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]

Financial Performance - Total revenue for Q3 2024 was $200.0 million, representing a 6% year-over-year growth, with total recurring revenue accounting for 94% of total revenue[2] - Net income for Q3 2024 was $12.6 million, and adjusted EBITDA was $96.0 million, reflecting a margin of 48% and a 13% year-over-year growth[2] - Subscription Annual Recurring Revenue (ARR) reached $289.5 million, marking a 36% year-over-year growth, while Total ARR was $724.1 million, representing an 8% year-over-year growth[2] - For Q4 2024, total revenue is expected to be in the range of $201 to $204 million, indicating approximately 2% growth compared to Q4 2023[7] - Adjusted EBITDA for Q4 2024 is projected to be approximately $95 to $98 million, representing an 11% growth over Q4 2023[7] - For the full year 2024, total revenue is anticipated to be between $788 to $791 million, reflecting a 4% growth over the full year 2023[8] - Adjusted EBITDA for the full year 2024 is expected to be approximately $376 to $379 million, indicating a 15% growth over the full year 2023[8] - Subscription revenue for Q3 2024 reached $76,463, up 30% from $58,764 in Q3 2023[28] - Total recurring revenue increased to $187,095 in Q3 2024, a 7% rise from $175,179 in Q3 2023[28] - Total revenue for the nine months ended September 30, 2024, was $586,586, compared to $560,601 for the same period in 2023[28] - Total revenue for the three months ended September 30, 2024, was $200,025 thousand, representing a growth rate of 5.5% compared to $189,591 thousand for the same period in 2023[34] - Non-GAAP total revenue on a constant currency basis for the nine months ended September 30, 2024, was $585,944 thousand, reflecting a growth rate of 4.5% from $560,601 thousand in 2023[34] - Total revenue for the nine months ended September 30, 2024, was $586,586 thousand, showing a growth rate of 4.6% from $560,601 thousand in 2023[34] Cash and Debt Management - As of September 30, 2024, total cash and cash equivalents were $199.2 million, while total debt stood at $1.2 billion[5] - Cash and cash equivalents decreased from $284,695 million to $193,017 million, a drop of about 32.3%[27] - Long-term debt increased slightly from $1,190,934 million to $1,195,846 million, indicating a marginal rise[27] - Total liabilities decreased from $1,808,871 million to $1,754,061 million, a decline of approximately 3.0%[27] - Total stockholders' equity decreased from $1,442,044 million to $1,364,363 million, a decline of approximately 5.4%[27] Operating Performance - Operating income for Q3 2024 was $51,684, significantly higher than $38,525 in Q3 2023[28] - Cash flows from operating activities for the nine months ended September 30, 2024, totaled $115,518, slightly down from $118,189 in the same period last year[29] - Total operating expenses for the nine months ended September 30, 2024, were $376,420, a decrease from $388,441 in the same period last year[28] - Cash paid for income taxes increased to $51,704 for the nine months ended September 30, 2024, compared to $32,477 in 2023[30] Profitability Metrics - GAAP gross profit for Q3 2024 was $179,012 thousand, compared to $168,222 thousand in Q3 2023, representing a 1.0% increase[31] - Non-GAAP gross profit for Q3 2024 was $180,957 thousand, up from $172,153 thousand in Q3 2023, reflecting a 5.2% growth[31] - GAAP operating income increased to $51,684 thousand in Q3 2024 from $38,525 thousand in Q3 2023, marking a 34.0% rise[32] - Non-GAAP operating income for Q3 2024 was $88,705 thousand, compared to $81,162 thousand in Q3 2023, indicating a 9.4% increase[32] - GAAP net income for Q3 2024 was $12,570 thousand, recovering from a net loss of $3,172 thousand in Q3 2023[32] - Non-GAAP net income for Q3 2024 reached $46,863 thousand, up from $38,013 thousand in Q3 2023, a 23.5% increase[32] - Adjusted EBITDA for Q3 2024 was $96,036 thousand, compared to $85,062 thousand in Q3 2023, reflecting a 12.0% growth[33] - Adjusted EBITDA margin improved to 48.0% in Q3 2024 from 44.9% in Q3 2023[33] - GAAP diluted earnings per share for Q3 2024 was $0.07, compared to a loss of $0.02 per share in Q3 2023[32] - Non-GAAP diluted earnings per share increased to $0.27 in Q3 2024 from $0.23 in Q3 2023, a 17.4% rise[32] Asset Management - Total assets decreased from $3,250,915 million as of December 31, 2023, to $3,118,424 million as of September 30, 2024, representing a decline of approximately 4.1%[27] - Current assets decreased from $421,327 million to $325,839 million, a reduction of about 22.7%[27] Future Outlook - The company expects to incur significant legal and professional service expenses related to a Cyber Incident in future periods, impacting operational costs[21] - Recent product enhancements include expanded capabilities in SolarWinds Observability offerings, including AI-driven features and improved cloud monitoring[4] - SolarWinds received multiple industry recognitions, including the 2024 GigaOm Radar Reports for Network and Cloud Observability[4] Cash Flow Analysis - Free cash flow for the nine months ended September 30, 2024, was $100,004 thousand, down from $104,785 thousand in 2023[36] - Unlevered free cash flow for the nine months ended September 30, 2024, was $174,195 thousand, compared to $171,037 thousand in 2023[36] - Cash paid for acquisition and other costs for the nine months ended September 30, 2024, was $18,180 thousand, significantly higher than $8,370 thousand in 2023[36] - Capital expenditures for the nine months ended September 30, 2024, totaled $(15,514) thousand, compared to $(13,404) thousand in 2023[36] - Forfeited tax shield related to interest payments for the nine months ended September 30, 2024, was $(21,036) thousand, compared to $(21,660) thousand in 2023[36]

