solarwinds(US:SWI)2021-08-04 04:15Financial Data and Key Metrics Changes - Total consolidated non-GAAP revenue for Q2 2021 was $262 million, representing year-over-year growth of 6% [12][19] - Consolidated adjusted EBITDA was $111.1 million, with an adjusted EBITDA margin of 42%, exceeding the high end of the outlook [13][25] - Ongoing SolarWinds maintenance renewal rate was 86%, above the expected low to mid-80s range [13][20] - Total ARR reached approximately $992 million as of June 30, reflecting year-over-year growth of 14% [23] Business Line Data and Key Metrics Changes - Total ongoing SolarWinds revenue was $177 million, above the high end of the second quarter revenue outlook [20] - Consolidated non-GAAP subscription revenue was $112.5 million, up 17% year-over-year, with ongoing SolarWinds subscription revenue growing 60% year-over-year [24] - License revenue was $26.7 million, a decline of approximately 21% compared to Q2 2020 [21] Market Data and Key Metrics Changes - The company secured the largest on-premises term subscription deal in its history from a large healthcare provider [13] - The company is winning large public sector deals globally, with the Secure by Design initiative being a key differentiator [14] Company Strategy and Development Direction - The company is focused on customer retention and aims to return to historical renewal rates of over 90% [13][34] - The Secure by Design initiative emphasizes enhancing security across internal environments, software build systems, and supply chain processes [11] - The company plans to continue expanding subscription offerings and prioritize new subscription sales [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to help customers accelerate business transformation through secure solutions [36] - The company anticipates challenges in the federal sector due to tough comparisons from the previous year [32][61] - Management expects maintenance renewal rates to remain in the mid-80s for the rest of 2021, with a target to return to historical performance in 2022 [34][78] Other Important Information - The spinoff of the N-able business was completed on July 19, 2021, allowing both companies to better align with market needs [16] - The company completed a two-for-one reverse stock split and declared a dividend of $1.50 per share [28] Q&A Session Summary Question: Customer retention and renewal rates - Management highlighted employee commitment and the relevance of solutions as key factors for improved renewal rates, which are currently at 86% [40][41] Question: Trends in the quarter and July performance - Management noted progress in demand generation activities and positive trends in Q3 and Q4 [42][43] Question: Federal business impact - Management indicated that the federal business comprises approximately 10% of total revenue and is experiencing slower conversations due to the cyber incident [98] Question: Subscription transition and unit economics - Management explained that the subscription transition typically has a two- to three-year return model, with pricing based on the three-year value of a license and maintenance model [65][67] Question: Product evolution and database opportunity - Management emphasized the focus on consolidating capabilities for clearer value propositions and integrating database solutions to support various platforms [82][85]