solarwinds(US:SWI)2020-08-08 19:29Financial Data and Key Metrics Changes - Total non-GAAP revenue for Q2 2020 reached approximately $248 million on a constant currency basis, reflecting a 7% year-over-year growth on a reported basis and 8% growth on a constant currency basis [13][14] - Adjusted EBITDA for Q2 2020 was over $119 million, exceeding the high end of the outlook, with an adjusted EBITDA margin of 48% and year-over-year growth of 7% [14][45] - Cash on hand at the end of Q2 2020 was $331 million, an increase of $94 million since March 31, 2020, and $158 million since December 31, 2019 [33] Business Line Data and Key Metrics Changes - Total ARR reached approximately $873 million as of June 30, 2020, reflecting year-over-year growth of 10% on a reported basis and 11% on a constant currency basis [23] - Non-GAAP subscription revenue for Q2 2020 was $96 million, growing 20% year-over-year, while total non-GAAP recurring revenue grew at 11%, reaching $213 million [35] - Non-GAAP license revenue in Q2 2020 totaled $33.7 million, reflecting a year-over-year decrease of approximately 14% [40] Market Data and Key Metrics Changes - Customer retention rates for the first six months of 2020 remained stable, with maintenance renewal rates over 92% [29] - The number of customers spending over $100,000 increased by 23% year-over-year to 958 customers [24] - The company closed the largest commercial transaction in its history with a global financial institution, significantly expanding its product footprint [26] Company Strategy and Development Direction - The company is exploring a potential spin-off of its MSP business to optimize growth and performance of both the MSP and core IT management businesses [11][65] - The core IT management business is projected to generate over $700 million in revenue in 2020, with a growth rate in the mid-single digits [63] - The company aims to leverage its disruptive go-to-market approach to capture market share during economic disruptions [20][53] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in budget pressure among technology professionals, with expectations of continued budget constraints in the second half of the year [18] - Despite economic challenges, the company has seen resilience in IT spending from small and medium-sized businesses [54] - The outlook for Q3 2020 anticipates total revenue in the range of $254 million to $259 million, representing year-over-year growth of 5% to 7% [48] Other Important Information - The company has launched subscription pricing options for its Orion product portfolio, resulting in over 60 subscription transactions in Q2 2020 [21] - The company is focused on database performance management as a significant growth opportunity, with revenue in this area growing over 30% in Q2 2020 [28] - The management team is committed to a seamless leadership transition as they explore the potential spin-off [81][87] Q&A Session Summary Question: Can you outline the key decision points remaining in the spin-off process? - The company is still early in the exploration process, with operational work needed to understand how to split the businesses effectively [94][95] Question: What are the shared functions and potential dissynergies in the spin-off? - There are shared functions in finance, legal, and IT that will need to be addressed, but operational costs are aligned to different business units [100] Question: How is the cloud management piece trending? - The MSP business is expected to approach $300 million in subscription revenue in 2020, with growth in cloud management products being an important part of the future strategy [107][108]