Core Insights - The Ademi Firm is investigating SolarWinds for potential breaches of fiduciary duty and other legal violations related to its transaction with Turn/River Capital [1][2] - SolarWinds stockholders are set to receive $18.50 per share, totaling approximately $4.4 billion, while insiders will benefit significantly from change of control arrangements [2] - The transaction agreement restricts competing offers for SolarWinds by imposing a substantial penalty if a competing bid is accepted, raising concerns about the board's fiduciary responsibilities [2]

Core Viewpoint - Kaskela Law LLC is investigating SolarWinds Corporation on behalf of its current shareholders regarding the adequacy of the acquisition price offered by Turn/River Capital [1][3]. Acquisition Details - On February 7, 2025, SolarWinds announced an agreement to be acquired by Turn/River Capital at a price of $18.50 per share [2]. - Following the transaction's closure, SolarWinds' shares will no longer be publicly traded, and shareholders will be cashed out [2]. Valuation Concerns - The investigation aims to assess whether the $18.50 per share offer is sufficient for SolarWinds' investors, especially considering Wedbush's price target of $20.00 per share at the time of the announcement [3].

Customer Base and Market Strategy - The company had over 300,000 customers worldwide as of December 31, 2024, indicating a broad customer base across various industries[59] - The company aims to extend its leadership in observability and IT infrastructure management, targeting growth in adjacent areas such as IT service management and database performance management[45] - The company plans to execute a subscription-first approach across its product portfolios, enhancing customer engagement and evolving offerings as new capabilities are delivered[45] - The company has made significant investments to increase its international sales and marketing operations, focusing on expanding its global brand awareness[50] - The company recognizes the importance of upsell and cross-sell opportunities, particularly during contract renewals, to increase penetration within its existing customer base[47] - The company is transforming its strategy to invest in and grow its partner channel, which is integral to delivering an excellent customer experience[48] - The company’s product portfolio includes solutions for network management, application performance management, and IT service management, designed to meet the needs of all IT professionals[56] - The company’s marketing and sales strategy focuses on low-touch, high-velocity digital marketing, effectively capturing demand while maintaining low customer acquisition costs[67] Innovation and Product Development - The company intends to continue innovating by bringing new products and tools to market, with frequent feature releases for existing products[49] - The research and development organization focuses on building observability and service management applications across private, hybrid, and multi-cloud environments, emphasizing "Secure by Design"[78] - The product portfolio has evolved to include cloud-native SaaS offerings and AI-driven solutions, which are critical for long-term growth and market relevance[160] Financial Health and Risks - The company has substantial indebtedness, which could adversely affect its financial health and ability to obtain future financing[102] - The trading price of the company's common stock has been volatile, which could affect the value of investments[102] - The company faces risks related to changes in tax laws and financial accounting standards that may adversely affect financial performance[102] - The company is currently facing litigation with the SEC due to a Cyber Incident, which has resulted in additional costs and could lead to penalties and reputational damage[119] - The company’s financial health may be adversely affected by its substantial indebtedness, limiting flexibility in business planning and operations[207] Cybersecurity and Compliance - The company has faced risks related to cybersecurity incidents, which could materially harm its business and reputation[99] - Cybersecurity risks are increasing, with potential breaches that could compromise proprietary and confidential information, leading to significant financial and reputational harm[112] - The ongoing transition to cloud-native SaaS offerings has increased the company's responsibility for data security, exposing it to additional risks related to unauthorized access and data breaches[118] - The company faces significant costs related to compliance with evolving regulations, particularly the AI Act, which may require changes to products and services[1] - Compliance with evolving global data privacy regulations may result in increased costs and liabilities[182] Operational Challenges - The company is experiencing challenges in maintaining website performance and cloud-based solutions, which could negatively affect business if services become unavailable[116] - The company relies on third-party cloud providers, and any disruptions in their services could adversely impact business operations and financial results[115] - The company faces intense competition in a fragmented market, which may hinder customer acquisition and retention efforts[144] - The ability to recruit and retain key personnel is critical for the company's success, and significant attrition could negatively impact productivity[148] Mergers and Acquisitions - The proposed Merger with Starlight Parent, LLC is subject to various conditions, including regulatory approvals, and there is no assurance it will be completed on the proposed terms or timeframe[101] - If the Merger is not completed, the market price of the company's common stock could decline, impacting investor confidence and potentially leading to stockholder litigation[103] - The company may incur significant costs related to the Merger, including a termination fee of $119.2 million if the Merger Agreement is terminated under certain circumstances[110] - The Merger may disrupt existing business relationships and divert management's attention, negatively impacting ongoing operations[105] International Operations - The company operates internationally in multiple countries and plans to continue expanding its international operations, which requires significant management attention and financial resources[138] - Risks associated with international operations include currency exchange rate fluctuations, dependence on global partners, and compliance with foreign regulatory requirements[139] Future Outlook and Speculation - Future financial outlooks provided by the company are speculative and subject to significant uncertainties, with actual results potentially varying materially from projections[155] - Adverse global macroeconomic conditions, including geopolitical tensions and inflation, may negatively impact customer spending on IT management solutions[165] Intellectual Property and Legal Risks - The company may need to spend substantial resources to monitor and protect its intellectual property rights, which could divert technical and management personnel[199] - The company’s ability to protect its intellectual property may be compromised by the use of open-source software, leading to potential litigation[204] - The company is exposed to risks from potential future litigation, which could divert management resources and lead to significant costs[192]

