368,102

 

Long-term liabilities:

 

 

 

Deferred revenue, net of current portion

 

31,173

 

 

 

25,699

 

Non-current deferred taxes

 

97,884

 

 

 

147,144

 

Non-current operating lease liabilities

 

93,084

 

 

 

Other long-term liabilities

 

122,660

 

 

 

133,532

 

Long-term debt, net of current portion

 

1,893,406

 

 

 

1,904,072

 

Total liabilities

 

2,661,220

 

 

 

2,578,549

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, $0.001 par value: 1,000,000,000 shares authorized and 308,290,310 and 304,942,415 shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

308

 

 

 

305

 

Preferred stock, $0.001 par value: 50,000,000 shares authorized and no shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

 

 

Additional paid-in capital

 

3,041,880

 

 

 

3,011,080

 

Accumulated other comprehensive income (loss)

 

(5,247

)

 

 

17,043

 

Accumulated deficit

 

(387,419

)

 

 

(412,328

)

Total stockholders’ equity

 

2,649,522

 

 

 

2,616,100

 

Total liabilities and stockholders’ equity

$

 

5,310,742

 

 

$

 

5,194,649

 

 

SolarWinds Corporation

Consolidated Statements of Operations

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

Revenue:

 

 

 

 

 

 

 

Subscription

$

 

87,280

 

 

$

 

69,587

 

 

$

 

320,747

 

 

$

 

265,591

 

Maintenance

 

115,610

 

 

 

105,354

 

 

 

446,450

 

 

 

402,938

 

Total recurring revenue

 

202,890

 

 

 

174,941

 

 

 

767,197

 

 

 

668,529

 

License

 

44,605

 

 

 

46,240

 

 

 

165,328

 

 

 

164,560

 

Total revenue

 

247,495

 

 

 

221,181

 

 

 

932,525

 

 

 

833,089

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of recurring revenue

 

21,412

 

 

 

18,127

 

 

 

79,571

 

 

 

70,744

 

Amortization of acquired technologies

 

43,922

 

 

 

43,870

 

 

 

175,883

 

 

 

175,991

 

Total cost of revenue

 

65,334

 

 

 

61,997

 

 

 

255,454

 

 

 

246,735

 

Gross profit

 

182,161

 

 

 

159,184

 

 

 

677,071

 

 

 

586,354

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

70,501

 

 

 

61,446

 

 

 

264,199

 

 

 

227,468

 

Research and development

 

27,894

 

 

 

24,472

 

 

 

110,362

 

 

 

96,272

 

General and administrative

 

25,143

 

 

 

20,792

 

 

 

97,525

 

 

 

80,641

 

Amortization of acquired intangibles

 

17,994

 

 

 

16,500

 

 

 

69,812

 

 

 

66,788

 

Total operating expenses

 

141,532

 

 

 

123,210

 

 

 

541,898

 

 

 

471,169

 

Operating income

 

40,629

 

 

 

35,974

 

 

 

135,173

 

 

 

115,185

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net

 

(25,094

)

 

 

(29,905

)

 

 

(108,071

)

 

 

(142,008

)

Other income (expense), net

 

(104

)

 

 

(20,411

)

 

 

402

 

 

 

(94,887

)

Total other income (expense)

 

(25,198

)

 

 

(50,316

)

 

 

(107,669

)

 

 

(236,895

)

Income (loss) before income taxes

 

15,431

 

 

 

(14,342

)

 

 

27,504

 

 

 

(121,710

)

Income tax expense (benefit)

 

2,208

 

 

 

401

 

 

 

8,862

 

 

 

(19,644

)

Net income (loss)

$

 

13,223

 

 

$

 

(14,743

)

 

$

 

18,642

 

 

$

 

(102,066

)

Net income available to common stockholders (1)

$

 

13,095

 

 

$

 

668,426

 

 

$

 

18,441

 

 

$

 

364,635

 

Net income available to common stockholders per share:

 

 

 

 

 

 

 

Basic earnings per share

$

 

0.04

 

 

$

 

2.63

 

 

$

 

0.06

 

 

$

 

2.60

 

Diluted earnings per share

$

 

0.04

 

 

$

 

2.60

 

 

$

 

0.06

 

 

$

 

2.56

 

Weighted-average shares used to compute net income available to common stockholders per share:

 

 

 

 

 

 

 

Shares used in computation of basic earnings per share

 

307,914

 

 

 

254,209

 

 

 

306,768

 

 

 

140,301

 

Shares used in computation of diluted earnings per share

 

311,922

 

 

 

256,711

 

 

 

311,168

 

 

 

142,541

 

____________

(1

)

Net income available to common stockholders is calculated as follows:

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

Net income (loss)

$

 

13,223

 

 

$

 

(14,743

)

 

$

 

18,642

 

 

$

 

(102,066

)

Accretion of dividends on Class A common stock

 

 

 

(14,928

)

 

 

 

 

(231,549

)

Gain on conversion of Class A common stock

 

 

 

711,247

 

 

 

 

 

711,247

 

Earnings allocated to unvested restricted stock

 

(128

)

 

 

(13,150

)

 

 

(201

)

 

 

(12,997

)

Net income available to common stockholders

$

 

13,095

 

