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].

SolarWinds (SWI) shares ended the last trading session 21.8% higher at $18.31. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 6.9% gain over the past four weeks.SolarWinds is benefiting from its Subscription First strategy, which has driven strong subscription and ARR growth, increased adoption of its Observability solutions, high customer retention, and a broad, diversified customer base, all contributing to sust ...

Looking for a stock that has been consistently beating earnings estimates and might be well positioned to keep the streak alive in its next quarterly report? SolarWinds (SWI) , which belongs to the Zacks Internet - Software industry, could be a great candidate to consider.When looking at the last two reports, this provider of information-technology management software has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 13.09%, on average, in the last two quarte ...

I recommended a hold rating for SolarWinds Corporation (NYSE: SWI ) when I wrote about it in September last year, as I was concerned about the near-term growth outlook. Based on my current outlook and analysis, I recommendI consider an investment ideal if it performs its core business in a sector projected to experience structural (organic) growth in excess of GDP growth over the next 5-10 years; profits from sustainable competitive advantages that translate into attractive unit economics; In the hands of c ...

Have you been paying attention to shares of SolarWinds (SWI) ? Shares have been on the move with the stock up 6% over the past month. The stock hit a new 52-week high of $14.03 in the previous session. SolarWinds has gained 12% since the start of the year compared to the 29.4% move for the Zacks Computer and Technology sector and the 27.4% return for the Zacks Internet - Software industry.What's Driving the Outperformance?The stock has a great record of positive earnings surprises, as it hasn't missed our e ...

Financial Data and Key Metrics Changes - In Q3 2024, total revenue reached $200 million, reflecting a 6% year-over-year growth, exceeding the high end of the guidance range [11][29] - Subscription revenue grew by 30% year-over-year, totaling $76 million, while subscription ARR increased by 36% to $289 million [11][30] - Adjusted EBITDA for Q3 was $96 million, representing a 13% year-over-year growth with a margin of 48% [12][35] - Total ARR at the end of Q3 was $724 million, an 8% increase year-over-year, with a maintenance renewal rate of 96% for the quarter [12][30] Business Line Data and Key Metrics Changes - The Observability solution saw increased adoption, contributing to revenue growth, with significant updates announced on October 2nd [9][18] - Maintenance revenue declined by 5% year-over-year to $111 million, as the company continues to convert customers to subscription products [32] - License revenue decreased by 10% to $13 million, impacted by the Subscription First strategy [34] Market Data and Key Metrics Changes - The company reported a balanced deal size across regions and market segments, indicating low customer concentration and criticality of solutions [10] - The customer base includes 1,100 customers with over $100,000 in total ARR, marking an 18% growth year-over-year [30] Company Strategy and Development Direction - The company is focused on a Subscription First strategy, aiming to enhance customer success and retention while expanding profitability [26][41] - Investments are being made selectively to drive growth while maintaining expense discipline [26][84] - The company aims to address the Hybrid Observability gap, providing unified visibility across on-premises and cloud environments [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving business and financial goals despite a challenging IT spending environment [28] - The demand environment remains stable, with growth driven by both existing customers and new customer acquisitions [60] - The company anticipates continued strong performance in Q4 2024, supported by a diversified customer base and robust solutions [41][42] Other Important Information - The company has transitioned to a model where 94% of total revenue is now recurring [33] - The net leverage ratio improved to approximately 2.8 times trailing 12-month adjusted EBITDA [36] Q&A Session Summary Question: Insights on product traction and partner activity - Management noted that customers are looking to bridge on-premises and cloud divides, leading to increased traction across various solutions [49] Question: Thoughts on financial model and topline growth - The new CFO highlighted the effectiveness of the business model and the alignment with market needs, emphasizing a long-term growth strategy [52][54] Question: Demand environment and growth trends - Management confirmed stable demand with a diversified customer base contributing to growth, while remaining prudent about future quarters [60][61] Question: Insights on new Chief Revenue Officer's impact - The new Chief Revenue Officer is expected to enhance the go-to-market model without major strategic shifts, focusing on partnerships and market reach [68][70] Question: Pricing strategy for Gen AI and Observability - Management indicated that Gen AI capabilities are part of premium packages, leading to automatic ASP uplift, but consumption-based pricing models are still under consideration [72][74] Question: Drivers behind the increase in $100K customers - The increase is attributed to ongoing subscription conversions, a unified Observability solution, and selective upstream customer requirements [78][79] Question: Consolidation theme in sales - Both proactive outreach and renewal cycles are driving consolidation discussions, supported by a strong customer success team [82] Question: Balancing margin and investment in growth - The company aims to balance growth and profitability, focusing on investments that yield clear returns while maintaining efficiency [89]

Exhibit 99.1 SolarWinds Announces Third Quarter 2024 Results AUSTIN, Texas - October 31, 2024 - SolarWinds Corporation (NYSE:SWI), a leading provider of simple, powerful, secure observability and IT management software, today reported results for its third quarter ended September 30, 2024. Third Quarter Financial Highlights • Total revenue for the third quarter of $200.0 million, representing 6% year-over-year growth, and total recurring revenue representing 94% of total revenue. • Net income for the third ...