Core Insights - SolarWinds reported revenue of $210.31 million for the quarter ended December 2024, reflecting a year-over-year increase of 6.1% and exceeding the Zacks Consensus Estimate of $202.82 million by 3.69% [1] - The company's EPS for the quarter was $0.51, significantly higher than the $0.24 reported in the same quarter last year, resulting in an EPS surprise of 88.89% compared to the consensus estimate of $0.27 [1] Financial Performance Metrics - Total Annual Recurring Revenue (ARR) was reported at $729,000, slightly below the average estimate of $737,183.50 from two analysts [4] - Subscription ARR reached $311,700, surpassing the average estimate of $306,525 from two analysts [4] - Total Recurring Revenue was $197.19 million, exceeding the four-analyst average estimate of $192.68 million, with a year-over-year increase of 7.8% [4] - Subscription Revenue was $89.26 million, significantly above the four-analyst average estimate of $82.23 million, marking a year-over-year increase of 31.8% [4] - Maintenance Revenue was $107.93 million, slightly below the four-analyst average estimate of $109.22 million, reflecting a year-over-year decline of 6.2% [4] - License Revenue was reported at $13.12 million, exceeding the average estimate of $11.40 million from four analysts, but showing a year-over-year decrease of 14.2% [4] Stock Performance - SolarWinds shares have returned 31.6% over the past month, significantly outperforming the Zacks S&P 500 composite, which saw a change of 4.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - SolarWinds reported strong quarterly earnings, significantly surpassing expectations, indicating robust performance in the information-technology management software sector [1][2]. Financial Performance - The company achieved earnings of $0.51 per share, exceeding the Zacks Consensus Estimate of $0.27 per share, and up from $0.24 per share a year ago, representing an earnings surprise of 88.89% [1]. - SolarWinds posted revenues of $210.31 million for the quarter, surpassing the Zacks Consensus Estimate by 3.69%, and an increase from $198.14 million year-over-year [2]. Market Performance - SolarWinds shares have increased approximately 27.9% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3]. - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for continued outperformance in the near future [6]. Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.27 on revenues of $199.27 million, and for the current fiscal year, it is $1.09 on revenues of $811.29 million [7]. - The trend of estimate revisions for SolarWinds has been favorable leading up to the earnings release, which may influence future stock movements [6]. Industry Context - The Internet - Software industry, to which SolarWinds belongs, is currently ranked in the top 29% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8].