 

$

 

668,426

 

 

$

 

18,441

 

 

$

 

364,635

 

 

SolarWinds Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

 

 

 

Net income (loss)

$

 

 

13,223

 

 

$

 

 

(14,743

)

 

$

 

 

18,642

 

 

$

 

 

(102,066

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

66,557

 

 

 

64,459

 

 

 

263,244

 

 

 

258,362

 

Provision for doubtful accounts

 

30

 

 

 

507

 

 

 

1,524

 

 

 

2,498

 

Stock-based compensation expense

 

10,478

 

 

 

5,501

 

 

 

34,395

 

 

 

5,833

 

Amortization of debt issuance costs

 

2,319

 

 

 

2,403

 

 

 

9,234

 

 

 

11,675

 

Loss on extinguishment of debt

 

 

 

19,547

 

 

 

 

 

80,137

 

Deferred taxes

 

(9,943

)

 

 

(8,016

)

 

 

(39,635

)

 

 

(22,101

)

(Gain) loss on foreign currency exchange rates

 

(6

)

 

 

663

 

 

 

(913

)

 

 

13,410

 

Other non-cash expenses

 

477

 

 

 

1,992

 

 

 

535

 

 

 

3,443

 

Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations:

 

 

 

 

 

 

 

Accounts receivable

 

(18,182

)

 

 

(4,047

)

 

 

(18,963

)

 

 

(18,010

)

Income taxes receivable

 

(354

)

 

 

838

 

 

 

(225

)

 

 

707

 

Prepaid and other assets

 

(4,851

)

 

 

(2,566

)

 

 

(11,094

)

 

 

(4,497

)

Accounts payable

 

3,377

 

 

 

3,930

 

 

 

3,734

 

 

 

(28

)

Accrued liabilities and other

 

5,664

 

 

 

31

 

 

 

337

 

 

 

9,776

 

Accrued interest payable

 

(14

)

 

 

(826

)

 

 

(42

)

 

 

(11,342

)

Income taxes payable

 

(663

)

 

 

5,439

 

 

 

(3,019

)

 

 

(10,673

)

Deferred revenue

 

14,949

 

 

 

13,216

 

 

 

41,248

 

 

 

35,507

 

Other long-term liabilities

 

 

 

(268

)

 

 

905

 

 

 

1,511

 

Net cash provided by operating activities

 

83,061

 

 

 

88,060

 

 

 

299,907

 

 

 

254,142

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(6,584

)

 

 

(3,151

)

 

 

(17,190

)

 

 

(15,945

)

Purchases of intangible assets

 

(2,250

)

 

 

(605

)

 

 

(5,851

)

 

 

(2,687

)

Acquisitions, net of cash acquired

 

(112,943

)

 

 

 

 

(462,447

)

 

 

(60,578

)

Proceeds from sale of cost method investment and other

 

(1,139

)

 

 

502

 

 

 

3,035

 

 

 

11,217

 

Net cash used in investing activities

 

(122,916

)

 

 

(3,254

)

 

 

(482,453

)

 

 

(67,993

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from our initial public offering, net of underwriting discounts

 

 

 

357,188

 

 

 

 

 

357,188

 

Proceeds from issuance of common stock under employee stock purchase plan and incentive restricted stock

 

 

 

 

 

1,080

 

 

 

1,723

 

Repurchase of common stock and incentive restricted stock

 

(7,045

)

 

 

(10

)

 

 

(7,427

)

 

 

(578

)

Exercise of stock options

 

201

 

 

 

3

 

 

 

623

 

 

 

16

 

Premium paid on debt extinguishment

 

 

 

(14,175

)

 

 

 

 

(36,900

)

Proceeds from credit agreement

 

 

 

 

 

35,000

 

 

 

626,950

 

Repayments of borrowings from credit agreement

 

(4,975

)

 

 

(319,975

)

 

 

(54,900

)

 

 

(1,014,900

)

Payment of debt issuance costs

 

 

 

 

 

 

 

(5,561

)

Payment for deferred offering costs

 

 

 

(1,468

)

 

 

 

 

(3,662

)

Net cash provided by (used in) financing activities

 

(11,819

)

 

 

21,563

 

 

 

(25,624

)

 

 

(75,724

)

Effect of exchange rate changes on cash and cash equivalents

 

3,986

 

 

 

(2,082

)

 

 

(1,078

)

 

 

(5,521

)

Net increase (decrease) in cash and cash equivalents

 

(47,688

)

 

 

104,287

 

 

 

(209,248

)

 

 

104,904

 

Cash and cash equivalents

 

 

 

 

 

 

 

Beginning of period

 

221,060

 

 

 

278,333

 

 

 

382,620

 

 

 

277,716

 

End of period

$

 

 

173,372

 

 

$

 

 

382,620

 

 

$

 

 

173,372

 

 

$

 

 

382,620

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

$

 

 

23,071

 

 

$

 

 

28,796

 

 

$

 

 

100,549

 

 

$

 

 

142,944

 

Cash paid for income taxes

$

 

 

12,345

 

 

$

 

 

905

 

 

$

 

 

47,988

 

 

$

 

 

8,950

 

Non-cash investing and financing transactions

 

 

 

 

 

 

 

