solarwinds(US:SWI)2022-02-17 19:17Financial Data and Key Metrics Changes - For Q4 2021, the company reported revenues of $186.7 million, exceeding the high end of the guidance range of $180 million to $184 million [12][25] - Adjusted EBITDA for Q4 was $78.4 million, representing an adjusted EBITDA margin of 42%, again exceeding the high end of the outlook for the quarter [12][34] - For the full year 2021, total GAAP revenue was $719 million, with subscription revenue contributing $125 million, reflecting a 90% year-over-year growth on a GAAP basis [32][33] Business Line Data and Key Metrics Changes - Subscription revenues increased by 18% year-over-year in Q4, driven by additional subscription revenue from SentryOne products and increased sales of on-premises subscriptions [14][30] - Total license and maintenance revenue for Q4 was $152 million, a decrease of 3% from the prior year, with maintenance revenue also down by 3% [26][33] - The company finished 2021 with 829 customers spending over $100,000 in the last 12 months, a 5% improvement over the previous year [34] Market Data and Key Metrics Changes - Total ARR reached approximately $631 million as of December 31, 2021, reflecting year-over-year growth of 1% [31] - Subscription ARR was $134.7 million, an increase of more than 20% year-over-year [31] - The company anticipates both license and subscription revenues to grow in 2022, reflecting a recovery in sales to new and existing customers [15][38] Company Strategy and Development Direction - The company aims to achieve $1 billion in ARR by 2025 with a compounded annual subscription ARR growth north of 30% [10] - The focus is on transitioning customers to subscription offerings and enhancing the product portfolio with unified platforms and superior customer experiences [48][49] - The company is committed to building a safer customer environment through its secure-by-design initiative [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improving customer retention rates, expecting to approach historical best-in-class levels in the low 90% range [13] - The company anticipates total revenue growth in 2022 to be positively impacted by increases in licensed and subscription revenue, despite a decline in maintenance revenue [38][40] - Management highlighted the importance of customer success management in driving adoption rates and expanding customer relationships [100] Other Important Information - The company completed the spin-off of the N-able business on July 19, 2021, and results now reflect SolarWinds as a standalone business [4][22] - One-time costs related to the Cyber Incident totaled approximately $33.1 million for the full year of 2021, which are excluded from adjusted EBITDA [35][36] - The company ended Q4 2021 with a cash balance of $732 million and net debt of approximately $1.2 billion [37] Q&A Session Summary Question: What percentage of new customers are choosing subscription? - Management noted that there is a good mix of customers choosing subscription, particularly in the database opportunity and midmarket [52][53] Question: How do you feel about SME spending trends in 2022? - Management indicated that while SME spending trends are stabilizing, they expect growth primarily from the SME segment [58] Question: What are the expectations for federal maintenance renewal rates in 2022? - Management projected that federal renewal rates would be consistent with commercial renewal rates, showing positive trends [60] Question: Can you discuss the rollout plans for the application monitoring service? - Management explained that application monitoring will be integrated into the hybrid cloud platform, enhancing customer experience and competitive positioning [63][64] Question: What gives you confidence that the licensed business can rebound in 2022? - Management cited improved demand activities, increased personnel in go-to-market efforts, and better packaging and pricing as factors for expected growth [108]