Financial Data and Key Metrics Changes - Total revenue for Q2 2024 was $193 million, representing a year-over-year growth of 4% and exceeding the high end of the guidance range [6][15] - Subscription revenue grew by 31% year-over-year, reaching $70 million, while total ARR increased by 7% year-over-year to $705 million [7][15] - Adjusted EBITDA for Q2 2024 was $92.5 million, reflecting a 17% year-over-year growth and an adjusted EBITDA margin of 48% [17] Business Line Data and Key Metrics Changes - Subscription ARR grew by 36% year-over-year, reaching $270 million, with a maintenance renewal rate of 97% [7][15] - Maintenance revenue decreased by 5% year-over-year to $110 million, as the company continued to convert customers to subscription products [16] - License revenue was $13 million, down 17% from the previous year, impacted by the subscription-first strategy [17] Market Data and Key Metrics Changes - The company reported a strong performance in hybrid cloud observability solutions, surpassing $100 million in total ARR for this segment [7] - The customer base included 1,042 customers with over $100,000 in total ARR, marking a 16% growth year-over-year [15] Company Strategy and Development Direction - The company is focused on a subscription-first strategy, emphasizing customer success and product innovation to drive growth [5][6] - Ongoing product enhancements aim to improve productivity, reduce complexity, and lower costs for customers [8][10] - The company is committed to expanding its hybrid visibility solutions and investing selectively while maintaining expense discipline [13] Management's Comments on Operating Environment and Future Outlook - Management noted that there has been no significant change in the macro environment from Q1 to Q2, with a strong value proposition resonating with customers [25] - The company is confident in its ability to meet financial goals for the remainder of 2024, raising revenue guidance for the full year to a range of $778 million to $788 million [20][22] - Management expressed optimism about the ongoing transformation efforts and the ability to adapt to evolving customer needs [23] Other Important Information - The company refinanced its debt in July 2024, reducing the interest rate by 50 basis points and extending the maturity to February 2030 [18] - Bart Kalsu, the CFO, announced his departure, with Lewis Black set to take over the role [14] Q&A Session Summary Question: What did you see during the quarter regarding the macro environment? - Management indicated no meaningful difference in the macro environment from Q1 to Q2, with strong customer value propositions driving performance [25] Question: How significant is the hybrid cloud observability solution for large customers? - Management stated that the hybrid cloud observability solution is a significant driver for customer adoption, particularly for larger enterprises [30] Question: Why is the Q3 guidance lower than the first half growth? - Management explained that the guidance is consistent with previous performance and reflects a prudent approach to forecasting [31] Question: What gives confidence to raise guidance despite others cutting it? - Management cited strong internal demand and the value customers see in their products as reasons for raising guidance [37] Question: Is there an increase in the pace of maintenance to subscription migration? - Management confirmed that they are achieving their plans and expanding market opportunities, with consistent results across geographies [38]