Conversion of redeemable convertible Class A common stock and accumulated dividends to common stock

$

 

 

 

 

$

 

 

3,378,419

 

 

$

 

 

 

 

$

 

 

3,378,419

 

 

SolarWinds Corporation

Reconciliation of Financial Results ASC 606 to ASC 605

(Unaudited)

 

 

 

Three Months Ended December 31, 2019

 

Twelve Months Ended December 31, 2019

 

 

As reported
(ASC 606)

 

ASC 606 impact

 

Without adoption of
ASC 606
(ASC 605)

 

As reported
(ASC 606)

 

ASC 606 impact

 

Without adoption of

ASC 606
(ASC 605)

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Subscription

$

 

87,280

 

 

$

 

(52

)

 

$

 

87,228

 

 

$

 

320,747

 

 

$

 

314

 

 

$

 

321,061

 

Maintenance

 

115,610

 

 

 

414

 

 

 

116,024

 

 

 

446,450

 

 

 

1,191

 

 

 

447,641

 

Total recurring revenue

 

202,890

 

 

 

362

 

 

 

203,252

 

 

 

767,197

 

 

 

1,505

 

 

 

768,702

 

License

 

44,605

 

 

 

(1,284

)

 

 

43,321

 

 

 

165,328

 

 

 

(3,109

)

 

 

162,219

 

Total revenue

$

 

247,495

 

 

$

 

(922

)

 

$

 

246,573

 

 

$

 

932,525

 

 

$

 

(1,604

)

 

$

 

930,921

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses(1)

 

141,532

 

 

 

1,321

 

 

 

142,853

 

 

 

541,898

 

 

 

5,273

 

 

 

547,171

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

 

13,223

 

 

$

 

(2,243

)

 

$

 

10,980

 

 

$

 

18,642

 

 

$

 

(6,877

)

 

$

 

11,765

 

_______

(1)

Adjustment represents the impact of the capitalization and amortization of sales commissions related to ASC 606. These adjustments are recorded in the sales and marketing line item in our consolidated statements of operations.

 

SolarWinds Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

ASC 606

 

ASC 606 impact

 

ASC 605

 

ASC 605

 

ASC 606

 

ASC 606 impact

 

ASC 605

 

ASC 605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except margin data)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenue

$

 

87,280

 

 

$

 

(52

)

 

$

 

87,228

 

 

$

 

69,587

 

 

$

 

320,747

 

 

$

 

314

 

 

$

 

321,061

 

 

$

 

265,591

 

Impact of purchase accounting

 

1,896

 

 

 

 

 

1,896

 

 

 

50

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

1,166

 

Non-GAAP subscription revenue

 

89,176

 

 

 

(52

)

 

 

89,124

 

 

 

69,637

 

 

 

326,677

 

 

 

314

 

 

 

326,991

 

 

 

266,757

 

GAAP maintenance revenue

 

115,610

 

 

 

414

 

 

 

116,024

 

 

 

105,354

 

 

 

446,450

 

 

 

1,191

 

 

 

447,641

 

 

 

402,938

 

Impact of purchase accounting

 

 

 

 

 

 

 

377

 

 

 

 

 

 

 

 

 

2,550

 

Non-GAAP maintenance revenue

 

115,610

 

 

 

414

 

 

 

116,024

 

 

 

105,731

 

 

 

446,450

 

 

 

1,191

 

 

 

447,641

 

 

 

405,488

 

GAAP total recurring revenue

 

202,890

 

 

 

362

 

 

 

203,252

 

 

 

174,941

 

 

 

767,197

 

 

 

1,505

 

 

 

768,702

 

 

 

668,529

 

Impact of purchase accounting

 

1,896

 

 

 

 

 

1,896

 

 

 

427

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

3,716

 

Non-GAAP total recurring revenue

 

204,786

 

 

 

362

 

 

 

205,148

 

 

 

175,368

 

 

 

773,127

 

 

 

1,505

 

 

 

774,632

 

 

 

672,245

 

GAAP license revenue

 

44,605

 

 

 

(1,284

)

 

 

43,321

 

 

 

46,240

 

 

 

165,328

 

 

 

(3,109

)

 

 

162,219

 

 

 

164,560

 

Impact of purchase accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP license revenue

 

44,605

 

 

 

(1,284

)

 

 

43,321

 

 

 

46,240

 

 

 

165,328

 

 

 

(3,109

)

 

 

162,219

 

 

 

164,560

 

Total GAAP revenue

$

 

247,495

 

 

$

 

(922

)

 

$

 

246,573

 

 

$

 

221,181

 

 

$

 

932,525

 

 

$

 

(1,604

)

 

$

 

930,921

 

 

$

 

833,089

 

Impact of purchase accounting

$

 

1,896

 

 

$

 

 

 

$

 

1,896

 

 

$

 

427

 

 

$

 

5,930

 

 

$

 

 

 

$

 

5,930

 

 

$

 

3,716

 

Total non-GAAP revenue

$

 

249,391

 

 

$

 

(922

)

 

$

 

248,469

 

 

$

 

221,608

 

 

$

 

938,455

 

 

$

 

(1,604

)

 

$

 

936,851

 

 

$

 

836,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

 

65,334

 