Financial Performance - Total revenue for Q4 2024 was $210.3 million, representing a 6% year-over-year growth, with total recurring revenue accounting for 94% of total revenue[5]. - Net income for Q4 2024 was $72.7 million, while adjusted EBITDA was $104.1 million, reflecting a margin of 49% and a 20% year-over-year growth[5]. - For the full year 2024, total revenue reached $796.9 million, marking a 5% year-over-year growth, with total recurring revenue also at 94% of total revenue[5]. - Full year net income was $111.9 million, and adjusted EBITDA totaled $384.7 million, representing a margin of 48% and a 17% year-over-year growth[5]. - Subscription Annual Recurring Revenue (ARR) was $311.7 million, showing a year-over-year growth of 34%, while total ARR reached $729.0 million, with a 7% year-over-year growth[5]. - Total revenue for the twelve months ended December 31, 2024, was $796.895 million, an increase of 5.0% compared to $758.740 million for the same period in 2023[29]. - Subscription revenue for the three months ended December 31, 2024, reached $89.259 million, up 31.8% from $67.726 million in the same period of 2023[29]. - Net income for the twelve months ended December 31, 2024, was $111.903 million, a significant recovery from a net loss of $9.109 million in 2023[29]. - Operating income for the three months ended December 31, 2024, was $60.350 million, compared to $43.370 million for the same period in 2023, reflecting a year-over-year increase of 39.2%[29]. - Total operating expenses for the twelve months ended December 31, 2024, were $505.169 million, a decrease from $521.362 million in 2023[29]. - Non-GAAP gross profit for the twelve months ended December 31, 2024, was $723.139 million, compared to $687.566 million in 2023, indicating a growth of 5.2%[34]. - Non-GAAP operating income for the twelve months ended December 31, 2024, reached $361,416, up from $310,129 in 2023, reflecting a growth of 16.5%[35]. - GAAP net income for Q4 2024 was $72,670, a significant recovery from a net loss of $576 in Q4 2023[35]. - Non-GAAP diluted earnings per share for the twelve months ended December 31, 2024, was $1.32, compared to $0.88 in 2023, reflecting a 50% increase[35]. Acquisition and Corporate Developments - SolarWinds entered into a definitive agreement to be acquired by Turn/River Capital in an all-cash transaction valued at approximately $4.4 billion, with stockholders receiving $18.50 per share[6]. - The acquisition is expected to be completed in Q2 2025, pending regulatory approvals and customary closing conditions[6]. - In October 2024, SolarWinds launched its Observability SaaS and Self-Hosted offerings, along with a new Universal Database License for its Database Performance Analyzer and SQL Sentry products[6]. - The company released its 2024 State of ITSM Report in November, analyzing over 2,000 ITSM data systems and 60,000 points of anonymized customer data[6]. Cash and Debt Management - As of December 31, 2024, total cash and cash equivalents were $259.3 million, while total debt stood at $1.2 billion[7]. - Cash and cash equivalents decreased from $284,695 thousand in 2023 to $251,850 thousand in 2024, a reduction of approximately 11.5%[27]. - Cash flows from operating activities for the twelve months ended December 31, 2024, amounted to $188.298 million, compared to $183.465 million in 2023[31]. - Cash and cash equivalents at the end of the period were $251.850 million, down from $284.695 million at the beginning of the period[32]. - The company paid $168.162 million in dividends during the twelve months ended December 31, 2024[31]. Assets and Liabilities - Total assets decreased from $3,250,915 thousand in 2023 to $3,168,288 thousand in 2024, reflecting a reduction of approximately 2.5%[27]. - Total liabilities decreased from $1,808,871 thousand in 2023 to $1,767,574 thousand in 2024, indicating a decline of about 2.3%[27]. - The accumulated deficit improved from $(1,218,874) thousand in 2023 to $(1,106,971) thousand in 2024, showing a reduction of approximately 9.2%[27]. Non-GAAP Measures and Performance Metrics - Non-GAAP net income (loss) is calculated by excluding adjustments to non-GAAP cost of revenue and non-GAAP operating income, resulting in a clearer understanding of past performance and future prospects[17]. - Adjusted EBITDA for the period is defined as net income (loss) excluding various costs, including stock-based compensation and restructuring costs, providing a measure to assess operating performance[18]. - Subscription Annual Recurring Revenue (Subscription ARR) is used to assess business performance, reflecting the annualized recurring value of all active subscription contracts[21]. - Total Annual Recurring Revenue (Total ARR) combines Subscription ARR and maintenance contracts, providing insights into customer retention and growth[22]. - The company expects to incur significant legal and professional service expenses related to a Cyber Incident in future periods, impacting operating expenses[19]. - Non-GAAP measures exclude restructuring costs and Cyber Incident costs, facilitating a more meaningful evaluation of operating performance[19][20]. - Unlevered free cash flow for the twelve months ended December 31, 2024, was $263,752, compared to $254,472 in 2023, marking a growth of 3.5%[42]. Profitability Metrics - The company reported a gross profit margin of 89.9% for the three months ended December 31, 2024, compared to 89.0% in the same period of 2023[34]. - GAAP operating margin improved to 28.7% in Q4 2024 from 21.9% in Q4 2023[35]. - Non-GAAP operating margin for the twelve months ended December 31, 2024, was 45.4%, up from 40.9% in 2023[35]. - Adjusted EBITDA for Q4 2024 was $104,097, up from $87,006 in Q4 2023, indicating a 19.6% increase[37]. - Total GAAP revenue for Q4 2024 was $210,309, a 6.1% increase from $198,139 in Q4 2023[40]. - Non-GAAP total revenue on a constant currency basis for the twelve months ended December 31, 2024, was $796,411, showing a growth rate of 5.0% compared to 2023[40].