Group 1: Earnings Performance - SolarWinds reported quarterly earnings of $0.26 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and up from $0.21 per share a year ago, representing an earnings surprise of 18.18% [1] - The company has surpassed consensus EPS estimates for four consecutive quarters [2] - SolarWinds posted revenues of $193.25 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 2.51%, and up from $185.03 million year-over-year [2] Group 2: Stock Performance and Outlook - SolarWinds shares have declined approximately 4.5% since the beginning of the year, while the S&P 500 has gained 15.8% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.25 on revenues of $194.23 million, and for the current fiscal year, it is $1.03 on revenues of $778.91 million [7] Group 3: Industry Context - The Internet - Software industry, to which SolarWinds belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact SolarWinds' stock performance [5]

Core Thesis - SolarWinds is strategically repositioning towards integrated AI technologies and subscription-based models, aligning with trends in automation solutions and recurring revenue streams in the IT sector, which is expected to enhance operational efficiency and customer satisfaction [3]. Company Overview - SolarWinds, founded in 1999, is a leading IT management software provider serving over 300,000 customers globally, including 499 of the Fortune 500 companies, with solutions tailored for various industries such as healthcare, finance, and government [4]. New Initiatives and Vulnerabilities - The introduction of SolarWinds AI technology aims to facilitate IT transitions, reducing resolution time by up to 40%, while the Database Performance Analyzer enhances PostgreSQL support, improving query performance by up to 30% [5]. - Despite these advancements, there are concerns regarding data privacy and security risks associated with AI technologies, necessitating robust security measures and continuous monitoring to maintain customer trust [6]. Financial Performance - In Q1 2024, SolarWinds reported total revenue of $193.31 million, a 4% increase year-over-year, driven by a shift to subscription models, although net income fluctuated from a loss of $5.62 million in Q1 2023 to a profit of $15.56 million in Q1 2024 [7]. - The stock price exhibited volatility over the past year, reflecting the company's financial performance and strategic initiatives, with a notable recovery in December [8]. Competitive Landscape - SolarWinds faces competition from significant rivals such as Progress Software, Rapid7, and Appian, which creates diverse competitive dynamics in the market [9]. Future Outlook - The adoption of AI technologies and upgrades to existing products are expected to drive significant growth for SolarWinds in the coming year, with revenue growth projected at approximately 5% and profit growth potentially improving to around 9-10% [10]. - Analysts estimate a revenue growth of 4.29% and an earnings growth of 8.53% for the upcoming year, indicating a positive outlook despite the competitive challenges [12]. Valuation Metrics - SolarWinds has a gross margin of 90.42%, significantly higher than the industry median of 49.23%, indicating strong cost management [12]. - The company's P/S ratio of 2.55 suggests it is undervalued compared to the sector median of 3.11, while the high P/E ratio of 188.98 indicates it may be overvalued in terms of earnings [12].

The company creates products that can power the secure monitoring and management of IT environments in multi-cloud or hybrid environments. Its overall goal is to help their customers strengthen and transform their businesses' digital capabilities with simple and secure solutions. SolarWinds' Industry Competition Datadog (DDOG) Dynatrace (DT) New Relic Quest Redgate SolarWinds generates revenue from fees for subscriptions to its software-as-a-service (SaaS) and time-based license agreements. Maintenance and ...

Shares of SolarWinds (SWI) have gained 7.8% over the past four weeks to close the last trading session at $11.88, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $15.36 indicates a potential upside of 29.3%. The mean estimate comprises seven short-term price targets with a standard deviation of $4.85. While the lowest estimate of $11.50 indicates a 3.2% decline from the current ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38711 SolarWinds Corporation (Exact name of registrant as specified in its charter) Delaware 81-0753267 (State or other jurisdic ...

SolarWinds Corporation (NYSE:SWI) Q1 2024 Earnings Conference Call May 2, 2024 8:30 AM ET Company Participants Tim Karaca - Group Vice President of Finance Sudhakar Ramakrishna - President and Chief Executive Officer Bart Kalsu - Chief Financial Officer Conference Call Participants Matt Hedberg - RBC Capital Markets Sanjit Singh - Morgan Stanley Pinjalim Bora - JPMorgan Miller Jump - Truist Securities Operator Thank you for standing by. My name is Kathleen and I will be your conference operator today. At th ...

This presentation and the accompanying oral presentation contain "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, our market opportunities, our evolution to a subscription-first mentality, the SolarWinds Platform, our product development in 2024 and beyond, expectations regarding customer retention, revenue growth and market expansion, and the impact of the global econo ...