 

 

 

$

 

65,334

 

 

$

 

61,997

 

 

$

 

255,454

 

 

 

 

$

 

255,454

 

 

$

 

246,735

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(573

)

 

 

 

 

(573

)

 

 

(272

)

 

 

(1,761

)

 

 

 

 

(1,761

)

 

 

(279

)

Amortization of acquired technologies

 

(43,922

)

 

 

 

 

(43,922

)

 

 

(43,870

)

 

 

(175,883

)

 

 

 

 

(175,883

)

 

 

(175,991

)

Acquisition and Sponsor related costs

 

(8

)

 

 

 

 

(8

)

 

 

(101

)

 

 

(147

)

 

 

 

 

(147

)

 

 

(336

)

Restructuring costs and other

 

(26

)

 

 

 

 

(26

)

 

 

 

 

(48

)

 

 

 

 

(48

)

 

 

Non-GAAP cost of revenue

$

 

20,805

 

 

 

 

$

 

20,805

 

 

$

 

17,754

 

 

$

 

77,615

 

 

 

 

$

 

77,615

 

 

$

 

70,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

 

182,161

 

 

$

 

(922

)

 

$

 

181,239

 

 

$

 

159,184

 

 

$

 

677,071

 

 

$

 

(1,604

)

 

$

 

675,467

 

 

$

 

586,354

 

Impact of purchase accounting

 

1,896

 

 

 

 

 

1,896

 

 

 

427

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

3,716

 

Stock-based compensation expense and related employer-paid payroll taxes

 

573

 

 

 

 

 

573

 

 

 

272

 

 

 

1,761

 

 

 

 

 

1,761

 

 

 

279

 

Amortization of acquired technologies

 

43,922

 

 

 

 

 

43,922

 

 

 

43,870

 

 

 

175,883

 

 

 

 

 

175,883

 

 

 

175,991

 

Acquisition and Sponsor related costs

 

8

 

 

 

 

 

8

 

 

 

101

 

 

 

147

 

 

 

 

 

147

 

 

 

336

 

Restructuring costs and other

 

26

 

 

 

 

 

26

 

 

 

 

 

48

 

 

 

 

 

48

 

 

 

Non-GAAP gross profit

$

 

228,586

 

 

$

 

(922

)

 

$

 

227,664

 

 

$

 

203,854

 

 

$

 

860,840

 

 

$

 

(1,604

)

 

$

 

859,236

 

 

$

 

766,676

 

GAAP gross margin

 

73.6

%

 

 

 

 

73.5

%

 

 

72.0

%

 

 

72.6

%

 

 

 

 

72.6

%

 

 

70.4

%

Non-GAAP gross margin

 

91.7

%

 

 

 

 

91.6

%

 

 

92.0

%

 

 

91.7

%

 

 

 

 

91.7

%

 

 

91.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expense

$

 

70,501

 

 

$

 

1,321

 

 

$

 

71,822

 

 

$

 

61,446

 

 

$

 

264,199

 

 

$

 

5,273

 

 

$

 

269,472

 

 

$

 

227,468

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(3,685

)

 

 

 

 

(3,685

)

 

 

(2,061

)

 

 

(11,653

)

 

 

 

 

(11,653

)

 

 

(2,295

)

Acquisition and Sponsor related costs

 

(15

)

 

 

 

 

(15

)

 

 

(1,132

)

 

 

(1,679

)

 

 

 

 

(1,679

)

 

 

(3,250

)

Restructuring costs and other

 

45

 

 

 

 

 

45

 

 

 

(193

)

 

 

(615

)

 

 

 

 

(615

)

 

 

(238

)

Non-GAAP sales and marketing expense

$

 

66,846

 

 

$

 

1,321

 

 

$

 

68,167

 

 

$

 

58,060

 

 

$

 

250,252

 

 

$

 

5,273

 

 

$

 

255,525

 

 

$

 

221,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expense

$

 

27,894

 

 

 

 

$

 

27,894

 

 

$

 

24,472

 

 

$

 

110,362

 

 

 

 

$

 

110,362

 

 

$

 

96,272

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(2,958

)

 

 

 

 

(2,958

)

 

 

(1,282

)

 

 

(9,259

)

 

 

 

 

(9,259

)

 

 

(1,330

)

Acquisition and Sponsor related costs

 

(62

)

 

 

 

 

(62

)

 

 

(547

)

 

 

(816

)

 

 

 

 

(816

)

 

 

(2,527

)

Restructuring costs and other

 

 

 

 

 

 

 

 

 

(123

)

 

 

 

 

(123

)

 

 

(201

)

Non-GAAP research and development expense

$

 

24,874

 

 

 

 

$

 

24,874

 

 

$

 

22,643

 

 

$

 

100,164

 

 

 

 

$

 

100,164

 

 

$

 

92,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expense

$

 

25,143

 

 

 

 

$

 

25,143

 

 

$

 

20,792

 

 

$

 

97,525

 

 

 

 

$

 

97,525

 

 

$

 

80,641

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(3,907

)

 

 

 

 

(3,907

)

 

 

(1,886

)

 

 

(12,597

)

 

 

 

 

(12,597

)

 

 

(1,929

)

Acquisition and Sponsor related costs

 