Core Insights - SolarWinds (SWI) shares experienced a significant increase of 21.8%, closing at $18.31, with trading volume higher than average [1] - The company is implementing a Subscription First strategy, leading to strong subscription and Annual Recurring Revenue (ARR) growth, high customer retention, and a diversified customer base, all contributing to sustained revenue growth and profitability [2] Financial Performance - SolarWinds is expected to report quarterly earnings of $0.27 per share, reflecting a year-over-year increase of 12.5%. Revenue is projected to be $202.82 million, up 2.4% from the same quarter last year [3] - The consensus EPS estimate for SolarWinds has remained unchanged over the last 30 days, indicating stability in earnings expectations [5] Market Position - SolarWinds holds a Zacks Rank of 2 (Buy), suggesting positive market sentiment towards the stock [5] - The company operates within the Zacks Internet - Software industry, where Radware (RDWR) also competes, having closed 0.4% higher at $23.04 with a 5.4% return over the past month [5]

Core Insights - SolarWinds (SWI) has consistently surpassed earnings estimates and is well-positioned for future earnings reports [1][2] Earnings Performance - In the last two quarters, SolarWinds has exceeded earnings estimates by an average of 13.09% [2] - For the most recent quarter, the expected earnings were $0.25 per share, but the actual reported earnings were $0.27 per share, resulting in an 8% surprise [3] - In the previous quarter, the consensus estimate was $0.22 per share, while the actual earnings were $0.26 per share, leading to an 18.18% surprise [3] Earnings Estimates and Predictions - Recent estimates for SolarWinds have been increasing, with a positive Zacks Earnings ESP (Expected Surprise Prediction) indicating a strong likelihood of an earnings beat [4][7] - The current Earnings ESP for SolarWinds is +2.75%, suggesting analysts are optimistic about its near-term earnings potential [7] Zacks Rank and Success Rate - SolarWinds holds a Zacks Rank of 2 (Buy), which, when combined with a positive Earnings ESP, indicates a high probability of another earnings beat [7] - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% success rate in beating consensus estimates [5]

Core Viewpoint - The recommendation for SolarWinds Corporation (NYSE: SWI) is to hold, based on concerns regarding the near-term growth outlook and the potential for structural growth in the sector over the next 5-10 years [1] Group 1: Investment Criteria - An ideal investment should operate in a sector expected to experience organic growth exceeding GDP growth over the next 5-10 years [1] - Profits should stem from sustainable competitive advantages that lead to attractive unit economics [1] - The company should be managed by competent, ethical, and long-term thinkers, and have a fair valuation [1]

Company Performance - SolarWinds shares have increased by 6% over the past month, reaching a new 52-week high of $14.03, and have gained 12% since the start of the year [1] - The company reported EPS of $0.27 in its last earnings report, exceeding the consensus estimate of $0.25 [2] - For the current fiscal year, SolarWinds is expected to post earnings of $1.09 per share on revenues of $787.36 million, reflecting a 23.86% change in EPS and a 3.77% change in revenues [3] Valuation Metrics - SolarWinds has a Value Score of B, a Growth Score of C, and a Momentum Score of B, resulting in a combined VGM Score of B [6] - The stock trades at 12.8X current fiscal year EPS estimates, significantly lower than the peer industry average of 32.9X, and at 14.2X on a trailing cash flow basis compared to the peer group's average of 27.4X [7] Zacks Rank - SolarWinds holds a Zacks Rank of 2 (Buy) due to rising earnings estimates, indicating potential for further price appreciation [8] Industry Comparison - The Internet - Software industry is performing well, ranking in the top 25% of all industries, providing favorable conditions for both SolarWinds and its peer Twilio Inc. [11]