(1,002

)

 

 

 

 

(1,002

)

 

 

(2,260

)

 

 

(5,902

)

 

 

 

 

(5,902

)

 

 

(14,288

)

Restructuring costs and other

 

(1,635

)

 

 

 

 

(1,635

)

 

 

(1,312

)

 

 

(4,812

)

 

 

 

 

(4,812

)

 

 

(2,560

)

Non-GAAP general and administrative expense

$

 

18,599

 

 

 

 

$

 

18,599

 

 

$

 

15,334

 

 

$

 

74,214

 

 

 

 

$

 

74,214

 

 

$

 

61,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

$

 

141,532

 

 

$

 

1,321

 

 

$

 

142,853

 

 

$

 

123,210

 

 

$

 

541,898

 

 

$

 

5,273

 

 

$

 

547,171

 

 

$

 

471,169

 

Stock-based compensation expense and related employer-paid payroll taxes

 

(10,550

)

 

 

 

 

(10,550

)

 

 

(5,229

)

 

 

(33,509

)

 

 

 

 

(33,509

)

 

 

(5,554

)

Amortization of acquired intangibles

 

(17,994

)

 

 

 

 

(17,994

)

 

 

(16,500

)

 

 

(69,812

)

 

 

 

 

(69,812

)

 

 

(66,788

)

Acquisition and Sponsor related costs

 

(1,079

)

 

 

 

 

(1,079

)

 

 

(3,939

)

 

 

(8,397

)

 

 

 

 

(8,397

)

 

 

(20,065

)

Restructuring costs and other

 

(1,590

)

 

 

 

 

(1,590

)

 

 

(1,505

)

 

 

(5,550

)

 

 

 

 

(5,550

)

 

 

(2,999

)

Non-GAAP operating expenses

$

 

110,319

 

 

$

 

1,321

 

 

$

 

111,640

 

 

$

 

96,037

 

 

$

 

424,630

 

 

$

 

5,273

 

 

$

 

429,903

 

 

$

 

375,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

$

 

40,629

 

 

$

 

(2,243

)

 

$

 

38,386

 

 

$

 

35,974

 

 

$

 

135,173

 

 

$

 

(6,877

)

 

$

 

128,296

 

 

$

 

115,185

 

Impact of purchase accounting

 

1,896

 

 

 

 

 

1,896

 

 

 

427

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

3,716

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,123

 

 

 

 

 

11,123

 

 

 

5,501

 

 

 

35,270

 

 

 

 

 

35,270

 

 

 

5,833

 

Amortization of acquired technologies

 

43,922

 

 

 

 

 

43,922

 

 

 

43,870

 

 

 

175,883

 

 

 

 

 

175,883

 

 

 

175,991

 

Amortization of acquired intangibles

 

17,994

 

 

 

 

 

17,994

 

 

 

16,500

 

 

 

69,812

 

 

 

 

 

69,812

 

 

 

66,788

 

Acquisition and Sponsor related costs

 

1,087

 

 

 

 

 

1,087

 

 

 

4,040

 

 

 

8,544

 

 

 

 

 

8,544

 

 

 

20,401

 

Restructuring costs and other

 

1,616

 

 

 

 

 

1,616

 

 

 

1,505

 

 

 

5,598

 

 

 

 

 

5,598

 

 

 

2,999

 

Non-GAAP operating income

$

 

118,267

 

 

$

 

(2,243

)

 

$

 

116,024

 

 

$

 

107,817

 

 

$

 

436,210

 

 

$

 

(6,877

)

 

$

 

429,333

 

 

$

 

390,913

 

GAAP operating margin

 

16.4

%

 

 

 

 

15.6

%

 

 

16.3

%

 

 

14.5

%

 

 

 

 

13.8

%

 

 

13.8

%

Non-GAAP operating margin

 

47.4

%

 

 

 

 

46.7

%

 

 

48.7

%

 

 

46.5

%

 

 

 

 

45.8

%

 

 

46.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

 

13,223

 

 

$

 

(2,243

)

 

$

 

10,980

 

 

$

 

(14,743

)

 

$

 

18,642

 

 

$

 

(6,877

)

 

$

 

11,765

 

 

$

 

(102,066

)

Impact of purchase accounting

 

1,896

 

 

 

 

 

1,896

 

 

 

427

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

3,716

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,123

 

 

 

 

 

11,123

 

 

 

5,501

 

 

 

35,270

 

 

 

 

 

35,270

 

 

 

5,833

 

Amortization of acquired technologies

 

43,922

 

 

 

 

 

43,922

 

 

 

43,870

 

 

 

175,883

 

 

 

 

 

175,883

 

 

 

175,991

 

Amortization of acquired intangibles

 

17,994

 

 

 

 

 

17,994

 

 

 

16,500

 

 

 

69,812

 

 

 

 

 

69,812

 

 

 

66,788

 

Acquisition and Sponsor related costs

 

1,087

 

 

 

 

 

1,087

 

 

 

4,040

 

 

 

8,544

 

 

 

 

 

8,544

 

 

 

20,401

 

Restructuring costs and other

 

1,616

 

 

 

 

 

1,616

 

 

 

1,505

 

 

 

5,598

 

 

 

 

 

5,598

 

 

 

2,999

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

19,547

 

 

 

 

 

 

 

 

 

80,137

 

Tax benefits associated with above adjustments

 

(14,849

)

 

 

 

 

(14,849

)

 

 

(18,966

)

 

 

(55,881

)

 

 

 

 

(55,881

)

 

 

(69,713

)

Non-GAAP net income

$

 

76,012

 

 

$

 

(2,243

)

 

$

 

73,769

 

 

$

 

57,681

 

 

$

 

263,798

 

 

$

 

(6,877

)

 

$

 

256,921

 

 

$

 

184,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings per share

$

 

0.04

 

 

 

 

$

 

0.04

 

 

$

 

2.60

 

 

$

 

0.06

 

 

 

 

$

 

0.04

 

 

$

 

2.56

 

Non-GAAP diluted earnings per share, pro forma

$

 

0.24

 

 

 

 

$

 

0.24

 

 

$

 

0.19

 

 

$

 

0.85

 

 

 

 

$

 

0.83

 

 

$

 

0.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to compute GAAP diluted earnings per share

 

311,922

 

 

 

 

 

311,922

 

 

 

256,711

 

 

 

311,168

 

 

 

 

 

311,168

 

 

 

142,541

 

Weighted-average shares used to compute Non-GAAP diluted earnings per share, pro forma(1)

 

311,922

 

 

 

 

 

311,922

 

 

 

307,414

 

 

 

311,168

 

 

 

 

 

311,168

 

 

 

307,013

 

___________

(1)

For an explanation of the pro forma calculation, please see "Reconciliation of GAAP to Non-GAAP Weighted-Average Outstanding Diluted Common Shares" below.

 

Reconciliation of GAAP to Non-GAAP Weighted-Average Outstanding Diluted Common Shares

(Unaudited)

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

(in thousands)

GAAP weighted-average shares used in computing diluted earnings per share available to common shareholders

311,922

 

 

256,711

 

 

311,168

 

 

142,541

 

 

 

 

 

 

 

 

 

Pro forma dilutive shares:

 

 

 

 

 

 

 

Weighted-average pro forma adjustment to reflect conversion of redeemed convertible Class A Common Stock and shares issued for accrued dividends(1)

 

 

44,453

 

 

 

 

144,198

 

Shares issued at offering(2)

 

 

6,250

 

 

 

 

20,274

 

Non-GAAP weighted-average shares used in computing diluted earnings per share, pro forma

311,922

 

 

307,414

 

 

311,168

 

 

307,013

 

_____________

(1)

Adjustment to give effect to the conversion of 2,661,015 shares of Class A Common Stock that were outstanding immediately prior to the closing of the initial public offering into 140,053,370 shares of common stock and the conversion of $717.4 million of accrued and unpaid dividends on the Class A Common Stock into 37,758,109 shares of common stock equal to the result of the accrued and unpaid dividends on each share of Class A Common Stock, divided by $19.00 per share, as if the shares had been issued at the beginning of the period.

(2)

Adjustment to give effect to 25.0 million shares issued in connection with the initial public offering retroactively applied as if the shares had been issued at the beginning of the period.

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 


ASC 606

 

ASC 606 impact

 

ASC 605

 

ASC 605

 


ASC 606

 

ASC 606 impact

 

ASC 605

 

ASC 605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Net income (loss)

$

 

13,223

 

 

$

 

(2,243

)

 

$

 

10,980

 

 

$

 

(14,743

)

 

$

 

18,642

 

 

$

 

(6,877

)

 

$

 

11,765

 

 

$

 

(102,066

)

Amortization and depreciation

 

66,557

 

 

 

 

 

66,557

 

 

 

64,459

 

 

 

263,244

 

 

 

 

 

263,244

 

 

 

258,362

 

Income tax expense (benefit)

 

2,208

 

 

 

 

 

2,208

 

 

 

401

 

 

 

8,862

 

 

 

 

 

8,862

 

 

 

(19,644

)

Interest expense, net

 

25,094

 

 

 

 

 

25,094

 

 

 

29,905

 

 

 

108,071

 

 

 

 

 

108,071

 

 

 

142,008

 

Impact of purchase accounting on total revenue

 

1,896

 

 

 

 

 

1,896

 

 

 

427

 

 

 

5,930

 

 

 

 

 

5,930

 

 

 

3,716

 

Unrealized foreign currency (gains) losses(1)

 

(6

)

 

 

 

 

(6

)

 

 

663

 

 

 

(913

)

 

 

 

 

(913

)

 

 

14,367

 

Acquisition and Sponsor related costs

 

1,087

 

 

 

 

 

1,087

 

 

 

4,040

 

 

 

8,544

 

 

 

 

 

8,544

 

 

 

20,401

 

Debt related costs(2)

 

95

 

 

 

 

 

95

 

 

 

19,697

 

 

 

385

 

 

 

 

 

385

 

 

 

81,535

 

Stock-based compensation expense and related employer-paid payroll taxes

 

11,123

 

 

 

 

 

11,123

 

 

 

5,501

 

 

 

35,270

 

 

 

 

 

35,270

 

 

 

5,833

 

Restructuring costs and other

 

1,616

 

 

 

 

 

1,616

 

 

 

1,505

 

 

 

5,598

 

 

 

 

 

5,598

 

 

 

2,999

 

Adjusted EBITDA

$

 

122,893

 

 

$

 

(2,243

)

 

$

 

120,650

 

 

$

 

111,855

 

 

$

 

453,633

 

 

$

 

(6,877

)

 

$

 

446,756

 

 

$

 

407,511

 

Adjusted EBITDA margin

 

49.3

%

 

 

 

 

48.6

%

 

 

50.5

%

 

 

48.3

%

 

 

 

 

47.7

%

 

 

48.7

%

_______________

(1)

 

Unrealized foreign currency (gains) losses primarily relate to the remeasurement of our intercompany loans and to a lesser extent, unrealized foreign currency (gains) losses on selected assets and liabilities.

(2)

 

Debt related costs include fees related to our credit agreements, debt refinancing costs and the related write-off of debt issuance costs.

 

Reconciliation of Non-GAAP Revenue to Non-GAAP Revenue on a Constant Currency Basis

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

Growth Rate

 

2019

 

2018

 

Growth Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except percentages)

GAAP subscription revenue

$

 

87,280

 

 

$

 

69,587

 

 

25.4

%

 

$

 

320,747

 

 

$

 

265,591

 

 

20.8

%

Impact of purchase accounting

 

1,896

 

 

 

50

 

 

2.7

 

 

 

5,930

 

 

 

1,166

 

 

1.7

 

Non-GAAP subscription revenue

 

89,176

 

 

 

69,637

 

 

28.1

 

 

 

326,677

 

 

 

266,757

 

 

22.5

 

Estimated foreign currency impact(1)

 

928

 

 

 

 

1.3

 

 

 

6,997

 

 

 

 

2.6

 

Non-GAAP subscription revenue on a constant currency basis

$

 

90,104

 

 

$

 

69,637

 

 

29.4

%

 

$

 

333,674

 

 

$

 

266,757

 

 

25.1

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP maintenance revenue

$

 

115,610

 

 

$

 

105,354

 

 

9.7

%

 

$

 

446,450

 

 

$

 

402,938

 

 

10.8

%

Impact of purchase accounting

 

 

 

377

 

 

(0.4

)

 

 

 

 

2,550

 

 

(0.7

)

Non-GAAP maintenance revenue

 

115,610

 

 

 

105,731

 

 

9.3

 

 

 

446,450

 

 

 

405,488

 

 

10.1

 

Estimated foreign currency impact(1)

 

519

 

 

 

 

0.5

 

 

 

3,783

 

 

 

 

0.9

 

Non-GAAP maintenance revenue on a constant currency basis

$

 

116,129

 

 

$

 

105,731

 

 

9.8

%

 

$

 

450,233

 

 

$

 

405,488

 

 

11.0

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total recurring revenue

$

 

202,890

 

 

$

 

174,941

 

 

16.0

%

 

$

 

767,197

 

 

$

 

668,529

 

 

14.8

%

Impact of purchase accounting

 

1,896

 

 

 

427

 

 

0.8

 

 

 

5,930

 

 

 

3,716

 

 

0.2

 

Non-GAAP total recurring revenue

 

204,786

 

 

 

175,368

 

 

16.8

 

 

 

773,127

 

 

 

672,245

 

 

15.0

 

Estimated foreign currency impact(1)

 

1,447

 

 

 

 

0.8

 

 

 

10,780

 

 

 

 

1.6

 

Non-GAAP total recurring revenue on a constant currency basis

$

 

206,233

 

 

$

 

175,368

 

 

17.6

%

 

$

 

783,907

 

 

$

 

672,245

 

 

16.6

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP license revenue

$

 

44,605

 

 

$

 

46,240

 

 

(3.5

)%

 

$

 

165,328

 

 

$

 

164,560

 

 

0.5

%

Impact of purchase accounting

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP license revenue

 

44,605

 

 

 

46,240

 

 

(3.5

)

 

 

165,328

 

 

 

164,560

 

 

0.5

 

Estimated foreign currency impact(1)

 

178

 

 

 

 

0.4

 

 

 

1,555

 

 

 

 

0.9

 

Non-GAAP license revenue on a constant currency basis

$

 

44,783

 

 

$

 

46,240

 

 

(3.2

)%

 

$

 

166,883

 

 

$

 

164,560

 

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Total GAAP revenue

$

 

247,495

 

 

$

 

221,181

 

 

11.9

%

 

$

 

932,525

 

 

$

 

833,089

 

 

11.9

%

Impact of purchase accounting

 

1,896

 

 

 

427

 

 

0.6

 

 

 

5,930

 

 

 

3,716

 

 

0.2

 

Non-GAAP total revenue

 

249,391

 

 

 

221,608

 

 

12.5

 

 

 

938,455

 

 

 

836,805

 

 

12.1

 

Estimated foreign currency impact(1)

 

1,625

 

 

 

 

0.7

 

 

 

12,335

 

 

 

 

1.5

 

Non-GAAP total revenue on a constant currency basis

$

 

251,016

 

 

$

 

221,608

 

 

13.3

%

 

$

 

950,790

 

 

$

 

836,805

 

 

13.6

%

________

(1)

The estimated foreign currency impact is calculated using the average foreign currency exchange rates in the comparable prior year monthly periods and applying those rates to foreign-denominated revenue in the corresponding monthly periods in the three and twelve months ended December 31, 2019.

 

Reconciliation of 2019 Non-GAAP Revenue to Adjusted Non-GAAP Revenue

Assuming Rates in Previously Issued Outlook

(Unaudited)

 

Three Months Ended

December 31, 2019

 

 

 

(in thousands)

Total non-GAAP revenue

$

 

249,391

 

Estimated foreign currency impact(2)

 

(671

)

Total adjusted non-GAAP revenue assuming foreign currency exchange rates used in previously issued outlook

$

 

248,720

 

________

(2)

Estimated foreign currency impact represents the impact of the difference between the actual foreign currency exchange rates in the period used to calculate our three months ended December 31, 2019 actual non-GAAP results and the rates assumed in our previously issued outlook dated October 30, 2019.

 

Reconciliation of Non-GAAP Revenue Outlook

 

 

 

 

 

Full Year 2020

 

 

Low

 

High

 

Low(2)

 

High(2)

 

 

 

 

 

 

 

 

 

 

 

(in millions, except year-over-year percentages)

Total non-GAAP revenue

$

 

1,035

 

 

$

 

1,055

 

 

10

%

 

12

%

Estimated foreign currency impact

 

2

 

 

 

2

 

 

1

 

 

1

 

Non-GAAP total revenue on a constant currency basis(1)

$

 

1,037

 

 

$

 

1,057

 

 

11

%

 

13

%

 

 

Q1 2020

 

Low

 

High

 

Low(2)

 

High(2)

 

 

 

 

 

 

 

 

 

(in millions, except year-over-year percentages)

Total non-GAAP revenue

$

 

244

 

 

$

 

249

 

 

13

%

 

15

%

Estimated foreign currency impact

 

1

 

 

 

1

 

 

1

 

 

1

 

Non-GAAP total revenue on a constant currency basis(1)

$

 

245

 

 

$

 

250

 

 

14

%

 

16

%

 

 

Full Year 2020(2)

 

Q1 2020(2)

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

Non-GAAP subscription revenue growth

 

21

%

 

 

23

%

 

28

%

 

31

%

Estimated foreign currency impact

 

 

 

 

1

 

 

1

 

Non-GAAP subscription revenue growth on a constant currency basis(1)

 

21

%

 

 

23

%

 

29

%

 

32

%

 

 

 

 

 

 

 

 

Non-GAAP license and maintenance revenue growth

 

5

%

 

 

7

%

 

5

%

 

8

%

Estimated foreign currency impact

 

 

 

 

1

 

 

 

Non-GAAP license and maintenance revenue growth on a constant currency basis(1)

 

5

%

 

 

7

%

 

6

%

 

8

%

________

(1)

Non-GAAP revenue on a constant currency basis is calculated using the average foreign currency exchange rates in the comparable prior year periods and applying those rates to the estimated foreign-denominated revenue in the corresponding periods rather than the forecasted foreign currency exchange rates for the future periods.

(2)

Revenue growth rates are calculated using non-GAAP revenue from the comparable prior period.

 

Reconciliation of Unlevered Free Cash Flow

 

 

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

(in thousands)

Net cash provided by operating activities

$

 

83,061

 

 

$

 

88,060

 

 

$

 

299,907

 

 

$

 

254,142

 

Capital expenditures(1)

 

(8,834

)

 

 

(3,756

)

 

 

(23,041

)

 

 

(18,632

)

Free cash flow

 

74,227

 

 

 

84,304

 

 

 

276,866

 

 

 

235,510

 

Cash paid for interest and other debt related items

 

22,885

 

 

 

28,477

 

 

 

99,264

 

 

 

143,071

 

Cash paid for acquisition and Sponsor related costs, restructuring costs, employer-paid payroll taxes on stock awards and other one time items

 

3,693

 

 

 

4,788

 

 

 

18,235

 

 

 

24,387

 

Unlevered free cash flow (excluding forfeited tax shield)

 

100,805

 

 

 

117,569

 

 

 

394,365

 

 

 

402,968

 

Forfeited tax shield related to interest payments(2)

 

(5,191

)

 

 

(6,479

)

 

 

(22,624

)

 

 

(32,162

)

Unlevered free cash flow

$

 

95,614

 

 

$

 

111,090

 

 

$

 

371,741

 

 

$

 

370,806

 

_______________

(1)

Includes purchases of property and equipment and purchases of intangible assets.

(2)

Forfeited tax shield related to interest payments assumes a statutory rate of 22.5% for the three and twelve months ended December 31, 2019 and 2018.

 

Contacts

Investors:
Ashley Hook
Phone: 385.374.7210
ir@solarwinds.com

Media:
Tiffany Nels
Phone: 512.682.9535
pr@solarwinds.com

Release Summary

SolarWinds Announces Fourth Quarter 2019 Results and the appointment of new member of its Board of Directors.

Contacts

Investors:
Ashley Hook
Phone: 385.374.7210
ir@solarwinds.com

Media:
Tiffany Nels
Phone: 512.682.9535
pr@solarwinds.com